Republicans Press Forward on Plan to Kill Hamp

WASHINGTON — On the eve of a House Financial Services Committee vote to shut down President Obama's foreclosure prevention programs, Republicans challenged the administration to justify the initiatives, which they say have failed to help many homeowners and will cost the government money.

They were aided by Neil Barofsky, the outgoing watchdog for the Troubled Asset Relief Program, who said the Home Affordable Modification Program, Obama's landmark borrower-aid initiative, was likely too troubled to survive.

"Those who argue for keeping Hamp alive have an increasingly daunting task, and absent meaningful action from Treasury, Sigtarp's 'support' of Hamp's continued existence is all but exhausted," said Barofsky, the special inspector general for Tarp.

The panel is set to vote Thursday on four bills to kill several programs, including Hamp, the Neighborhood Stabilization Program and $1 billion in mortgage relief for those hurt by job loss or medical costs.

"The Home Affordable Modification Program, or Hamp, is a program that has met bipartisan condemnation," said Rep. Patrick McHenry, R-N.C., who introduced the bill to end the program.

Of the programs, Hamp has earned the most attention — and the most scorn. Originally expected to help 3 million to 4 million consumers, the Treasury Department said it has helped a little over 600,000 receive permanent workouts. Since its inception, it has been plagued with criticism over issues from eligibility requirements to redefaults. Many borrowers who have entered the program have seen their workouts end and their credit standing worsen.

But administration officials defended the programs on Wednesday, insisting that turning off the switch abruptly would have its own pitfalls. They said cutting off funding midstream would block workouts now in process, and while Hamp may not have hit its earlier goals, it is still on track to help tens of thousand of borrowers.

"We're continuing to help a lot of people. If we continue the program, we will help more people. No one is putting forth a better alternative," Tim Massad, an assistant Treasury secretary, told reporters in a telephone briefing before the hearing.

He acknowledged that the administration at first "overestimated" the number of people who would be eligible for a workout, but following adjustments to the program since its 2009 launch, it has met a gradual need.

"The amount of money we spend is proportionate to the number of people helped," he said. "Why continue? Because 25,000 to 30,000 families each month are getting permanent modifications, and that is significant."

But Barofsky said the Treasury's changing goals were not an argument for the program's success.

"While, as Treasury repeatedly points out, for the more than 520,000 families that benefit from ongoing permanent Hamp modifications the program has certainly been successful, this does not make the program itself successful," he said in his prepared testimony.

During the hearing, Barofsky was even more pointed, saying the Treasury keeps changing the goalposts, but won't disclose its targets.

"It's somewhat shameful that at this point here we are in March 2011 and the Treasury Department will in one breath say that 'Well we know the number is not going to be anywhere close to what we originally said it would be,' and then in the second breath refuse — this is such a basic failure of transparency — to refuse to tell Sigtarp, to tell [the Government Accountability Office], to tell the Congressional Oversight Panel, to tell you [Congress] what their expectation is as to the total number that are going to receive permanent modifications," Barofsky said. "That is the exact opposite of transparency. It evades accountability."

Under McHenry's bill, the Hamp Termination Act would stop the Treasury from being able to grant new modifications, but preserve aid under workouts that have already been offered.

"While I have no doubt the programs we're discussing today were implemented by individuals of good will with good intentions, there is no getting around the fact that they were poorly designed and by any practical standards have failed to help at-risk homeowners," McHenry said. "In most cases, they've done much more harm than good."

But the GOP is going further than the loan modification program. Another bill would also end a Federal Housing Administration refinancing program launched last March to help borrowers with negative equity. A third bill would end the Neighborhood Stabilization Program, designed to provide grants for neighborhoods to help prepare areas blighted by foreclosure for reuse. Further legislation would end the Emergency Mortgage Relief Program.

While the House Financial Services Committee is expected to approve all four bills, their overall chances of enactment are low. The House is expected to approve them, but the Democrat-controlled Senate is unlikely to follow suit.

Democrats on the House subcommittee said the GOP plans were blind to the need for support of a still-wounded housing market.

"Simply doing away with these critical programs that serve the American people without offering any real solutions that reforms or replaces these programs does nothing to alleviate our nation's foreclosure emergency," Rep. Luis Gutierrez, D-Ill., the subcommittee's ranking member, said in a prepared statement.

Other witnesses said turning off the spigot for the programs would have consequences.

Mercedes Marquez, the assistant secretary for community planning and development in the Department of Housing and Urban Development, said some projects green-lighted by the NSP have been slow to get off the ground because of general fiscal issues facing local governments. Still, she said, "grantees continue to make great strides in production."

"To rescind the final $1 billion in NSP funding at this time would stall that progress and remove critically needed investments from the hardest hit housing markets in the country," Marquez said.

FHA Commissioner David Stevens said while the government "cannot and should not help everyone," targeted help is necessary and attainable.

"The administration must focus on providing responsible homeowners opportunities to obtain a modification or to refinance and prevent avoidable foreclosures and, when necessary, facilitate the transition to a more sustainable housing situation," he said. "The programs are tailored to accomplish these goals by helping a targeted group of borrowers."