Last week the Republican House majority voted to cut several U.S. Department of Housing and Urban Development (HUD) programs intended to curb foreclosure activity and to provide assistance to unemployed home owners and underwater mortgage holders struggling with their mortgages. In response, HUD released a statement against the action calling the move “irresponsible.”
By the end of the week of March 14, 2011 the House is expected to vote to cut funding on a total of four separate HUD programs. So far the Republicans have already passed bills cutting funding to the Short Refi program (designed to help home owners underwater on their mortgages) and HUD's Emergency Homeowner Loan Program (specifically created to provide interest free loans for unemployed borrowers tormented by their monthly payments). Home Affordable Modification Program (HAMP) and the Neighborhood Stabilization Program (NSP) are the next housing programs facing the federal ax.
About the HUD Programs at Risk
As part of the Dodd–Frank Wall Street Reform and Consumer Protection Act and other programs created to prop up the U.S. economy crippled by the mortgage meltdown, the Treasury allotted a total of $46 billion through these four programs. According to HousingWire.com, the distribution provides approximately $29 billion for HAMP, $8 billion through FHA Short Refi, $7 billion through NSP, and $1 billion through Emergency Homeowners' Loan Program (EHLP). It is expected that only a fraction of those resources would actually be used.
Each program is targeted on assisting different types of home loans at risk for default:
- HAMP: "The U.S. program established to aid qualified home owners refinance or modify their existing loans as a way to stem foreclosure epidemics. The program launched as part of the Financial Stability Act of 2009," (Mortgage Marvel).
- FHA Short Refi: The program kicked off in September of 2010 and provides refinance opportunities to help underwater borrowers get out of negative equity.
- EHLP: The program set to launch in spring will provide mortgage assistance to unemployed borrowers courtesy of 0 percent interest loans up to $50,000.
- NSP: The program launched in 2008 and provides grants to state and local government and nonprofits to rehab and resell homes left vacant by foreclosure with the goal of neighborhood stabilization.
What is Fueling House Activity
Since gaining the House majority courtesy of the 2010 election season, Republicans have stated that one of their main goals was to curb government spending and help control the ever-growing national debt. As a result, a slew of bills have been passed by the house in order cut billions of dollars from the government's budget. Since the freshman class assumed their roles at the turn of the New Year, they have passed bills promoting the disbanding of the Environment Protection Agency, stopgap bills on Health Care Reform and voted to cut funding to National Public Radio. It has been common knowledge that a variety of housing programs were eventually going to share the same fate.
Currently the national debt exceeds $14 trillion and grows larger with every second. The U.S. Debt Clock assigns over a $128,000 burden to each American taxpayer and Republicans have stated that the housing programs are no longer affordable based on the current state of affairs.
While it is true that the growing debt is of concern to lawmakers from both sides of the political fence, the House activity is being viewed mostly as a symbolic gesture. In regards to the housing bills, none of them are expected to pass through the Senate. If they do, President Barack Obama has publicly stated he will veto the measures.
HUD's Opinion
HUD believes that making revisions to the existing housing programs is a smarter approach than canceling them altogether. The agency has stated that bills are too drastic and have chided Republicans for their shortsightedness. According to a spokesperson for HUD, passing the termination of EHLP bills would be "irresponsible" as "The Obama administration is committed to helping struggling homeowners stay in their homes and taking the steps needed to stabilize the housing market, and ending this program would mean the loss of an important lifeline for those families and risk damaging the fragile recovery we’re finally starting to see in the housing market," (HousingWire.com).
