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Bill would kill loan modification program

House lawmakers are scheduled tomorrow to debate the bill to kill the federal mortgage modification program for struggling homeowners.

Republicans, who control the House, said President Obama's Home Affordable Modification Program has been ineffective and they want to take unused funding to help balance the budget.

But Obama and supporters of the program say it's better than nothing. Under the program, lenders, investors and loan servicers get incentives to lower borrowers' monthly payments, including by stretching the mortgage period and lowering interest rates.

On March 28, New York state banks superintendent Richard H. Neiman countered opponents of the program, saying he's criticized it also but is far from supporting its termination.

"Killing the program is a far worse solution than even maintaining the status quo," said Neiman, who's also on the congressional oversight panel for the Troubled Asset Relief Program, which funds the modification incentives.

He said the program has made a lot of progress in helping homeowners, including setting loan modification standards for mortgage servicers.

"Treasury must do more to oversee mortgage servicers," Neiman said, "but ending the government's responsibility in this area would leave individual homeowners on their own to fend for themselves against the nation's biggest banks."

The bill to end the program might be just a pro forma effort from Republicans to show voters that they’re working to keep debt from spiralling. The Democrat-led Senate is unlikely to pass the bill and Obama has promised to veto it.

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