WASHINGTON (Reuters) – Republicans in the U.S. House of Representatives on Tuesday took a step toward killing President Barack Obama's signature foreclosure prevention program, though the move will likely be blocked by the Senate.
The House Financial Services Committee voted 32-23 to shutter the Home Affordable Modification Program, which aims to help struggling borrowers win lower mortgage payments. The full Republican-controlled House is expected to follow suit next week.
The program, which offers incentives for lenders to modify loans, was launched to great fanfare in the spring of 2009. The Obama administration had hoped it would permanently lower mortgage payments for 3 million to 4 million homeowners.
To date, however, only about 500,000 borrowers have received permanent loan modifications, and the program has been widely criticized as ineffective.
Republicans argue the program, which is currently scheduled to accept new borrowers through next year, is a waste of taxpayer money amid soaring U.S. budget deficits.
"If you can't get rid of programs that number one, aren't working, aren't effective ... what hope do we have" of reducing government spending, Republican Representative Jeb Hensarling asked.
About $30 billion has been set aside for the program from the government's $700 billion financial rescue fund, but only about $1 billion of that has been spent so far.
Democrats admit the program is falling short of its original goals, but defend it as a useful tool when so many borrowers are in need. With Democrats in control of the Senate, the measure to shut down HAMP is likely to founder.
PART OF WIDER EFFORT
The committee also voted to kill an additional $1 billion slated to go to the Neighborhood Stabilization Program, which provides money for state and local governments to help clean up blighted properties and redevelop them. The bill is expected to face a vote in the full House next week.
In all, House Republicans plan to pass four bills targeting Obama administration housing programs, all of which are expected to die in the Senate.
The House on Thursday is set to vote on a bill to repeal a program that lets borrowers owing more than their homes are worth refinance into government-backed mortgages.
On Friday, it is expected to vote on legislation to end a program that would extend loans unemployed borrowers to help them make mortgage payments for up to two years.
Analysts say the votes are an effort by Republicans, who won control of the House with an anti-bailout, anti-deficit message, to score political points.
"They are doing this for the base," said Larry Sabato, director of the University of Virginia's Center for Politics.
While HAMP has seen few loan terms changed, loan modifications may rise if government officials and the largest U.S. banks reach a settlement over accusations that many lenders improperly foreclosed on thousands of borrowers.
Major U.S. banks, including Bank of America, JPMorgan Chase and Wells Fargo, have been asked to forgive some of the amount owed on troubled mortgages in a 27-page proposal sent to them by state attorneys general and federal agencies last week.
A number of House Republicans, including panel chair Spencer Bachus, said they have "significant concerns" about the financial market impact of the proposed settlement.
(Reporting by Corbett B. Daly; Editing by Gary Crosse)
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