House GOP works to end Obama mortgage plan

WASHINGTON (CNNMoney) — The House is expected to vote Tuesday to kill a signature Obama administration program that helps homeowners stay in their homes but faces criticism as ineffective.

House Republicans will consider a bill to stop any new funding for the Home Affordable Modification Program (HAMP). The program taps the federal bailout that saved the big banks, providing incentives to mortgage servicers to modify mortgages for borrowers behind on their payments.

The bill’s path in the Senate is uncertain. President Obama has vowed to veto it.

Already, the House has passed three other smaller programs designed to help families and neighborhoods dealing with foreclosure. What makes the HAMP program different is the widespread criticism it has received, from both Republicans and Democrats, for being ineffective.

On Tuesday, 50 House Democrats wrote Treasury Secretary Tim Geithner a letter, urging him to reform the program, saying “HAMP must change to meet its potential.”

The outgoing special investigator general for the Troubled Asset Relief Program called HAMP a “failure,” in an interview with CNN on Friday. He said it was supposed to help 3 to 4 million underwater homeowners stay in their homes. But so far, it has only managed to help about 500,0000 homeowners.

“It’s really one of the deep failures of TARP,” said Neil Barofsky, the special investigator general. “TARP wasn’t supposed to just help the banks return to profitability, it was supposed to help people stay in their homes.”

Treasury has pointed out, on several occasions, that while the HAMP program could be better, it’s the only federal program spurring mortgage servicers to help homeowners.

“This is a very difficult housing market to fix, and this program, is at least helping fix it,” Timothy Massad, the Treasury acting assistant secretary who is overseeing HAMP, said recently to a Senate Banking panel. “It’s not enough. But it needs to be continued so we can try to ease the pain for millions of American families.”

The GOP proposal would stop Treasury from being able to help 100,0000 new troubled homeowners, according to the Congressional Budget Office. Treasury spends about $13,000 per homeowner on the program, CBO said. It would also cut federal deficits, saving a minimal amount, $1.3 billion over the next five years. 

First Published: March 29, 2011: 12:10 PM ET