U.S. housing programs are failing to help enough homeowners even as taxpayer-funded bailouts contributed to rescuing the broader economy, the chairman of a congressional watchdog panel said.
The Troubled Asset Relief Program “has fallen far short in its efforts to help homeowners stay in their homes,” former Senator Ted Kaufman, chairman of the Congressional Oversight Panel for TARP, said at a hearing in Washington today. Overall, bailout programs “helped pull our markets back from the abyss,” said Kaufman, a Delaware Democrat.
The U.S. government-backed programs were started to help homeowners struggling to pay their mortgages, with the aim of reducing foreclosures. House Republicans took a first step yesterday toward eliminating two of the plans.
The House Financial Services Committee voted along party lines, 33-22, to kill a program that lowers mortgage payments for so-called underwater borrowers and an emergency fund for homeowners who have lost their incomes. To become law, the bill would need to clear the House as well as the Democratic- controlled Senate and be signed by President Barack Obama.
Timothy Massad, the Treasury Department’s acting assistant secretary for financial stability, said that of the $700 billion Congress approved for TARP in 2008, the government will spend no more than $475 billion. About $411 billion has been disbursed, of which $277 billion has been repaid, Massad said in testimony prepared for the hearing.
While the housing programs “have been the most criticized component of TARP,” they “can continue to ease the pain of this terrible crisis,” Massad said. “Beyond those immediately helped, TARP housing programs have also had a positive impact on mortgage servicing.”
A Federal Reserve official told the panel that the central bank’s Term Asset-Backed Securities Loan Facility has generated interest income of almost $600 million, and risk controls are likely to prevent future losses.
“The experience to date suggests that the multiple risk controls built into the TALF program have been effective and losses appear unlikely,” William R. Nelson, deputy director, division of monetary affairs, said in his testimony. “We believe that the TALF program represents a very successful use of TARP funds.”
The Fed program helped restart the asset-backed securities market when credit was tight, Nelson said.
© Copyright 2022 Bloomberg News. All rights reserved.