HAMP: On the Chopping Block

Last week a House Financial Services Subcommittee voted to eliminate two programs designed to mitigaternthe impact of the housing meltdown. </p

Republicans on the Committee voted unanimously to shut down thernEmergency Homeowner’srnLoan Program (EHLP) and FHA’s Short-Refinance Option.  EHLP is not scheduled to go into operationrnuntil next month and the Short-Refi program got off to a slow start and has, asrnyet assisted only a few homeowners but also has cost $0 in federal monies. </p

The next two housing recovery efforts on the chopping block: HAMP and the Neighborhood Stabilization Program. With the Committee scheduled to vote Wednesdayrnon the fate of both programs, supporters are beginning to fight back.  </p

Lastrnweek representatives of the Administration testified to the Committee as to thernimportance of the Home Affordable Modification Program (HAMP), a joint programrnoperated by Departments of Treasury and Housing and Urban Development.   While HAMP has been plagued with problems, atrnlast count it had moved 600,000 borrowers into permanent loan modifications whilernanother 126,000 are in the required three month trial modification period.  The so-called “HAMP Termination Act ofrn2011” (H.R. 839) would prohibit the Secretary of the Treasury fromrnproviding any further assistance to the program but would allow assistance torncontinue where a homeowner was in process with an offer to participate in the program.rn</p

Timothy G. Massad, acting assistant secretary of the Treasury, Officernof Financial Stability sent a letter to the Chairperson of the Committee JudyrnBiggert, (R-IL) before last week’s vote saying that terminating HAMP before thernend of 2012 would be a mistake. rn”HAMP continues to help tens of thousands of additional familiesrnevery month with mortgage modifications that provide the typical borrower withrna $500 reduction in monthly mortgage payments. rnPut simply, ending HAMP now, without a meaningful alternative in place,rnwould mean that struggling homeowners would have far fewer ways of coping withrnthe worst housing crisis in generations. rnInstead, their fate would be left solely in the hands of the samernmortgage servicers whose standards are widely recognized to be in need ofrnreform”</p

Massad said that the value of HAMP has reached beyond the number ofrnpermanent modifications.  The program hasrnset affordability standards and developed a framework for how mortgage servicersrnshould assist those homeowners and set critical protections forrnhomeowners.  It is also important tornunderstand, he said, the taxpayer funds are used only for homeowners inrnpermanent modifications and only when those homeowners continue to make theirrnpayments. </p

On March 3 the New York TimesrnEditorial Board chimed in. “The ongoing crash,” it said in anrneditorial, “is further evidence that the government’s antiforeclosurernefforts 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 thernantiforeclosure business altogether and leave homeowners to fend forrnthemselves.  The result would be hundredsrnof thousands of additional foreclosures and steeper price declines.”  They have, The Times said “introduced bills to eliminate four federalrnantiforeclosure programs and replace them with – nothing.”</p

The newspaper went through each of the threatened initiatives and theirrnaccomplishments and laid out a brief primer on how each could be improved; HAMPrnfor example, by seeking legislation and regulation and stiffer penalties forrnbanks, with which “much of the problem lies,” for “improperrndelay and denial of modifications, excessive fees, and violations of borrowers’rnlegal protections.”</p

The Neighborhood Stabilization Program (NSP) is the second program thernCommittee will vote to end on Wednesday (H.B. 861). NSP, begun under the BushrnAdministration, provides money to local governments and non-profits to buy andrnrehabilitate abandoned and foreclosed properties and return them to the taxrnrolls or to a non-profit use.   ThernTimes said the $6 billion Congress appropriated for the program over thernlast two fiscal years was simply not enough, it has all been obligated andrn”House Republicans want to eliminate a third round of financing – $1rnbillion – promised in the financial reform law.”  The paper said that a Republican claim thatrnthe program may provide a perverse incentive for banks to foreclose “isrnabsurd. Banks foreclose when they deem it in their interest, not because arnsmall federal program entices them.” </p

The editorial also defended the two programs</bthat were voted down last week, refuting critics claims the that EHLP encouragedrnindebtedness and stating that ending the FHA Short-Refi program, which hasrnresolved its early technical problem would squander an important chance tornprevent foreclosures.  "All of the targeted programsrnaddress serious unmet needs," ThernTimes said.  “If HousernRepublicans get their way and shut these programs down, all Americans will payrnthe price.” </p