The Republican controlled House closed one of President Obama’s Troubled Asset Relief Program (TARP) mortgage refinancing programs and rescinded $29 billion in unspent funding on Tuesday. The White House, however, released a statement stating that Obama will veto the bill if it passes the Democrat-held Senate.
The House passed the HAMP Termination Act of 2011 on Tuesday by a vote of 252-170, 1 present. The unspent TARP money will go toward reducing the U.S. debt, which is currently more than $14.1 trillion.
“If we can’t eliminate a blatant failure of a program that is actively harming Americans every day, and costing them billions of dollars, then I ask my colleagues on the other side: What can we cut?,” Rep. Patrick McHenry (R.-N.C.), who sponsored the bill, said during the floor debate.
The HAMP termination is part of a larger effort by House Republicans to close wasteful government programs created with TARP funds by the Democratic Congress and Obama. Earlier in March, the House shut down Obama’s FHA Refinance Program and rescinded the $8.12 billion of TARP funds.
The Obama administration started the Home Affordable Modification Program (HAMP) in 2009 with $30 billion in TARP funds for the Treasury Department to run the program.
The Special Inspector General for for TARP Neil Barofsky testified before the House Financial Services Committee about the failures of HAMP and its use of TARP funds.
“HAMP has been beset by problems from the outset and, despite frequent retooling, continues to fall woefully short of meeting its original expectations,” testified Barofsky. “Today the program is under siege from all quarters, with near universal agreement that the program has failed to meet its goals.”
When announcing the program, the Obama administration promised that HAMP would help “three to four million at-risk avoid foreclosure” by “reducing monthly payments to sustainable levels.”
In the two years of HAMP program, the amount of foreclosures filed has been staggering: 2.8 million in 2009 and 2.9 million in 2010. Foreclosure filings for 2011 are projected to increase 20% from 2010, to exceed three million homeowners.
HAMP, however, has only permanently modified 521,630 mortgages in the two years, spending $840 million. Even Obama’s Treasury Secretary Timothy Geithner has conceded that HAMP “won’t come close” to helping the promised three to four million homeowners.
Of the modified mortgages, a smaller percentage have been “successful,” which are those that allow the homeowners to stay in their houses and not default on the government loans. The government has spent $20,000 for each of the “successful” modifications, according to the Treasury Department.
Furthermore, many of these homeowners are in worse financial shape after participating in the Treasury Department’s trial modifications of mortgages. Barofsky testified that Treasury’s insistence on citing the trial modifications as a benchmark for success “ignore the real and often debilitating harm that such modifications have inflicted on many families.”
Also, the re-default rate for HAMP mortgages is significantly higher than average, according to the House Financial Services Committee.
The Congressional Oversight Panel, which was created by Congress to oversee TARP funded programs, reported that high re-default rates “signal the worst form of failure of the HAMP program: billions of taxpayer dollars will have been spent to delay, rather than prevent, foreclosures.” The committee also reported that “each re-default represents thousands of taxpayer dollars that have been spent merely to delay rather than prevent a foreclosure.”
The Obama administration is seemingly in denial of the facts of HAMP’s failures, putting out the veto threat before the House voted on Tuesday. “As tens of thousands of responsible American homeowners struggling with their mortgages receive permanent assistance each month from HAMP, the Administration believes that continuation of HAMP is important to the Nation’s sustained economic recovery,” read the White House statement.
But Special Inspector General for TARP Barofsky testified that HAMP, “offers others little more than false hope, and in certain cases causes more harm than good.”