In 2009, after the real estate market collapse left millions of American homeowners at risk for foreclosure, the Obama administration announced its Home Affordable Modification Program (HAMP) with great fanfare. Its goal was to help 3 to 4 million troubled homeowners negotiate loan modifications with their mortgage lenders that would allow them to keep their homes.
However, of the more than 1.5 million troubled homeowners who have applied for loan modifications through the program, more than 800,000 have dropped out completely, either because they were rejected or because their trial loan modifications didn’t work out. Only slightly more than 500,000 have received permanent loan modifications. The HAMP program has been criticized by both Democrats and Republicans for being ineffective.
Today, the House Financial Services Committee voted along party lines to repeal two other foreclosure prevention programs, including a new program aimed at people unable to afford their mortgage payments due to unemployment. The Committee delayed a vote on whether to end the HAMP program until next week.
The two programs the Committee voted to repeal were the FHA Short Refinance Option and the Unemployment Mortgage Assistance Program, part of Obama’s Hardest Hit Fund, which was rolled out in Florida at the end of February.
The FHA Short Refinance Option allows homeowners with underwater mortgages to refinance into 30-year fixed-rate mortgages guaranteed against default by the FHA. The fledgling program, which has not been widely advertised, was rolled out separately in the 18 states targeted as the hardest hit, along with the District of Columbia. According to Reuters, only 44 borrowers have successfully refinanced their loans through the program.
The Unemployment Mortgage Assistance Program offers up to $35,000 to homeowners who can’t pay their mortgages due to a job loss. In Florida, the program is run by the Florida Housing Finance Corporation, which pays the money directly to the lender.
While no one is happy with the programs’ performance, Democrats say the vote to repeal them is politically motivated
Democrats say that the party-line vote to ax the programs is political — an effort to criticize the administration’s housing policy. They argue that the programs should be fixed, not repealed.
In the midst of an often heated debate, Representative Michael Capuano, a Democrat from Massachusetts, challenged members of the Committee to take their disapproval of the program to its logical limit — and ask all the homeowners who received money from the programs to return it.
“If you are not willing to do that, then you are simply being hypocritical and political,” he said.
The vote in the House Financial Services Committee clears the way for the bills to be considered by the full House, where they are likely to pass. They are not expected to pass in the Senate.
Source: Reuters, “Republicans take steps to kill Obama mortgage aid,” Corbett B. Daly, March 3, 2011