Symbolic Vote Passes to Kill Mortgage Programs

Foreclosure_Jeff_Turner_Flickr Republicans in the House of Representatives voted Thursday to kill two new programs intended to help prevent foreclosure, arguing that government initiatives to help people stay in their homes have failed.

The effort to end the programs was largely symbolic, since it has little chance of passing in the Democratic-controlled Senate.

The Republican-led House Financial Services Committee voted along party lines to end the programs. One, called the “short refinance” initiative by the Federal Housing Administration, requires investors in mortgage-backed securities to agree to reduce the amount owed by at least 10 percent for homeowners whose houses are now worth significantly less than the original purchase price.

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The committee also voted to end the Emergency Homeowners’ Loan Program, which would provide $1 billion for zero-interest loans to help homeowners who have recently lost their jobs.

“We should not waste taxpayer dollars on failed government programs that do not work and actually make things worse for struggling homeowners,” Spencer Bachus (R – Ala) said in a press release. “These programs may have been well-intentioned, but they’re doing more harm than good.”

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Democrats countered that the programs should be tweaked, not scrapped. And they criticized Republicans for trying to end programs aimed at helping struggling homeowners while offering nothing in their place.

“The majority opinion seems to be foreclosures will happen … so be it … let’s make no effort whatsoever to improve these programs or let them survive,” said Rep. Barney Frank (D – Mass), the committee’s top Democrat.

Though both programs were included in the Dodd-Frank financial reform bill, passed last summer, neither one is up and running yet. The Federal Housing Administration has struggled to find lenders willing to participate in the short refinance initiative, as recently reported on Credit.com.

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The Department of Housing and Urban Development has yet to launch the loan program for the unemployed.

This was just the first of what is likely to be many symbolic votes by the committee, intended to register Republicans’ displeasure with the Dodd-Frank financial reform act and other programs passed by Democrats in the last Congress.

A separate bill has been introduced calling for the end of the Home Affordable Modification Program. Aimed at encouraging loan servicers to modify mortgages, the initiative has been a complete failure, according to a recent study by the Government Accountability Office. The bill may be considered by the committee next week.

Image: Jeff Turner, via Flickr.com