Obama administration officials launched a campaign to preserve as much as they can of $50 billion in foreclosure-prevention aid for homeowners amid growing criticism from both Republicans and Democrats.
“It’s very important to continue these programs given how difficult the housing market is right now,” Timothy Massad, the Treasury’s acting assistant secretary for financial stability, said in a conference call with reporters yesterday. Tens of thousands of borrowers are joining foreclosure-prevention programs every month, each saving more than $500 on their mortgage payments, Massad said.
The House Financial Services Committee is scheduled to weigh the future of the administration’s Home Affordable Modification Program, or HAMP, and three other aid programs at a meeting today. Republicans want to eliminate funding for the programs, which both they and some Democratic lawmakers say have done more harm than good.
More than a dozen Democratic lawmakers unleashed their frustration onto Treasury Secretary Timothy F. Geithner, Housing and Urban Development Secretary Shaun Donovan and a half dozen other administration officials yesterday during a closed-door meeting that lasted for more than an hour.
“This is an arbitrary, capricious system that kicks hard- working people out on the street,” Representative George Miller, a California Democrat, said in an interview after the meeting. “This administration cannot allow this to continue.”
About 1.5 million households have begun trial mortgage modifications through HAMP, down from initial projections of 3 million to 4 million, the Obama administration said yesterday.
The effort is “clearly a failure,” Neil Barofsky, special inspector general for the Troubled Asset Relief Program, said at a House Financial Services subcommittee hearing after the report was released. HAMP’s successes “pale in comparison” to the record 2.9 million foreclosure filings in 2010, Barofsky told lawmakers.
Administration officials say that cutting the programs would be a mistake, even as they acknowledge that they’ve failed to meet expectations.
“Unspent funds don’t cost the taxpayer a penny,” Federal Housing Administration Commissioner David Stevens told reporters yesterday, noting that federal money is spent only when homeowners win loan modifications. “If you eliminate these programs, if you eliminate HAMP, the only people doing the modifications are the institutions that caused the problem.”
The Treasury will spend only about a fourth of the $50 billion allocated for the program, according to a Congressional Budget Office projection.
In their monthly HAMP scorecard released yesterday, the Treasury and HUD reported that almost 28,000 new borrowers entered permanent loan modifications in January. Of the 1.5 million trial modifications begun since the program was started in 2008, about 808,000 have been canceled.
Geithner has said that ending HAMP would cause “a huge amount of damage” to a still-fragile housing market.
HAMP’s smaller numbers are largely attributable to the Treasury’s decision to tighten eligibility standards so that participants would be more likely to qualify for permanent relief, Massad said.
“We overestimated how many people would be eligible,” Massad said yesterday. The Treasury wants to continue improving the program and accepting new borrowers through the end of 2012, he said.