A newly powerful member of Congress has a plan for how to fix the government’s failed mortgage assistance program: Kill it. In a recent interview with American Banker on a wide range of financial issues, Randy Neugebauer (R-Texas) says that the federal Home Affordable Refinance Program (HAMP) is making the housing markets worse, not better.
“Some of these crazy programs that we’ve dreamed up, I think we may have to pull the plug on them,” Neugebauer, chairman of the House Financial Services Oversight Subcommittee, said in an interview published Monday.
[Expert column: Solving The Foreclosure Mess: Let’s Get Serious]
HAMP has been an abject failure from the beginning. A report by the nonpartisan Congressional Oversight Panel published in December found that the program will only prevent 700,000 foreclosures, a pittance compared to the four million the Treasury Department initially hoped to avoid. The program’s biggest shortcoming, the panel found, was its reliance on loan servicers to modify loans without changing the incentives that made it much more profitable for servicers to foreclose on a home rather than modify the loan. See the COP’s video report on why HAMP is failing:
Neugebauer admits that killing HAMP may not be popular right now, but is necessary because the housing market must be allowed to hit bottom before it can begin a true recovery.
“What about the folks who are out there who are going to lose their homes?” Neugebauer told American Banker. “My perception is right now that most of the people that can keep their homes can keep them, but we are probably postponing the people that long-term aren’t going to be able to keep them.”