Republicans take steps to kill Obama mortgage aid

* Panel votes to kill two Obama housing aid programs

* Vote on Obama’s signature foreclosure program delayed

* Vote in full House next; Senate not expected to follow

By Corbett B. Daly

WASHINGTON, March 3 (Reuters) – Republicans in the U.S.
House of Representatives moved on Thursday to kill some of
President Barack Obama’s programs to help borrowers struggling
to keep their homes, an effort that is likely to fail if it
reaches the Senate.

The House Financial Services Committee voted to terminate a
program aimed at helping borrowers who owe more than their
homes are worth and another that seeks to help unemployed
homeowners.

The action clears the way for consideration of the bills by
the full House next week. While House passage is likely, the
legislation will probably die in the Democrat-led Senate.

Republicans delayed until next week a panel vote on the
Obama administration’s signature foreclosure prevention effort,
the Home Affordable Modification Program, or HAMP, and a fourth
program aimed at stabilizing neighborhoods.

The panel voted 33-22 along party lines to repeal the
Federal Housing Administration’s short refinance program, which
lets borrowers who owe more than their homes are worth
refinance into 30-year fixed rate mortgages backed by the FHA.

The FHA does not make loans directly but guarantees them
against default. Only 44 borrowers have successfully obtained a
new loan under the fledgling program.

The panel also voted 33-22 to kill a separate program that
would extend loans to borrowers who have lost their jobs to
enable them to make payments on their homes for up to two
years. Congress provided $1 billion for the loan program when
it rewrote U.S. financial rules last year, and the program was
expected to start operating later this year.

The bills have provided a focal point for Republicans to
criticize the administration’s housing policy, which has come
under heavy fire from both liberals and conservatives.

The HAMP program, introduced in the spring of 2009 to much
fanfare, is widely viewed as ineffective.

The administration had hoped the program would permanently
lower mortgage payments for 3 to 4 million homeowners. However,
to date, only slightly over 500,000 borrowers have received
permanent loan modifications under the program.

More than 800,000 of the 1.5 million borrowers who started
in the program have dropped out.

Democrats say something is better than nothing, and argue
that the program should be fixed, not killed.

Rep. Michael Capuano, a Massachusetts Democrat, challenged
lawmakers voting to kill the program to request the return of
taxpayer money from homeowners who received government aid.

“If you are not willing to do that, then you are simply
being hypocritical and political,” Capuano said during the
often heated debate.

The debate on foreclosure prevention comes as the
government and the largest U.S. banks are close to reaching
what could be a multibillion dollar settlement over foreclosure
abuses.

Regulators and a coalition of state attorneys general are
negotiating with the biggest mortgage lenders, including Bank
of America (BAC.N: Quote, Profile, Research), JPMorgan Chase (JPM.N: Quote, Profile, Research) and Wells Fargo
(WFC.N: Quote, Profile, Research).

These banks and other mortgage servicing firms have been
accused of foreclosing on thousands of borrowers without having
the necessary paperwork.
(Reporting by Corbett B. Daly; Editing by Dan Grebler)