Frank sees TARP money going to foreclosure aid

WASHINGTON (Reuters) - The Bush administration is likely to back off its opposition to spending money from a $700-billion bank bailout fund on reducing home foreclosures, the chairman of a U.S. congressional committee said on Tuesday.

"I think you're going to see some movement toward TARP money for foreclosure modification," Rep. Barney Frank, chairman of the House of Representatives Financial Services Committee, told reporters after a hearing, referring to the Treasury Department's Troubled Asset Relief Program, or TARP.

Treasury Secretary Henry Paulson was harshly criticized by lawmakers at the committee hearing for not doing more to prevent home mortgage foreclosures under the huge financial stabilization program approved by Congress in early October.

Frank, a Massachusetts Democrat, and leading House Democrats had a nearly two-hour meeting on Monday with Paulson and Federal Reserve Chairman Ben Bernanke.

Frank said he thinks that the Bush administration, in consultation with the transition team of President-elect Barack Obama, had decided "to hold off the rest of this money for them to come into power and have a chance to deal with it."

"I think that's reasonable," Frank said. But he added, "People on both sides underestimated the negative of not doing foreclosure modification."

Following Monday's meeting in the Capitol, House Ways and Means Committee Chairman Charles Rangel told Reuters: "I got the impression that he (Paulson) wants to leave something for the next administration."

About $290 billion of the first $350 billion authorized under the program has been used or committed for use. Paulson said he wanted to reserve the balance for the incoming administration. Obama takes office on January 20.

Frank said: "An essential decision ... to let Obama have a major say in this is not undermined by carving out $25 billion to pay for a sensible" foreclosure reduction program.

He said he thinks legislation will not be needed because "I do not think we will have to direct them."

"So I am pretty confident that we will have a TARP-funded program that will substantially enhance mortgage foreclosure fairly soon."

(Additional reporting by Richard Cowan; Editing by Tim Dobbyn)