Just as two major lenders finally commit to participate in a federal program to help underwater homeowners, the Republican-led House of Representatives may scrap the program entirely.

Wells Fargo and Ally, formerly GMAC Inc., announced Friday that they will participate in the Federal Housing Administration’s “Short Refi” program, according to reporting by American Banker. The program would subsidize banks that refinance mortgages for consumers whose homes are worth significantly less now than what they paid during the housing boom.

The program has languished for almost a year as the Obama administration struggled to find lenders willing to take part, as we reported here. But now top Republican leaders in the House want to kill the refinance program, along with other federal housing assistance initiatives.

"In an era of record-breaking deficits, it's time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners," House Financial Services Committee Chairman Spencer Bachus (R – Ala.) said in a press release.  “These programs may have been well-intentioned but they’re not working and, in reality, are making things worse.”

The committee will debate killing the program this week.

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