UPDATE 1-U.S. House votes to kill main Obama foreclosure aid

* Republicans lead charge to kill foreclosure assistance

* Senate not expected to OK; White House has veto threat

* Banks, gov’t separately meeting on foreclosure abuses
(Adds detail, background, byline)

By Corbett B. Daly

WASHINGTON, March 29 (Reuters) – The U.S. House of
Representatives on Tuesday voted to kill President Barack
Obama’s signature program to help struggling homeowners avoid
foreclosure.

A bill to terminate the program was approved on a 252-170
vote. But the bill is unlikely to clear the Senate.

It was the last in series of four measures brought forward
by newly empowered House Republicans to end government
assistance for homeowners hurt by the housing crisis. For a
Factbox on all four programs, see [ID:nN16284838]

Republicans argued the foreclosure prevention plan, known
as the Home Affordable Modification Program, is ineffective and
not worthy of taxpayer support amid soaring budget deficits.
The vote broke largely along party lines.

The program, which offers incentives for lenders to modify
loans, was launched to great fanfare in the spring of 2009. The
Obama administration had hoped it would permanently lower
mortgage payments for 3 million to 4 million homeowners.

But fewer than 600,000 borrowers have received permanent
loan modifications, and the program has been widely criticized
as ineffective from critics on both the left and the right.

“The HAMP program is a failure,” said Representative
Patrick McHenry, the North Carolina Republican who sponsored
the bill. “If we can’t eliminate this failed program, what
program can we eliminate?”

Analysts see the votes as an effort by Republicans, who
last seized control of the House in an election in November
with an anti-bailout, anti-spending message, to score points
with their political base.

The White House has already threatened to veto the measure.
However, it is unlikely to come to that since Democrats, who
retained control of the Senate, largely opposed the measure.
Both the House and Senate would have to approve the bill for it
to reach the president’s desk.

About $30 billion has been set aside for the program from
the government’s $700 billion financial rescue fund, but only
about $1 billion of that has been spent so far.

Democrats argued the program should be fixed, not killed.

“The absence of any program leaves people worse off,” said
Representative Barney Frank, the top Democrat on the House
Financial Services Committee.

Even as the Obama administration argues for keeping HAMP in
place, it is pressing forward on a separate track that could
result in much larger aid for struggling homeowners.

Big U.S. banks are meeting with federal officials and state
attorneys general at the Justice Department on Wednesday as
they negotiate what could turn into a multi-billion dollar
settlement over alleged abuses by the companies that collect
mortgage payments.

The banks and authorities are expected to discuss a
settlement proposal that the state officials sent out earlier
this month, which called on banks to treat borrowers better and
to reduce loan balances for some struggling homeowners.

A group of 50 state attorneys general and about a dozen
federal agencies are probing bank mortgage practices that came
to light last year, including the use of “robo-signers” to sign
hundreds of unread foreclosure documents a day.

On March 3, state attorneys general leading the probe sent
banks the outline of a proposed settlement endorsed by some
federal agencies, including the Justice Department, the Housing
and Urban Development Department and Treasury staff setting up
the Consumer Financial Protection Bureau.

The banks that received the proposal and that will have
representatives at Wednesday’s meeting are Bank of America Corp
(BAC.N: Quote, Profile, Research), JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), Citigroup Inc (C.N: Quote, Profile, Research),
Wells Fargo & Co (WFC.N: Quote, Profile, Research) and Ally Financial, according to
sources briefed on the meeting.
(Additional reporting by Dave Clarke; Editing by Carol
Bishopric)

UPDATE 1-U.S. House votes to kill main Obama foreclosure aid