By Ryan Grim & Arthur Delaney
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 It’s one more example of why government interference in the private sector doesn’t work and that’s why it should be repealed.”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.