WASHINGTON The incoming head of a House of Representatives panel overseeing the Obama White House on Thursday called for pulling the plug on a widely criticized program to help struggling borrowers stay in their homes.
"This program seems to have outlived its usefulness," Representative Darrell Issa, the top Republican on the House Oversight and Government Reform Committee said, referring to the administration's Home Affordable Modification Program,
Issa, who is expected to head the panel when Republicans take control of the House in January, made the comments at a hearing of the House Judiciary Committee.
Issa said the program, which has helped just under 500,000 homeowners get permanent loan modifications, has only managed to provide payments to financial institutions which would have modified those loans without the government's money.
Treasury launched HAMP to try to find a way to reduce mortgage payments for struggling homeowners who wanted to keep their homes but who were at imminent risk of foreclosure.
But it is widely regarded as a flawed program. Lawmakers say it is failing to ease the strain on households where incomes have been sapped by slow economic growth, high unemployment and red tape imposed by banks that makes it hard to meet all the hurdles for a temporary or permanent reduction in monthly payments.
Phyllis Caldwell, who heads the Treasury Department's Homeownership Preservation Office, said the mere existence of HAMP has changed the way mortgage servicers, firms which collect loan payments, modify loans.
Treasury's HAMP was not alone in the line of fire.
Panel members slammed regulators for not paying close enough attention to documentation problems that have led to the "robo-signing" controversy.
The still struggling housing market has been further weakened by allegations that banks have used "robo-signers" to sign hundreds of foreclosure documents a day without proper legal review.
"Can you explain how the OCC which regulates the large banks that are at the center of this controversy failed to detect that there were foreclosure documentation issues well before this turned into a crisis that we find has gummed up the entire works here and caused problems for families, problems for people who want to buy homes, has really altered the entire real estate market in the country," Representative Robert Goodlatte asked a top lawyer at the Office of the Comptroller of the Currency, which supervises the largest U.S. banks.
Julie Williams, chief counsel at the OCC, said her agency was focused on supervisory efforts of the loan modification process.
"There were no warning signs from internal audit, quality control, or even complaints relating to the foreclosure documentation aspect of mortgage servicing that were triggering red lights for us," Williams said, adding that she learned of the controversy from press accounts.
"In hindsight, if we think about the volume of transactions that were going through the process, we could have been more suspicious" there might be problems, Williams said.
Federal bank regulators and all 50 state attorneys general are probing Bank of America, JPMorgan, and other major mortgage servicers, many of whom temporarily halted foreclosures to examine their practices, only to then resume them.
(Reporting by Corbett B. Daly, Editing by Chizu Nomiyama)