House panel's bill would end foreclosure program

AP News
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Posted: Feb 24, 2011 1:17 PM
House panel's bill would end foreclosure program

A House committee plans to write legislation next week ending the Obama administration's flagship effort for helping struggling homeowners avoid foreclosure and abolishing three other housing assistance programs.

At its meeting next Thursday, the highest-profile target of the Republican-run House Financial Services Committee will be the Home Affordable Modification Program. The Treasury Department has acknowledged the program won't meet its original goal of preventing 3 million to 4 million foreclosures, and last month a federal inspector general said it has been a failure.

The bill comes at a time when Republicans are proposing deep spending cuts across the federal budget. They have already pushed legislation through the House cutting this year's spending by $61 billion, despite opposition by President Barack Obama and congressional Democrats.

The committee will also vote on GOP plans to terminate programs that help state and local governments buy foreclosed properties and sell or rent them, provide loans to unemployed people who have fallen behind in their mortgage payments, and help restructure mortgages for people who owe more than their homes are worth.

Democrats signaled that they will oppose the proposals.

"As we continue to respond to the victims of the foreclosure crisis in a responsible way, we will make the case that there are better ways for the federal government to cut spending than by attacking these programs," said Rep. Barney Frank of Massachusetts, top Democrat on the committee.

Financial Services Chairman Spencer Bachus, R-Ala., who announced his committee's meeting on Thursday, said the targeted programs have had little impact, have increased some homeowners' debts and may have led to additional foreclosures.

"In an era of record-breaking deficits, it's time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners," Bachus said in a written statement.

The Home Affordable Modification Program is designed to help financially troubled homeowners reduce their monthly mortgage payments by offering them lower interest rates and longer repayment periods.

Foreclosures have remained high, with the foreclosure listing firm RealtyTrac Inc. saying there were 2.9 million foreclosure filings last year and over 3 million expected this year.

Even so, the modification program is expected to ultimately complete only 700,000 to 800,000 permanent modifications, according to a report issued last month by the government's special inspector general overseeing the program.

The program "continues to fall dramatically short of any meaningful standard of success," the report said.