Watchdog: TARP falls "woefully short" for homeowners
The Troubled Asset Relief Program has so far "fallen woefully short" of preserving homeownership through the Obama administration's modification efforts, according to the Special Inspector General for TARP, a congressionally mandated watchdog for the program. The Treasury Department launched the Home Affordable Modification Program in March 2009 under TARP to provide servicers an incentive to modify mortgages on the verge of foreclosure. Through September, participating servicers permanently modified more than 495,000 eligible loans. According to SIGTARP's quarterly report to Congress Monday, TARP's portion of the program yielded only roughly 207,000 of that total and "stands in stark contrast" to the 5.5 million homes that received a foreclosure filing and the 1.7 million homes lenders repossessed since January 2009. As of Sept. 30, the Home Affordable Foreclosure Alternatives program has funded 342 short sales or deeds-in-lieu of foreclosure, according to the report. HAFA, launched in April, was designed for loans eligible for HAMP but were canceled out of trial or permanent stage. The Treasury has yet to release official numbers for the program. But a Treasury official told HousingWire one of HAMP's legacies that is often overlooked is how its guidance set the standards for how other proprietary modifications are carried out. According to the Treasury, lenders have completed 3.5 million modifications since April 2009, which is more than triple the amount of foreclosures completed in the same time. The Treasury's authority to initiate new investments under TARP expired Oct. 3, exactly two years after it was created. According to SIGTARP, its impact on Wall Street has been a success if only by preventing a complete collapse of the financial industry. But in its shortcomings, according to the report, Main Street has suffered alone. Unemployment holds at 9.6%, three percentage points higher than when the program started, and the poverty rate has increased more than a percentage point to 14.3% in 2009. While the projected cost of the program has fallen below previous estimates to between $51 billion and $66 billion, SIGTARP reported more costly items off the ledger. "For example, as SIGTARP has noted in past quarterly reports, increased moral hazard and concentration in the financial industry continue to be a TARP legacy," according to the report. "The biggest banks are bigger than ever, fueled by government support and taxpayer-assisted mergers and acquisitions." The two areas of the greatest spending going forward are HAMP and the Treasury's continued recapitalization of American International Group. While taxpayers may ultimately profit off its majority holdings in AIG, HAMP is a one-way street. According to HAMP guidelines, servicers can receive up to $4,500 per successful permanent modification, which includes $1,000 at the outset of the modification, another $1,000 for every year the loan is in good standing, and $500 if the loan was current before the trial stage. The Treasury's adjustable cap for how much it will pay servicers through HAMP is set at $29.9 billion, according to its most recent TARP report on Oct. 21. "While TARP is arguably moving to a new phase, recent actions this past quarter unfortunately suggest that the risks it poses to the public’s trust in government will continue," according to the SIGTARP report. Write to Jon Prior.