RENEE MONTAGNE, Host:

Congress passed a sweeping bill last summer aimed at easing the home foreclosure crisis. One part of the bill was designed to help homeowners with high mortgage rates, refinanced to less expensive loans backed by the government. But the program, called Hope for Homeowners, has gone largely unused, and Congress today holds a hearing to find out why. The issue serves as a cautionary tale on the government's ability to deal with the complex subprime crisis. NPR's Brian Naylor reports.

BRIAN NAYLOR: When the Senate began debating the Hope for Homeowners program last spring, Senate Banking Committee Chairman Chris Dodd was, well, full of hope for the program.

CHRIS DODD: This Hope for Homeowners Act, I believe, will give us a positive confidence-building measure that will allow people to remain in their homes where appropriate, and secondly allow us to get to a bottom, I hope, and a floor where capital can begin to flow again.

NAYLOR: By the time the measure was approved last summer, the expectations were already modest. Congressional analysts forecast just 400,000 mortgage owners would be served by the program. But even those low expectations proved optimistic.

MEG BURNS: We have 451 applications and only 25 loans have closed.

NAYLOR: That's Meg Burns of the Federal Housing Administration, which is in charge of implementing the program. It's pretty clear why just 25 loans have closed since the program started in October. It's not a great deal for homeowners. Loan fees and interest rates are high. Borrowers have to provide two years worth of financial records and certify they did not provide misleading information to bankers. Lenders, meantime, have to be willing to take a loss on their existing loans. And if a value of a house increases, homeowners have to share that equity with the government. John Taylor heads the National Community Reinvestment Coalition, a housing advocacy group.

JOHN TAYLOR: You have to give 50 percent of all you've earned, even though you've paid off the loan at high rates to the federal government. So you can see why I say I think they sat down with Tony Soprano to design the original program.

NAYLOR: While no loan sharks are believed to have taken part in drafting Hope for Homeowners, the bill was a product of compromises between Democrats in Congress and the Republican Bush administration. There were many political tradeoffs between conservatives who wanted tough safeguards and liberals who wanted greater access to the program. Democratic Congressman Barney Frank of Massachusetts, who helped draft the original bill, admits it has its flaws.

BARNEY FRANK: What it says is that when you have problems that are unprecedented both in difficulty and in magnitude, human beings don't always get it right the first time. Is that a surprise to anybody?

NAYLOR: Frank says while the government may have mishandled its first approach to the problem, the subprime crisis was brought on by decisions in the private sector. Frank, who chairs the House Financial Services Committee, is unveiling a proposal today to rework parts of Hope for Homeowners.

FRANK: It was tightened up to prevent abuse, but we tightened it up so much that we didn't just prevent abuse, we prevented use. It's not very easily workable. What I would like to do is to relax it a little bit.

NAYLOR: Frank's bill would lower the program's fees and interest rates. He's optimistic that this time the government will get it right.

Brian Naylor, NPR News, Washington.

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