Modifications,Short Sales,Deeds in Lieu,WriteDowns

House to Determine Fate of Four Foreclosure Mitigation Programs

Posted on Thursday, March 17, 2011

Last week it was announced that a meeting would be held in front of the Insurance, Housing and Community Opportunity Subcommittee on Wednesday to determine the fate of four federal foreclosure mitigation programs.
The Home Affordable Modification Program (HAMP), HUD’s Neighborhood Stabilization Program, the Federal Housing Administration (FHA) Refinance Program, and the Emergency Mortgage Relief Fund all have bills advocating for their termination.
The hearing, titled “Legislative Proposals to End Taxpayer Funding for Ineffective Foreclosure Mitigation Programs,” had witnesses from several government agencies.
“We need to break down barriers that have delayed the housing recovery, including expensive and ineffective government programs that have failed to help homeowners. Unfortunately, these programs were set up in haste, executed poorly, and have done little to restore stability in the marketplace,” said the Subcommittee Chairman Judy Biggert.
The subcommittee is a part of the House Financial Services Committee.
Biggert continued, “A government program that spends more to save a single borrower than it costs to buy a home is no help at all – it’s just a waste of taxpayer money. We need to stop funding programs that don’t work with money we don’t have.”
Witnesses who gave testimony at the hearing included Neil Barofsky, special inspector general for the Troubled Asset Relief Program (TARP); Mercedes Marquez, assistant secretary of community planning and development for HUD; and David Stevens, commissioner of the Federal Housing Administration.
Barofsky has been very vocal on his views of HAMP and in January said in a report to Congress that he feels the program is underperforming, calling the half-million modifications it has provided “anemic.”
The Department of Treasury released reports on Wednesday highlighting the more than 500,000 permanent modifications completed under HAMP. Those in favor of the program’s termination are quick to point out that number is significantly lower than the 3 or 4 million homeowners the program was projected to help.
During the hearing it was pointed out that HAMP has spent approximately $840 million to date.
In his testimony, Barofsky also responded to claims that he does not support termination of HAMP, based on
statements he made saying that Treasury should have a chance to respond to criticism and implement meaningful changes. Barofsky asserts that since this did not happen, claims that he doesn’t support the program’s termination are not exactly accurate.
“Those who argue for keeping HAMP alive have an increasingly daunting task, and absent meaningful action from Treasury [my] continued ‘support’ of HAMP’s continued existed is all but exhausted,” he said.
But other attendees of the hearing did not feel the best option for the federal programs is termination.
The FHA Refinance Program Termination Act terminates the program and rescinds unobligated funding. The price tag for this program is $8.12 billion, of which only $50 million has been disbursed thus far. For this large outlay, the taxpayers have seen minimal return on their investment. As of December 13, 2010, only 35 applications had been submitted for this program.
In defense of the program, David Stevens said, “The FHA Short Refinance Option and the Emergency Homeowners Loan Program, in conjunction with HAMP and other modification efforts, are responsible efforts that have the potential to further stabilize the housing market and keep homeowners out of foreclosure.”
His testimony outlined the progress that the programs have made and said to terminate them now would be counterproductive to the goal of keeping responsible homeowners in their homes.
Mercedes Marquez defended the Neighborhood Stabilization Program in her testimony.
Congress has appropriated $7 billion for the Neighborhood Stabilization program. Two rounds of NSP funding have already been provided to states and localities. The Neighborhood Stabilization Program Termination Act ends the program and rescinds the unobligated third round of funding of $1 billion.
Marquez said, “The NSP is being effectively implemented by HUD’s Office of Community Planning and Development consistent with the purpose of assisting state and local governments in addressing the negative effects of abandoned and foreclosed properties. NSP grantees are gaining traction at the local level as they build capacity and expend funds, thereby helping to stabilize still fragile housing markets.”
She continued, “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.”
Despite arguments in favor of continuing the programs, the house subcommittee did not seem convinced that the programs are up to par. The full Financial Services Committee will hear the arguments on Thursday, March 3.
“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,” said Committee Chairman Spencer Bachus. “These programs may have been well-intentioned but they’re not working and, in reality, are making things worse.”
By: Joy Leopold, DS NEWS


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