A new report released yesterday (.pdf) by Neil Barofsky, special inspector general for the Troubled Asset Relief Program (TARP) warns that Obama administration efforts to bailout homeowners through the Home Affordable Modification Program (HAMP) are ineffective and will not stem the sweeping tide of foreclosures.
The $75 billion HAMP program was created with a promise to bailout 3 to 4 million homeowners in foreclosure, paying lenders to modify troubled mortgages. Foreclosures reached 2.8 million in 2009 and are on track to exceed that total with over 932,000 foreclosures filed in the first three months of 2010, the report found.
The inspector general found the program “has made very little progress in stemming this onslaught” in a year with only 230,000 loans permanently modified.
Rep. Jeb Hensarling (R-Texas), top Republican on the House Financial Services Subcommittee on Financial Institutions and Consumer Credit put a fine point on the bailouts rewarding bad behavior.
“We must remember that 93.6% of households rent, own free and clear, or are current on their mortgages,” Hensarling stated. “Programs like HAMP that force the responsible majority to subsidize the irresponsible minority should be rejected. This is another chapter of ‘America: The Bailout Nation,’ a book being written by President Obama and Congressional Democrats. The final chapter of this narrative is the Democrats’ financial regulatory restructuring proposal — a proposal which creates permanent bailout authority in Washington.”
“Not only is this expensive program ineffective, it is completely unfair,” Hensarling said. “HAMP forces responsible taxpayers, struggling to make their own mortgage payments, to pay their neighbor’s mortgage. There are no safeguards preventing irresponsible individuals, who used their homes as ATM machines so they could live beyond their means, from taking advantage of the program.”
Hensarling warns that jobs — not big government — are the only cure for the foreclosure epidemic.
“Until the federal government begins to reign in excessive spending and focus on policies that will encourage innovation and job creation, the American people will continue to suffer,” Hensarling added. “Without jobs so that more homeowners can pay their bills, it will be impossible to stem the foreclosure tide."