WASHINGTON — The U.S. House of Representatives voted Tuesday to terminate the Obama administration’s signature anti-foreclosure effort, the beleaguered Home Affordable Modification Program. The 252-170 vote broke down mostly along party lines, with Republicans in favor of ending the program.
HAMP, as the program is known, has been widely criticized for lagging far behind President Barack Obama’s stated target of reducing mortgage payments for 3 to 4 million struggling homeowners. Republicans recited the program’s latest statistics on the House floor during debate before the vote: Since the program launched in early 2009, fewer than 600,000 homeowners are in permanent modifications as of February, while more than 800,000 homeowners have had their modifications canceled.
“The intent was to help homeowners, but two years after the fact, we’re left with the cold, hard fact that this program has hurt more people than it’s helped,” Rep. Patrick McHenry (R-N.C.) said on the House floor. McHenry was a principal sponsor of the HAMP Termination Act, which is unlikely to prevail in the Senate and would almost certainly be vetoed by the White House.
Speaking on the floor, McHenry related an anecdote about a constituent who’d spent 14 months trying to win a HAMP modification — a process that is not supposed to take longer than three months. “It’s false hope that this program delivers,” said McHenry, who also called the program “an epic failure.”
Consumer advocates have attributed HAMP’s shortcomings mostly to the fact that the Treasury Department, which administers the program, does nothing to punish banks that violate its guidelines. Treasury, for its part, says it has little recourse, citing what it refers to as the voluntary nature of the program. However, federal oversight panels have repeatedly criticized that line of thinking, saying that Treasury has every right to penalize firms for noncompliance.
Homeowners who are eligible for modifications under HAMP are supposed to receive five-year, so-called “permanent” loan reductions if they successfully make reduced payments during a three-month “trial” modification, but homeowners’ stories of mixed signals and lost paperwork from their mortgage servicers are legion. Government auditors have reported that the program sometimes lures foreclosure-bound homeowners into making futile extra payments, and that in some cases the program even causes the foreclosures it’s designed to prevent. Several homeowners have sued their banks over HAMP mods gone awry.
An internal report prepared by the Treasury Department’s fledgling consumer protection bureau and first published by The Huffington Post found that the biggest banks have saved about $25 billion since 2007 by taking shortcuts in the processing of struggling borrowers’ loans.
Despite HAMP’s limited results, however, House Democrats criticized Republicans Tuesday for pushing to eliminate the program without offering any sort of alternative anti-foreclosure effort.
“It makes no sense to say to 500,000 people, ‘We want you to be homeless. Good luck, you’re on your own.” That’s basically what they’re saying,” Rep. Jim McDermott (D-Wash.) said, although in fact, the bill would not end the program for homeowners who are already in modifications.
McDermott has emerged as a HAMP defender in recent weeks. “You got to get the servicers to play better with the program,” he said. “They simply don’t want to do it.”
Rep. Maxine Waters (D-Calif.), a senior Democrat on the House Financial Services Committee, which approved the HAMP Termination Act earlier this month, successfully amended the bill to require the Treasury Department to notify all HAMP applicants “that they will not be considered for a modification due to termination of the program, and that they can contact their Member of Congress for assistance in negotiating with, or acquiring a loan modification from, their servicer.”
The Congressional Budget Office estimated that the HAMP termination bill would save taxpayers roughly $1.4 billion.