By Congressman Mike TurnerJump to video of me questioning representatives from four of the largest mortgage loan servicers in the country about the effectiveness of the Treasury Department's Home Affordable Modification Program (HAMP) by clicking here.
No one needs to explain the depth of the mortgage foreclosure crisis to us in Southwestern Ohio, but the statistics are still astounding. In 2010, Fannie Mae and Freddie Mac took over a foreclosed home approximately every 90 seconds. By the end of March, they owned 163,828 homes. They spend 10 million dollars every month to mow the lawn of each home twice.
Foreclosure proceedings have been initiated against 2.8 million households. The Dayton Region has seen roughly 7,000 foreclosures each of the last three years; there were 3,311 through the first of May this year. This is a three-fold increase from a decade ago.
This crisis damages individuals, families, homes, and communities. Foreclosed and abandoned homes provide a haven for drugs and other unlawful activities and bring down the property values in surrounding homes, directly impacting the entire neighborhood. Because of the seriousness of this threat, both the Bush and Obama Administrations developed programs that seek to help these families keep their homes. These programs meant to provide incentives for lenders to lower the payments by lowering interest rates and writing off principle for homes that have lost significant value.
On June 24, the Oversight and Government Reform Committee, of which I am a senior member, held a hearing entitled, "Are Loan Servicers Honoring Their Commitments to Help Preserve Homeownership?” The purpose of the hearing was to examine the successes and failures of the Home Affordable Modification Program, also known as HAMP.
Earlier that week, the Administration released a report citing a very high re-default rate for those participating in the program, along with a high number of borrowers whose trial modifications were canceled. During testimony before the Congressional Oversight Panel for the Troubled Asset Relief Program (TARP), Treasury Secretary Timothy Geithner questioned the effectiveness of the (HAMP) and argued, “This program was not designed to prevent foreclosures. It was not designed to sustain homeownership at a level that would be unachievable or imprudent.”
As the chairwoman of the panel noted following the hearing, “the Secretary seemed to be saying that a program that helps only a tiny handful of families facing foreclosures is a successful program because, in effect, the rest deserve to lose their homes.”
Like the chairwoman, I find that “shocking.” Not only is Secretary Geithner responsible for ensuring the success of the program, his statements are inconsistent with what the President told the American people that this program was designed to accomplish.
Clearly the Treasury Department must closely examine the program and provide real answers on its goals and objectives. Furthermore, we must also reign in the financial institutions that got us in this mess starting with Fannie Mae and Freddie Mac. Since they purchase the majority of new mortgages written, their standards define the market, and these standards did not make sense; they did not make sound business decisions, did not protect our community banks and did not protect capital investments. Their bad behavior threatened our entire economy and continues to affect all of us. It’s virtually impossible to get loan servicers, banks, and financial institutions to work with home buyers to avoid foreclosure. I believe that if we can avoid foreclosure everyone benefits; capital is preserved, the market is sustained and families are protected.
HAMP must be improved so that more families can stay in their homes, housing values will stay strong, and fewer neighborhoods will be at risk. The administration has to be honest about the extent of the problems with HAMP and must redouble their efforts to help more families.
We also need to better understand the depth of this problem. Our government collects excellent information on job creation and layoffs, business inventories, exports and imports, but we have no central database on national mortgage performance.
This lack of centralized consistent information makes it much more difficult to see the trends that are occurring and makes claims of price stability that much more suspect. I have introduced H.R. 3195, the National Home Mortgage and Loan Performance Registry Act, along with Congressman Brad Miller, to create a national database. With this better information, we can better focus policy; with better policy we can help more families realize the American dream of owning their home and prevent crises like this from happening again.
I am working with members of the Oversight and Government Reform, and Financial Services, committees to improve our response to the national foreclosure crisis and make our national housing policy more efficient and effective for families and our communities. The American people deserve answers, and I will continue to push the President and this Congress to address the issues that threatened millions of homeowners and our entire economy.