WASHINGTON -- Three leading House Republicans have introduced legislation to repeal the Home Affordable Modification Program, the Obama administration's signature foreclosure-relief effort, calling it a "colossal failure" and seconding an inspector general report that found the program ultimately left many participating homeowners worse off.
By most objective measures, the diagnosis of failure is a fair one. HAMP has bounced more people than it's helped and has no hope of reaching its original goal, as stated by President Obama in February 2009, of reducing mortgage payments for 3 to 4 million homeowners -- a goal the administration has since disavowed.
The main requirement for HAMP eligibility is that a borrower's monthly payments amount to more than 31 percent of monthly income. Eligible borrowers who make three months of trial payments are supposed to be granted five years worth of "permanent" reduced payments. But these temporary-reduction periods often drag on far longer than three months, as banks lose paperwork and offer shifting excuses.
Borrowers who are ultimately rejected from the program are then required to make up the difference between the lower rates they received during the trial period and their full mortgage payments. If they can't come up with the money, they lose their house to foreclosure even if they never missed a payment before they applied for HAMP.
The bill to unwind the program is being put forward by Rep. Jim Jordan (R-Ohio) -- the head of the Republican Study Committee, a powerful bloc of conservative Republicans -- as well as House Oversight Committee Chairman Darrell Issa (R-Calif.) and Rep. Patrick McHenry (R-N.C.), a former member of House leadership. Jordan is chair of the newly renamed Regulatory Affairs, Stimulus Oversight and Government Spending subcommittee on the oversight panel.
"HAMP is a colossal failure," Jordan said in a statement. "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 It's one more example of why government interference in the private sector doesn't work and that's why it should be repealed."
Progressive critics of HAMP, however, argue that the program failed because there was insufficient government interference -- that the program relied too heavily on bank cooperation and lacked necessary enforcement powers (the Treasury Department has not sanctioned a single mortgage servicer for violating HAMP guidelines). But in the face of HAMP's failure, that's a tough argument to make.
"[W]hat is infuriating is that their logic is practically unassailable at this point," writes David Dayen of FireDogLake, a longtime critic of the program. "And this is why HAMP was so damaging. The government ruined its own brand with a program that hurt the people it was meant to help. This is why I've said for almost a year that HAMP gravely hurt liberalism. I cannot argue with Issa and Jordan and McHenry when they say that HAMP has to go."
The House bill would snag the unspent HAMP money and return it to the Treasury to pay down the national debt. Despite the program's lack of results, advocates fighting the foreclosure crisis are loathe to lose the few remaining dollars still available to combat the problem, especially given the new political dynamic in the House, which is unlikely to produce any money to fund other foreclosure-relief efforts.
"There's no doubt HAMP is a flawed program, but to simply throw it away would make a bad situation worse," said Chris Vaeth, legislative director for the low-income homeowner advocate Greenlining Institute. "What we need to do is fix it -- push lenders and loan servicers to reduce the principal on underwater loans and give struggling homeowners real relief. Otherwise, we're looking at millions more foreclosures, more devastated neighborhoods and a continuing drag on the economy."
The Republicans' bill seconds the conclusion of the Inspector General for the Troubled Asset Relief Program -- that in some cases, HAMP actually causes the foreclosures it's designed to prevent by luring current or slightly-delinquent borrowers to make reduced trial payments that leave them severely delinquent. The legislation states that "many homeowners whose modifications were canceled suffered because they made futile payments -- some were even forced into foreclosure as a result."
Bea Garwood of Pinckney, Mich. told HuffPost in August that that's what happened to her. "They told us we were a great candidate, so we went for it," she said. "And as a result we're losing our home."
Dave Graham of Big Bear City, Calif. told HuffPost this month that he wouldn't have fallen so far behind if it weren't for HAMP. "I would have found some way to [make my payments] if I had to," he said. "It may even been that we'd have fallen behind a month or two. I certainly wouldn't have been in this sort of shape."
Troy Taliancich of New Orleans said he could have caught up if Bank of America hadn't told him to make reduced payments, while Linda Cooks of Aurora, Col. said in November she wished she'd saved the $893.86 she paid each month during the futile trial period. "That's money I could have put to getting another place," she said. "I thought I had a chance."
The Treasury Department said in a statement that the GOP bill would bad for homeowners.
"If enacted, this legislation would close the door to struggling homeowners seeking relief in the face of the worst housing crisis in generations," said a Treasury spokeswoman in an email to HuffPost. "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."