RPC Must Read March 4, 2011

 

Ending Ineffective Housing Programs

 

Yesterday, the House Financial Services Committee held a mark up to terminate two ineffective housing programs. These programs are symbolic of the failed Washington response to the recent financial crisis. Click here to find more information on this legislation from the Financial Services Committee. An account of the mark up is below.

 

As a bonus item – Assistant Secretary for Financial Markets Mary Miller announced on Tuesday, March 1, that the United States is now projected to reach the debt limit between April 15 and May 31 of this year.

 

House Panel Endorses Bills to End Foreclosure Assistance Programs

 

CQ Today, March 3, 2011

By Charlene Carter

 

The House Financial Services Committee on Thursday advanced legislation to dissolve two of the Obama administration’s foreclosure mitigation programs.

 

The panel approved along party lines, 33-22, a bill (HR 830) that would terminate a Federal Housing Administration (FHA) program established to provide assistance to homeowners who owe more than their homes are worth.

 

In a separate 33-22 party-line vote, the committee also approved legislation (HR 836) to end a Department of Housing and Urban Development (HUD) program that provides emergency loans to unemployed homeowners facing foreclosure.

 

House leaders have announced that both measures are expected to be considered on the floor next week.

 

The two bills represent the first phase of an effort by Financial Services panel Republicans to eliminate four foreclosure assistance programs that were established to help struggling homeowners following the onset of the financial crisis in 2008. Republicans on the committee call the programs failed and ineffective, and say that the two measures approved Thursday to terminate the FHA and HUD initiatives would save taxpayers $9 billion.

 

Other Targets

 

The panel is expected next week to take up measures targeting the other two foreclosure mitigation programs that Republicans want to end. One bill (HR 839) would terminate the Home Affordable Modification Program, which was designed to use money from the Troubled Asset Relief Program (TARP; PL 110-343) to offer incentives to lenders to renegotiate troubled loans with borrowers. The other measure (HR 861) would end the Neighborhood Stabilization Program, which makes grants to states and local governments to purchase and redevelop foreclosed and abandoned homes and residential properties.

 

“Congress needs to stop funding programs that don’t work with money we don’t have,” House Financial Services Chairman Spencer Bachus, R-Ala., said.

 

Democrats argued that the programs should be retooled instead of eliminated, citing government officials that testified at a panel subcommittee hearing Wednesday.

 

“Each of them gave some indication that the programs should be administered better but not terminated,” Texas Democrat Al Green said. “We can amend them, we need not end them.”

 

FHA Program

 

During Thursday’s markup, the panel voted to end the FHA Refinance Program that was announced in March 2010 to help homeowners who owe more on their mortgages than their homes are worth — a condition known as being “underwater” — refinance their loans. The bill also would rescind all unobligated funds allocated for the program under the 2008 financial industry bailout (PL 110-343).

 

Borrowers who are current on their mortgage could qualify for an FHA refinanced loan provided that the lender or investor writes off at least 10 percent of the unpaid principal balance of the mortgage.

 

To participate in the program, the existing loan to be refinanced must not be an FHA-insured loan, and the refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent and, for more than one mortgage, a combined loan-to-value ratio no greater than 115 percent.

 

Rep. Robert Dold, R-Ill., who introduced the bill, said that in the six months since the program began operating in Sept. 2010, it has dispersed $50 million of the $8 billion in TARP funds obligated to it to refinance 44 mortgages.

 

Dold said the program’s qualifications doomed it to fail from the outset.

 

“The program categorically disqualifies most homeowners from the beginning,” he said.

Rep. Carolyn B. Maloney, D-N.Y., who argued that the FHA Refinance Program is still in its infancy, offered an amendment to postpone termination of the program until more than 500,000 mortgages have been insured under the program.

 

“If you want to ensure termination, you can still vote for my amendment, but let’s give this program a chance to work.” Maloney said. The panel rejected her amendment along party lines, 22-33.

 

The panel gave voice-vote approval to an amendment by Green after adopting a second-degree substitute amendment by New York Republican Michael G. Grimm. Green’s original language would have authorized the HUD secretary to consult with the Pentagon and Veterans Affairs Department to determine the cost of providing loan modifications to veterans and armed forces personnel. It would have funded that program through unobligated funds allocated for the FHA Refinance Program. The panel adopted, 33-22, Grimm’s amendment to replace that provision with language calling for a study on veterans’ housing assistance.

 

HUD Program

 

The panel adopted, 33-22, a similar veterans’ amendment by Grimm during its consideration of the bill to end the HUD program that provides emergency loans to unemployed homeowners facing foreclosure. The bill also would rescind all unobligated funds allocated for the HUD program.

 

The 2010 financial regulatory overhaul law (PL 111-203) provided $1 billion to authorize HUD to make emergency mortgage-relief payments to unemployed homeowners facing foreclosure for up to 12 months. It also allows HUD to extend those benefits for an additional year.

 

Barney Frank of Massachusetts, the top Democrat on the panel, criticized Republicans for crafting language to terminate foreclosure mitigation programs while voting to extend subsidies for Brazilian cotton farmers in the fiscal 2011 continuing appropriations measure (HR 1).

 

“The Emergency Homeowner Relief Fund provides assistance to people who are unable to pay their mortgages not because they were imprudent or irresponsible but because they are unemployed,” Frank said.

 

He offered an amendment to keep $300 million — the cost of two years of the agricultural subsidies— obligated for such emergency loans before or after enactment of the bill, but it was rejected, 22-33.