GOP-led House bill to end troubled mortgage program passes

Most Democrats, while acknowledging that the Home Affordable Modification Program has fallen short of original goals, protested the vote to kill it.

The White House, in a statement, said that if the bill ever reaches President Obama’s desk, his senior advisers would recommend he veto it. The vote was 252 to 170.

The GOP-led House this month has voted to kill three other programs aimed at reviving the struggling housing market, including one to aid homeowners who have lost their jobs or become sick and another helping state and local governments buy and revamp abandoned properties.

All face veto threats in the unlikely event they clear the Senate.

The modification program, enacted two years ago with funds from the Troubled Asset Relief Program, offers incentives to loan servicers to modify loans for people having trouble making payments.

But the Treasury Department has no authority to compel banks and loan servicers to participate, and so far the program has modified only about 600,000 loans, well below the 3 million to 4 million anticipated.

Representative Patrick McHenry, Republican of North Carolina and the sponsor of the bill, said that a majority of those who enter the program end up being harmed because they use up savings and damage credit ratings during months of waiting, and then are rejected for permanent reduced loans.

Representative Barney Frank of Massachusetts, top Democrat on the Finance Committee, denied the program was a burden on taxpayers, saying that any TARP money spent and not returned to taxpayers when it ends in 2013 will be provided by large financial institutions.

A Treasury Department official visiting Harvard University yesterday urged Congress not to end the program.

Doing that “would immediately relax the pressure on mortgage companies to offer better assistance to struggling homeowners,’’ said Tim Massad, the Treasury’s acting assistant secretary for financial stability and the administrator for TARP, in a speech at Harvard’s Kennedy School.

House Republicans also proposed legislation yesterday that would begin reducing the influence of government-run mortgage companies Fannie Mae andFreddie Mac.

The measures would wind down the lenders in phases as policy makers work on a broader overhaul of the mortgage market.

The proposed legislation would cut the value of the companies’ combined $1.5 trillion loan portfolio, raise the fees they charge to guarantee loans, and reduce executive compensation.