The House Financial Services Committee late this week voted to terminate a Federal Housing Administration principal reduction program designed to refinance underwater borrowers.
On Thursday the committee voted 33-22 to pass the FHA Refinance Program Termination bill (H.R. 830) after a heated debate between Democratic and Republican members.
GOP officials argued that the fledgling program, launched in September, has refinanced only 44 borrowers at a cost of $50 million and is a waste of taxpayer money.
Democrats countered that it takes time to start up such programs. The Treasury has advanced $50 million to FHA to cover possible defaults – but no money has been spent yet.
Rep. Mel Watts, D-N.C., said Republicans are just trying to "score points" as budget cutters when they know the Senate is going to reject H.R. 830. The Treasury Department committed $8 billion of TARP funds for the FHA 'Short Refi' program.
Wells Fargo and GMAC/Ally Financial are starting pilot programs to implement short refis with Citigroup about to launch a similar effort.
Chairman Spencer Bachus, R-Ala., has scheduled a vote for next week to terminate the Home Affordable Modification Program. (See related story on the NMN website.)
