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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 them.
March 2
WASHINGTON — If the House Financial Services Committee passes two bills that have little to no chance of approval in the Senate, do they really matter? That was the question that dogged the panel's 33-to-22 approval on Thursday of legislation that would scuttle two foreclosure-prevention programs.
Although Republicans trumpeted the bills as ending a waste of taxpayer money, Senate Democrats are not expected to take up the legislation.
But for one of the first markups of the GOP-controlled Financial Services Committee, the votes held a symbolic importance, giving a taste of what is to come over the next two years as Republican leaders pursue many other objectives, including stripping funding from the Consumer Financial Protection Bureau, that are also likely to fall short.
"My sense is a bit of political maneuvering here — House trying to set the tone regarding what they see needs to happen even if it won't pass muster in the Senate," said Cliff Rossi, a professor at Robert H. Smith School of Business at the University of Maryland. "At this point I think it's fair to say that this is simply telegraphing the direction things need to head."
The panel had originally scheduled a vote on four separate bills to kill several foreclosure prevention programs, but deferred on two of them. As a result, Thursday's votes were to end the Federal Housing Administration's Refinance Program and the Emergency Relief Program. The committee said it expects the House floor to approve both next week.
The Obama administration's most famous foreclosure prevention program, the Home Affordable Modification Program, was not targeted on Thursday, but is scheduled for a separate vote next week.
Industry observers said it was clear why Republicans had chosen to move forward quickly on the foreclosure-prevention programs, arguing it fit in with their overall focus on reducing the deficit.
"It is the battle of the budget," said Laurence Platt, a partner at K&L Gates. "Cuts are going to have to come from discretionary spending, and the question is from where. Hamp is an easy target. It is perceived as a failure, and there is not a lot of public support for using taxpayers' moneys to fund loan modifications."
Chairman Spencer Bachus and other GOP members of the panel argued that the programs were a waste of government resources, and their funding should be used to pay down the deficit.
"If these programs had been effective, if they'd met their goals, if they'd actually helped American taxpayers and homeowners we wouldn't be here today," Bachus said. "By every objective measure these foreclosure mitigation programs have been a failure. … These programs, while well intentioned, are actually doing more harm than good for many struggling homeowners, and in this era of record-breaking deficits Congress needs to stop funding programs that don't work with money we don't have."
But Democrats countered that even if the programs have fallen short of projections, they have at least helped more than 500,000 homeowners avoid foreclosure. They attacked Republicans for their failure to suggest improvements or offer alternatives.
"The majority opinion seems to be foreclosures will happen … so be it … let's make no effort whatsoever to improve these programs or let them survive," said Rep. Barney Frank, the committee's top Democrat.
Doug Elliott, a fellow at the Brookings Institutions, said the vote was about laying out political priorities.
"It presumably is an attempt to stake out a position early in order to influence the political and policy debate ahead, which will be a long one," Elliott said.
The vote divided the two sides on the basic premise of whether the government should use taxpayer money to assist homeowners.
"We should not overlook that taxpayers are the target of these programs," said Rep. Al Green, D-Texas. "We can amend them. We need not end them. There is a means they can work for us."
Frank said the Republicans should give the programs, particularly the newly created FHA initiative, more time.
"What we have to do is allow this to have a chance to make it work," Frank said. "What we have here is a program that was carefully started up … helpful for some people, but not all."
But Republicans said it was not the government's job.
"To my friends on the other side of the aisle who believe the only modification program takes place by the government, millions have had their loans modified by lenders," said Rep. Jeb Hensarling, R-Texas., who sponsored the bill to end the Emergency Homeowner Loan Program.
Rep. Robert. Dold, R-Ill., the sponsor of the bill to kill the FHA refinance program, said it was "a failure for homeowners and can't be saved."
The vote comes as key Senate Banking Committee members are seeking to expand, not eliminate, assistance to troubled homeowners.
Sen. Jack Reed, D-R.I., introduced a bill along with Majority Whip Richard Durbin, Sens. Sheldon Whitehouse, D-R.I., Jeff Merkley, D-Ore., and Al Franken, D-Minn., that would streamline the loan modification process, eliminate "dual track" of foreclosure, and limit foreclosure fees.
"The problems with Hamp are, it's voluntary and some use it only in practice or theory," Sen. Merkley said in an interview this week. "My main underlying point is this isn't a silver bullet. There are many ways to make the housing market work better."
Merkley said Republicans need to engage on the issue, offering ways to help homeowners, even while acknowledging the failures of Hamp.
Congress should have "a much larger bipartisan conversation about how to make the housing market better because what we have right now is a colossal disappointment," Merkley said. "The Hamp program is a colossal disappointment."
