The Republican House terminated a mortgage refinancing program established by President Obama and rescinded $8 billion in TARP funds designated for it. The “Federal Housing Administration Refinance Program Termination Act” passed the House on Thursday by a vote of 256-171, with 18 Democrats voting in favor of it. The unspent money will go toward reducing the U.S. debt, which is currently more than $14 trillion.
“I’m pleased the House has voted to save taxpayers billions of dollars by beginning to shut down the TARP bailout program. The American people understand we can’t continue spending money we don’t have, especially on things that don’t work,” Speaker of the House John Boehner (R.-Ohio) said in a statement. “I hope the Senate will give these spending cuts the consideration they deserve.”
The “FHA Refinance Program Termination Act,” which was sponsored by Rep. Robert Dold (R.-Ill.), will still need to pass the Democrat-controlled Senate.
The White House announced on Wednesday that President Obama will veto the bill because he believes that “continuation of the FHA refinancing programs is vital to the nation’s sustained economic recovery.”
The Obama administration established the FHA Refinance Program a year ago and directed $8.12 billion in TARP funds to finance it. The program, run by the Federal Housing Administration, uses federal dollars to allow homeowners who are under water on their mortgages to refinance.
“The money from this program doesn’t go to the homeowner, it goes to the lender, it goes to the banks. And who pays for it? The taxpayers and ultimately our children and grandchildren, because the federal government borrows 42 cents of every dollar it spends,” said Financial Services Committee Chairman Spencer Bachus (R.-Ala.).
When the Obama administration created the program, it claimed that it would help between 500,000 and 1.5 million homeowners. Since it went into effect in September, however, the program has wasted millions of dollars on only 44 homeowners.
“This program is already allocated $50 million and has helped only 44 people. Do the math,” said Bachus during the floor debate.
Also this week, the committee passed two bills that end other ineffective and costly government housing programs and save $30 billion. The bills, which passed the committee on Wednesday, would terminate the Home Affordable Modification Program (HAMP) and the Neighborhood Stabilization Program (NSP). The bills will be voted on by the House next week.
“All who investigate, analyze, or survey this program conclude that it is an epic failure. The government is offering false hope to hundreds of thousands of Americans, and it just can’t deliver,” said Rep. Patrick McHenry (R.-N.C.), who sponsored the bill to end HAMP.
HAMP was announced by the Obama administration in February 2009 and cost $30 billion in TARP funds. In the past two years, only $840 million of the funds have been spent for the ineffective program, so the remaining $29 billion in TARP funds will be rescinded.
At the time it was established, the administration claimed that HAMP would help 4 million homeowners, but instead the program has put many people in worse financial shape. The program has modified only 521,630 loans, and the re-default rate is high, according to the committee.
NSP was established by the Obama administration in 2008 to supposedly help homeowners avoid foreclosure. Instead, the program has only helped mortgage lenders and real estate speculators, who have used it to get rid of foreclosed properties at taxpayers’ expense.
Originally funded with $1 billion from the “Dodd-Frank Wall Street Reform and Consumer Protection Act,” NSP has run out of money twice in two years. The formerly Democratic Congress gave the program new funding of $1 billion and then $2 billion from the stimulus spending. The committee bill closes the failed program and refuses to add another round of funding.
“We have little to show for the nearly $6 billion of the taxpayers’ money that was spent on this ineffective program. NSP was inefficient and it did not target resources to those areas with the most need. Even worse, there was no requirement for repayment of the allocated funds,” said Rep. Gary Miller (R.-Calif.), sponsor of the bill to end the program.
The bills this week that rescind billions of dollars in TARP funding and terminate wasteful programs are part of a larger effort by House Republicans to stop the out-of-control government spending from the years in which Democrats controlled Congress.
“Democrats and Republicans alike know that we must stop wasting money on ineffective government programs and instead focus on improving the conditions for jobs and income growth,” Dold stated after passage of his bill.