House and Senate lawmakers are criticizing the Obama administration for leaving their states out of a $1.5 billion program that helps five states with battered housing markets.
Ohio and Rhode Island lawmakers argue the program, which would redirect money from the $700 billion Wall Street bailout, should benefit their states in addition to the five selected: Nevada, California, Florida, Arizona and Michigan.
President Barack Obama unveiled the program for the “hardest-hit housing markets” when he was in Nevada in February to help campaign for Senate Majority Leader Harry Reid (D-Nev.).
The program was designed to help housing finance agencies in states that have witnessed home-price declines of at least 20 percent from their peak. Just five states have seen such high-percentage declines: Nevada (49.9), California (38.9), Florida (37.4), Arizona (36.8) and Michigan (24.1).
The administration said the program is aimed at developing new efforts to help housing markets. The recipients can use the money for a range of programs, including mortgage modifications, modifications with principal write-downs and short sales. The state housing finance agencies would not need to repay the money.
“While many states across the nation have experienced decline, these really are the hardest-hit,” Diana Farrell, deputy director at the National Economic Council, said when the program was announced.
Sen. Jack Reed (D-R.I.) has raised concerns about the program neglecting Rhode Island, which has the seventh-highest rate of price decline in the country, at 17.2 percent, according to government data.
“Reed believes this is a flawed plan. He has communicated that to the White House and asked why Rhode Island wasn’t included,” said Reed spokesman Chip Unruh.
Ohio Sens. Sherrod Brown (D) and George Voinovich (R) have both complained to the administration that there is no reason their state should be left out of the new program.
“This exclusion has resulted in confusion, concern and resentment from elected officials, housing agencies and organizations, and some of my constituents,” Voinovich wrote to Treasury Secretary Timothy Geithner.
A bipartisan group of Ohio House members in late February wrote a similar letter to the president. The members were Reps. Dennis Kucinich (D), Marcia Fudge (D), Michael Turner (R), Steve Driehaus (D), Mary Jo Kilroy (D), John Boccieri (D), Patrick Tiberi (R), Steven LaTourette (R), Betty Sutton (D), Tim Ryan (D), Marcy Kaptur (D), Charlie Wilson (D) and Zack Space (D).
The Ohio lawmakers argue that their state has been slammed with high rates of mortgage delinquencies and foreclosures. By focusing on home prices, the program skews toward states that have had heavy speculation, Ohio lawmakers charge.
Meanwhile, Ohio housing advocates argue the administration’s other programs to encourage mortgage modifications have been of little benefit to the state.
A report from the Coalition on Homelessness and Housing in Ohio (COHHIO) pegs the state as the fourth worst in terms of the number of seriously delinquent loans that received modifications.
“I am deeply concerned that the proposal would disregard states like Ohio that have borne the brunt of the crisis,” Brown wrote to the president.
Meg Reilly, a spokeswoman at the Treasury Department, said Ohio is receiving a heavy amount of aid from other federal housing programs. Among other efforts, Reilly said, Ohio state and local housing finance offices received a total of $555 million in bond support in October.
Last week, the administration allocated the $1.5 billion among the five states: California ($700 million), Florida ($418 million), Michigan ($155 million), Arizona ($125 million) and Nevada ($103 million).
Lawmakers and officials in other states that have seen steep price declines said they were not pressing the administration to be included.
Sen. Ben Cardin (D-Md.) is monitoring the program to see if it could be beneficial in Maryland, which has the sixth-highest rate of home-price declines, at 19 percent.
“He would be interested in seeing it expand to other states if it helps a significant number of homeowners stay in their homes,” said Susan Sullam, spokeswoman for Cardin.
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