Why Is Congress Risking Billions to Save Nothing?

Conn Carroll /

This week the House is set to pass legislation to help homeowners who spent too much on their homes avoid foreclosure. From the beginning, the bill’s architects have been ambivalent about how many people their plan would actually help. Over a month ago Rep. Barney Frank told The Hill it was “irrelevant” how many people would actually be helped by his plan: “I would hope a million [would benefit]. It’s irrelevant. There’s no downside. Why not try?”

Well even that one million Frank hoped to help was overly optimistic. The Congressional Budget Office very quietly released a report last Friday estimating that Dodd’s housing bill, which allows the Federal Housing Administration to guarantee problem mortgages in exchange for reducing the amount owed, would only aid 500,000 households over the next four years. According to the CBO, about 2.8 million homeowners with exotic mortgages will face foreclosure over the next four years. 40% of that 2.8 million have second liens on their homes rendering them ineligible for the program and less than 40% of the remaining group will find their primary lenders willing to participate. An earlier CBO study of the Dodd plan concluded “the plan would not be sweeping enough to restore the housing market or ailing economy.”

So how much will American taxpayers pay for a plan that helps nobody and does nothing to help the economy? The CBO’s Friday study also estimated that if just one-third of the problem mortgages FHA insures fails, taxpayers will be on the hook for “only” $2.7 billion. So the plan now being pushed by Frank would do nothing to help most homeowners at risk, would do nothing to hep the economy, and would cost American taxpayers $2.7 billion.

In contrast, the Treasury Department has already helped over a million homeowners through their voluntary Hope Now program and are helping thousands more each month. So to recap: the liberal bill in Congress will help only 500,000 people over five years and cost American taxpayers $2.7 billion, while the voluntary Hope Now program costs the American people nothing and has already helped over one million homeowners.