Republican members of Congress have set their sight on gutting assistance to troubled homeowners at risk of foreclosure.
A bill, H.R. 430, introduced by Rep. Jim Jordan, R-Ohio, and other Republicans would dismantle the Home Affordable Modification Program set up by George W. Bush during the height of financial crisis to modify mortgages and help families remain in their homes.
GOP representatives summoned Neil Barofsky, the special inspector general for the government’s bank bailouts to testify before a House oversight committee.
Barofsky, while pointing to significant problems with the program – 10 new defaults for every HAMP modification – attributed the cause to the banking institutions themselves. The mortgage program “has failed because regulators are “afraid to rein in or impose penalties on the mortgage servicers” whose record “has been nothing short of abysmal” said Barofsky.
Kathleen Day, from the Center for Financial Responsibility, also faulted the big banks, reported USA Today: “Blame for HAMP’s poor performance rests not with the Treasury Department, but with a mortgage-servicing industry that ‘can’t distinguish between the foreclosures that are inevitable and those that are avoidable,’ Day said.”
Significantly, Barofsky called for strengthening the program, not dismantling it. Avril Lighty, in a post on The Leadership Conference on Civil and Human Rights website, writes that the Inspector General said the program “could work better if the Treasury Department re-evaluates, sets clear and realistic goals, and holds loan servicers accountable for frequent errors and misconduct.”
The program initially was supposed to help 3 to 4 million homeowners, however only “only 238,000 of the 522,000 modifications completed by December 31, 2010, can even be attributed to the program.”
A large percentage – over three-quarters – of those receiving assistance are expected to default because of severe financial woes.
Americans for Financial Reform have called for several reforms to strengthen the program, among them that “The Department of Housing and Urban Development and all government housing programs must enforce their rules that require servicers to try to modify loans before proceeding to foreclosure.”
Currently the program is voluntary and the government lacks any mechanism for enforcement. “I agree that the servicer performance has been abysmal and that’s something that we have been trying to fix,” said Timothy Massad, the Treasury official in charge of bank bailouts. “Let me first make it clear, this is a voluntary program. Congress didn’t give us the tools to impose fines.”