Last week a House Financial Services Subcommittee voted to eliminate two programs designed to mitigate the impact of the housing meltdown.
Republicans on the Committee voted unanimously to shut down the Emergency Homeowner's Loan Program (EHLP) and FHA's Short-Refinance Option. EHLP is not scheduled to go into operation until next month and the Short-Refi program got off to a slow start and has, as yet assisted only a few homeowners but also has cost $0 in federal monies.
The next two housing recovery efforts on the chopping block: HAMP and the Neighborhood Stabilization Program. With the Committee scheduled to vote Wednesday on the fate of both programs, supporters are beginning to fight back.
Last week representatives of the Administration testified to the Committee as to the importance of the Home Affordable Modification Program (HAMP), a joint program operated by Departments of Treasury and Housing and Urban Development. While HAMP has been plagued with problems, at last count it had moved 600,000 borrowers into permanent loan modifications while another 126,000 are in the required three month trial modification period. The so-called "HAMP Termination Act of 2011" (H.R. 839) would prohibit the Secretary of the Treasury from providing any further assistance to the program but would allow assistance to continue where a homeowner was in process with an offer to participate in the program.
Timothy G. Massad, acting assistant secretary of the Treasury, Office of Financial Stability sent a letter to the Chairperson of the Committee Judy Biggert, (R-IL) before last week's vote saying that terminating HAMP before the end of 2012 would be a mistake. "HAMP continues to help tens of thousands of additional families every month with mortgage modifications that provide the typical borrower with a $500 reduction in monthly mortgage payments. Put simply, ending HAMP now, without a meaningful alternative in place, would mean that struggling homeowners would have far fewer ways of coping with the worst housing crisis in generations. Instead, their fate would be left solely in the hands of the same mortgage servicers whose standards are widely recognized to be in need of reform"
Massad said that the value of HAMP has reached beyond the number of permanent modifications. The program has set affordability standards and developed a framework for how mortgage servicers should assist those homeowners and set critical protections for homeowners. It is also important to understand, he said, the taxpayer funds are used only for homeowners in permanent modifications and only when those homeowners continue to make their payments.
On March 3 the New York Times Editorial Board chimed in. "The ongoing crash," it said in an editorial, "is further evidence that the government's antiforeclosure efforts have fallen short and America's struggling homeowners need more help. So what are House Republicans proposing? They want the government to get out of the antiforeclosure business altogether and leave homeowners to fend for themselves. The result would be hundreds of thousands of additional foreclosures and steeper price declines." They have, The Times said "introduced bills to eliminate four federal antiforeclosure programs and replace them with - nothing."
The newspaper went through each of the threatened initiatives and their accomplishments and laid out a brief primer on how each could be improved; HAMP for example, by seeking legislation and regulation and stiffer penalties for banks, with which "much of the problem lies," for "improper delay and denial of modifications, excessive fees, and violations of borrowers' legal protections."
The Neighborhood Stabilization Program (NSP) is the second program the Committee will vote to end on Wednesday (H.B. 861). NSP, begun under the Bush Administration, provides money to local governments and non-profits to buy and rehabilitate abandoned and foreclosed properties and return them to the tax rolls or to a non-profit use. The Times said the $6 billion Congress appropriated for the program over the last two fiscal years was simply not enough, it has all been obligated and "House Republicans want to eliminate a third round of financing - $1 billion - promised in the financial reform law." The paper said that a Republican claim that the program may provide a perverse incentive for banks to foreclose "is absurd. Banks foreclose when they deem it in their interest, not because a small federal program entices them."
The editorial also defended the two programs that were voted down last week, refuting critics claims the that EHLP encouraged indebtedness and stating that ending the FHA Short-Refi program, which has resolved its early technical problem would squander an important chance to prevent foreclosures. "All of the targeted programs address serious unmet needs," The Times said. "If House Republicans get their way and shut these programs down, all Americans will pay the price."
A third defense was published by Steve Adamske, Deputy Assistant Secretary for Public Affairs at the U.S. Treasury Department on the Department's on-line blog. Adamske said HAMP was not designed to prevent every single foreclosure, but terminating the program would mean that more Americans would lose their homes, more families would have to endure the painful process of foreclosure, there would be more vacant homes in communities that are already suffering, and it would mean that the still-fragile housing market and the nation's broader economic recovery would be put at greater risk.
If the Committee votes tomorrow to terminate the second set of programs, the bills must still pass a vote by the entire House, the democratically controlled Senate, and then a Presidential veto. The latter two sound unlikely based on rhetoric from the Administration
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