The Treasury Department spent $4.3 million on incentives to servicers and investors through the Home Affordable Foreclosure Alternatives program through November, a fraction of what it spent on HAMP, according to a report from the Congressional Oversight Panel.
The Treasury launched HAFA in April to provide incentives for short sales and deeds-in-lieu of foreclosure and HousingWire became the first news organization to report on its creation. The program was designed as another solution for borrowers who qualified for the Home Affordable Modification Program trial but failed to get a permanent modification either by a redefault during the trial stage or failing to send in the required documentation.
HAMP came under fire again this week from the panel for continually underwhelming numbers. Sen. Ted Kaufman (D-Del.), chairman of COP, said the subprograms under HAMP, which include HAFA and a second-lien modification program, 2MP, have had little effect on the foreclosure crisis as well.
COP reported that the Treasury has spent $652 million in HAMP payouts, and projects the program will cost $4 billion, not the $30 billion the Treasury has allocated to it.
But the Treasury Department points out that the legacy of these programs is that they provide a standard for proprietary programs that were not there in the past, especially for short sales, a routine headache for real estate agents, sellers and buyers.
"And it's important to remember that these programs take time to get up and running. You can't just make an announcement and then everyone is up to speed," Tim Massad, acting assistant secretary for financial stability at the Treasury said in a conference call with reporters Monday.
According to HAFA program guidelines, the Treasury pays $1,500 to mortgage servicers for a short sale and up to a $2,000 match for mortgage investors for allowing up to $6,000 in short sale proceeds to be distributed to subordinate-lien holders. The Treasury also pays $3,000 for borrower relocation assistance.
If the Treasury paid the maximum $6,500 for each short sale done so far, and the Treasury has paid $4.3 million so far, that means roughly 661 short sales have gone through the HAFA program in eight months.
In October, the Special Inspector General for the Troubled Asset Relief Program reported servicers and investors had cleared only 342 short sales or deeds-in-lieu of foreclosure as of Sept. 30.
The Treasury has yet to put out official numbers on HAFA.
Write to Jon Prior.
