House votes to axe federal refinance program

Despite railing from Democrats including a few from the East Bay, the House today voted to scrap the Federal Housing Administration Refinance Program, which aims to help homeowners who are “underwater” – owing more on their mortgage than their home is worth – refinance. The vote was 256-171.

Authorized under the Troubled Asset Relief Program (TARP), the FHA program has used only $50 million of the more than $8 billion set aside for it, and Republicans think the money should be redirected to pay down the federal budget deficit. Democrats agreed the program has underperformed but said it should be fixed rather than abolished, as there’s still enormous need for it.

The bill now goes to the Democrat-dominated U.S. Senate, which probably won’t even take it up, and the White House earlier this week threatened a veto.

Here’s what Rep. Jerry McNerney, D-Pleasanton, said today on the House floor:

“I’m proud to represent much of San Joaquin County, which is the jewel of California’s Central Valley. Our Valley is a great place to live and work, but unfortunately we’ve been hit very hard by the economic downturn. The Valley has been ground zero for the foreclosure crisis.

“Over the past few years, thousands of families in San Joaquin County and throughout the Valley have lost their homes. I’ve hosted foreclosure assistance workshops; I’ve met with hardworking people who were misled by lenders who are struggling to stay on top of their mortgages. I’ve seen grown men cry because they couldn’t keep a roof over their children, I’ve talked to veterans who served their country only to return home to notices of default, and I’ve met seniors on the brink of homelessness.

“The administration’s foreclosure prevention initiatives have fallen short in the Valley. Simply put, the administration’s programs haven’t effectively served the people underwater on their mortgage, and the administration hasn’t been tough enough on the big banks. I call on President Obama and his cabinet to develop more effective efforts to stem the tide of foreclosures.

“But despite these shortcomings, the bill the House Republicans are offering today is absolutely the wrong approach. It’s throwing the baby out with the bathwater. Instead of canceling foreclosure relief programs at their beginning stages like they’re proposing, we should be strengthening them so they’re more effective. Mortgage counselors from my district advise and plead to improve our efforts, to get tough on big banks and provide meaningful relief to families. Stabilizing the housing market is critical to economic recovery and creating jobs.

“For those reasons, I oppose H.R. 830, and I yield back the balance of my time.”

See Rep. John Garamendi’s statement – in four parts – after the jump…

Garamendi, D-Walnut Grove, had introduced an amendment to the bill that would’ve addressed what he said was one of the major underlying causes of the subprime mortgage crisis and the recession: Wall Street’s broken bonus compensation system; his amendment would’ve effectively required that Wall Street bonuses be paid in stock.

H.R. 830
AMENDMENT NO. 7: At the end of the bill, add the following new section:
The Federal regulatory agencies for banking and financial institutions and for securities regulation shall jointly issue regulations that—
(1) require all new employees of any institution, company, or entity regulated by such
a regulatory agency, upon hiring, to sign a contract stipulating that any bonus income provided to such employee will be paid in securities or obligations that such institution, company, or entity creates or deals in in its regular course of business;
(2) require that any such bonuses paid shall be held in escrow for such period as may be necessary to determine whether the such securities or obligations created or dealt with by such institution, company, or entity are of substandard quality or cannot be readily identified as an asset or a liability;
(3) require such escrow accounts to be portable so that an employee may change jobs without hindrance; and
(4) prohibit use of any such bonuses to hedge against future losses.

Rep. Judy Biggert, R-Ill., raised a point of order against Garamendi’s amendment, complaining that it violated a House rule that an amendment address the same subject as the underlying bill. Rep. Charles Bass, R-N.H., who was chairing the floor debate on the bill, sustained Biggert’s point, so the amendment was tossed.

Speaker John Boehner, R-Ohio, issued a statement which said the House had “voted to begin shutting down the TARP bailout program, saving taxpayers $8 billion in mandatory government spending, with more savings to come,” but didn’t mention mortgages, refinancing or foreclosures at all:

“I’m pleased the House has voted to save taxpayers billions of dollars by beginning to shut down the TARP bailout program. The American people understand we can’t continue spending money we don’t have, especially on things that don’t work. That’s why we’re focusing not just on discretionary spending, but mandatory spending as well. Unfortunately, the Democrats who run Washington believe in this time of fiscal challenges we should continue propping up government programs that overspend and underdeliver. The new majority in the House will continue to listen to the American people, who want us to cut spending to end uncertainty for small businesses and help them begin hiring again. I hope the Senate will give these spending cuts the consideration they deserve.”

As the Washington Post notes, Democrats earlier this week pointed out that Boehner spoke strongly in favor of TARP’s passage in 2008:

Josh Richman

Josh Richman covers state and national politics for the Bay Area News Group. A New York City native, he earned a bachelor’s degree in journalism from the University of Missouri and reported for the Express-Times of Easton, Pa. for five years before coming to the Oakland Tribune and ANG Newspapers in 1997. He is a frequent guest on KQED Channel 9’s “This Week in Northern California;” a proud father; an Eagle Scout; a somewhat skilled player of low-stakes poker; a rather good cook; a firm believer in the use of semicolons; and an unabashed political junkie who will never, EVER seek elected office.