The House Financial Services Committee has signed off on two bills that would scuttle the FHA’s $11 billion short refinance program for underwater homeowners and end emegency bridge loans administered by the U.S. Housing and Urban Development Department to unemployed homeowners.
The committee put off until next week a markup session and vote on two other bills: HR 839, The HAMP Termination Act of 2011, which would shut down the Obama administration’s Home Affordable Modification Program (HAMP); and HR 861, the NSP Termination Act, which targets Neighborhood Stabilization Program funding for state and local government agencies to acquire, redevelop or demolish foreclosed properties.
Republican backers say the bills are aimed at cutting wasteful spending in the face of rising deficits. Democrats say the programs they would eliminate are still vital to mitigating the impacts of the housing downturn and foreclosures.
"I am very disappointed in my colleagues on the opposite side of the aisle, who in their mania to achieve fiscal austerity at all costs moved to cut two nascent programs designed to really help struggling homeowners," said Rep. Maxine Waters, D-Calif., in a press release.
In written testimony to the committee, Federal Housing Administration Commissioner David Stevens urged lawmakers not to shut down the the FHA short refi program or the $1 billion Emergency Homeowners Loan Program (EHLP).
The FHA short refi program allows underwater borrowers who are current on a non-FHA mortgage to refinance into an FHA-backed loan if their lender agrees to write off at least 10 percent of their principal.
Stevens noted that the program is limited to homes occupied by their owners — vacation homes and investment properties are excluded — and that the new loan can’t have a combined loan-to-value ratio of more than 115 percent.
Of the $11 billion of TARP funds allocated to support program, up to $8 billion will be made available to provide coverage to lenders for a share of potential losses on the loans, Stevens said.
Although only 245 applications have been submitted and 44 loans approved since the program launched in September, 23 lenders are participating in the program, Stevens said.
The EHLP initiative program was approved as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act to provide bridge loans of up to $50,000 to help unemployed homeowners cover their mortgage and other costs for up to 24 months.
The program is aimed at assisting up to 30,000 borrowers in 32 states who are not receiving aid under the Treasury Department’s "Hardest Hit" program.
Stevens said it’s taking longer than expected to implement the EHLP program, in part because of a required public notice to reactivate the 1975 relief program that funding was provided to.
In states that already have similar programs, state agencies will administer EHLP programs. In others, NeighborWorks of America will designate housing counseling agencies to administer the loans.
Stevens said EHLP loans should be available to distressed homeowners later this spring.