Rep. Darrell Issa to introduce bill to scrap Obama mortgage modification program [Updated]
Republicans have long targeted the Obama administration's troubled mortgage modification initiative as an ineffective government program. And now that they're in position to do something about it in the House, some longtime critics are moving to end it.
Rep. Darrell Issa (R-Vista), the new chairman of the House Oversight and Government Reform Committee, along with Reps. Jim Jordan (R-Ohio) and Patrick McHenry (R-N.C.), announced Friday that they were introducing legislation to repeal the Home Affordable Mortgage Program.
Known as HAMP, the program is run by the Treasury Department using money from the $700-billion financial bailout bill and offers banks cash incentives for lowering mortgage payments of troubled homeowners.
"HAMP is a colossal failure," Jordan said. "In many cases it has hurt the very people it promised to help. It’s one more example of why government interference in the private sector doesn't work and that’s why it should be repealed."
With Democrats controlling the Senate and the White House, the legislation ending the program is unlikely to become law. But Issa and other Republicans have shown they intend to keep a spotlight on its troubles.
Issa focused on the program Wednesday at his first hearing since taking over as chairman of the powerful committee as part of the Republican takeover of the House.
He brought in as a witness Neil Barofsky, the special inspector general for the government's Troubled Asset Relief Program (TARP), who has slammed the mortgage modification program for failing to help anything close to the 3 million to 4 million homeowners the Obama administration promised when it launched the initiative in 2009.
Barofsky told Issa's committee that the program "has to date been a failure." He said there could be more than 10 million foreclosure filings during the course of the program, which is set to run through 2012, yet the Congressional Oversight Panel monitoring TARP estimates the program will result in no more than 800,000 permanently lowered mortgage payments.
Through December, there had been 579,650 permanently modified mortgages under the program. Qualifying homeowners first get a three-month trial with lower mortgage payments. If they make those payments, the modification can be made permanent. Only at that point does the servicer get the incentive payment.
Of the $29.9 billion in TARP money allocated to HAMP, only about $1 billion has been spent.
[Correction: Earlier versions of this post reported that the TARP allocation for HAMP was $50 billion. That is the figure for all the Obama administration's foreclosure prevention programs.
Timothy Massad, the acting assistant Treasury secretary in charge of TARP, defended the program at Wednesday's hearing, noting that even if it does not reach its original goal, it has still helped more than half a million struggling homeowners.
"These are people that make $50,000 a year, so to sort of write it off and say, well, it's a failure, I think is not really appropriate," he said.
[Updated at 4:30 p.m.: The Treasury Department issued a statement on the proposed legislation. It said, "If enacted, this legislation would close the door to struggling homeowners seeking relief in the face of the worst housing crisis in generations. The administration remains committed to reaching eligible homeowners to give them every opportunity to avoid foreclosure and will continue working to make our programs as effective as possible."]
-- Jim Puzzanghera
Photo: Rep. Darrell Issa (R-Vista). Credit: Harry Hamburg / Associated Press