Study Finds Obama Administration Failed to Help Those Hardest Hit by Housing Crisis

The Hardest Hit Fund, created in the spring of 2010, grants money to state housing finance agencies to help families facing foreclosure. The fund has “experienced significant delay” because of “a lack of comprehensive planning” by the Treasury Department and limited involvement by Fannie Mae, Freddie Mac and other large mortgage servicers, said a report by the special inspector general for the TARP program.

“TARP wasn’t supposed to be just a bank bailout,” said Christy L. Romero, the special inspector general for TARP, in an interview. “It was specifically designed with the goal of helping homeowners, and our concern is that that goal may not be met.”

Only 3% of monies budgeted to help homeowners has been dispersed to date.

The report is the latest black eye on the Obama administration’s efforts to relieve homeowners suffering from the housing bubble collapse and ensuing recession. The office of the special inspector general has repeatedly criticized Treasury’s management of the Home Affordable Modification Program, Washington’s strongest effort to prevent foreclosures.

The Treasury Department estimated that the program would reach three to four million homeowners. It has aided fewer than a million. The report cited a lack of planning and leadership as the reason so little money has been spent.

The report also states that the federal government has not used it’s influence over large mortgage servicers or Fannie and Freddie to coerce them into participating in state-devised and state-managed initiatives.

The Hardest Hit Fund “is a TARP Program, and Treasury is the steward over TARP,” the report says.

“This report misses the mark by not acknowledging the hard work of participating states and the innovative ways they are preventing foreclosures in their local communities,” Timothy G. Massad, the assistant secretary for financial stability, said in a statement.

“The Hardest Hit Fund is helping states address some of the most difficult problems caused by the housing crisis in ways that suit local conditions and have already kept tens of thousands of families in their homes,” Mr. Massad added.

To receive money, states have to meet certain criteria: a 20 percent decline in house prices, a high proportion of the state population living in counties with an unemployment rate above 12 percent or an unemployment rate above the national average.

Eighteen states have received money and built programs to help local homeowners.

An official for Florida’s home finance agency told the special inspector general, “The $1 billion has been a nice carrot to use for servicers in Florida, but there is no stick with the carrot to force servicers to participate.”

In New Jersey just 54 households have received help from the fund as of the end of 2011. In California, where 48,422 houses received a foreclosure notice in February alone, the program has aided just 4,357 homeowners.

Programs financed by the Hardest Hit Fund have been ramping up recently in some states. In Michigan the number of participants climbed 40 percent during the fourth quarter of 2011, and the amount of money disbursed increased by half. Nearly 97 percent of the early beneficiaries continued to own their homes a year after receiving assistance.

“The states can change their programs,” said Ms. Romero, the special inspector general. “So it’s not too late for the states to figure out how to use these funds. That’s the dynamic nature of the program, and that’s what needs to happen.”


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