HUD calls ending foreclosure programs 'irresponsible'
The Department of Housing and Urban Development released its first statement condemning legislation aimed at ending its mortgage assistance programs. The House passed two bills terminating the Federal Housing Administration's Short Refi program, which refinances underwater borrowers out of negative equity, a leading signal of strategic default. Another bill passed Friday by the House would end HUD's Emergency Homeowner Loan Program, which provides interest free loans to the unemployed borrowers for help on their mortgage payments. "The Emergency Homeowners Loan Program will provide relief to tens of thousands of families who are still struggling to make ends meet after the deepest economic recession and housing crisis in a generation," a HUD spokesperson said Friday after the bill passed. Two more bills will reach the floor next week, which would end the Home Affordable Modification Program and the Neighborhood Stabilization Program. The Treasury has set aside a total of $46 billion through these four programs. It breaks down to roughly $29 billion for HAMP, $8 billion through FHA Short Refi, $7 billion through NSP, and $1 billion through EHLP. Even though these programs are projected to spend fractions of what was set aside for them, Republicans say the U.S. can no longer afford them. "The money from this program doesn’t go to the homeowner, it goes to the lender, it goes to the banks. And who pays for it? The taxpayers and ultimately our children and grandchildren because the federal government borrows 42 cents of every dollar it spends,” Rep. Spencer Bachus (R-Ala.) said of the FHA Short Refi program. Rep. Jeb Hensarling (R-TX) said this sort of spending will "drive this country off a cliff." Republican efforts are seen largely as symbolic. The Obama administration made clear Tuesday it would veto these bills, which stand little chance of making it far in the Senate anyway. Still, HUD said these bills go too far and reprimanded Republicans for cutting off homeowners from EHLP assistance. "The Obama administration is committed to helping struggling homeowners stay in their homes and taking the steps needed to stabilize the housing market, and ending this program would mean the loss of an important lifeline for those families and risk damaging the fragile recovery we’re finally starting to see in the housing market," the spokesperson said. "It would be irresponsible and should be opposed." Write to Jon Prior. Follow him on Twitter: @JonAPrior