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House delays fight to end HAMP

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The House of Representatives pushed back its vote on ending the Home Affordable Modification Program because the congressmen could not find time on the floor, according to a spokesperson for the House majority leader Rep. Eric Cantor (R-Va.). H.R. 839 would end HAMP, a long-time lightning rod from both sides of the aisle since its inception in March 2009. The bill, sponsored by Rep. Patrick McHenry (R-N.C.), is part of a wider initiative by House Republicans who already voted to end the Federal Housing Administration's Short Refi program and the Department of Housing and Urban Development's program to provide mortgage assistance to the unemployed. Republicans say the government, overburdened with debt, can no longer afford these subsidies. And while Democrats agree that HAMP specifically has underwhelmed so many, they would rather see the Treasury Department take a tougher stance with servicers. Servicers have started roughly 600,000 permanent modifications in two years for a program originally projected to reach between 3 million and 4 million by the end of 2012. Borrowers complain of lost paperwork and foreclosures taking place while the homeowner is being considered for a modification, and servicers are just now finishing the pricey operation of installing HAMP procedures within their shops. In its final report on the Troubled Asset Relief Program released Tuesday, the Congressional Oversight Panel said the program, originally billed for $30 billion will end up spending only a fraction of that and HAMP will only reach about 800,000 borrowers by the time it is finished. COP said when the program was first rolled out, many commented that the 31% debt-to-income ratio benchmark was too "aggressive." Many homeowners cannot qualify because their monthly payments are already below that threshold, and while panelists asked Treasury to lower it, officials have not. The Obama administration has said the president will veto any bill ending HAMP prematurely, and sources within the Senate said the legislation is "dead on arrival." "This program offers eligible homeowners an opportunity to lower their mortgage payments, helping individuals avoid foreclosure and leading to the protection of home values and the preservation of homeownership," the Treasury said in a statement released Tuesday. "The administration is committed to helping struggling American homeowners stay in their homes, and has taken many steps over the last two years to stabilize what was a rapidly-declining housing market." Assistant Treasury Secretary Tim Massad defended the program in a Tuesday briefing with reporters saying Treasury officials currently hold servicers accountable for their performance. "We are in the servicers' shops all the time, and we force them to make corrections all the time," Massad said. COP did commend the Treasury for installing additional help around HAMP, such as unemployment assistance through the Hardest Hit Fund and a recent principal reduction initiative. See chart below for a timeline. But negative equity, delinquencies and foreclosure remain elevated, and the Treasury has experienced problems in balancing the harm to bank balance sheets with better outcomes for homeowners. "Principal write-downs on a large scale, for example, would help homeowners but hurt the banks. Over the last two years, Treasury has designed housing programs that aim to avoid fully facing this trade-off, by providing assistance to homeowners without restructuring bank balance sheets," COP said in its report. "The limitations of that approach are apparent in the problems that Treasury has encountered." In the end, Massad said each HAMP permanent modification will cost the government roughly $20,000. And at least for now, the House has put off for another week its decision on whether or not it will continue funding the cause. Write to Jon Prior. Follow him on Twitter: @JonAPrior

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