TARP Bailout Money Fails to Reach Neediest Homeowners After Two Years: Report
A federal housing program funded with taxpayer money left over from the government’s bailout of the banks and auto companies is failing to deliver on its promised relief to struggling homeowners.
The Hardest Hit Fund, a $7.6 billion initiative established by the federal government in February 2010 to help families in states most crippled by the collapsed housing market, has distributed just 3 percent of its money — or $217.4 million — to help homeowners, according to a report released Thursday by the Office of the Special Inspector General for the Troubled Asset Relief Fund, or SIGTARP.
“Look at the TARP money that goes out to the banks,” said Special Inspector General Christy Romero in an interview with The Huffington Post. “That goes out in a matter of days. This has been two years and only 3 percent of these funds have trickled out to homeowners.”
The Hardest Hit Fund has helped just slightly more than 30,000 homeowners, or 7 percent of the roughly 480,000 homeowners targeted for assistance by the end of 2017 when the program expires, according to the report. The program is funded by TARP, the 2008 legislation that has provided a $600 billion to bail out various banks and other companies in the wake of the nation’s financial crisis.
“The Hardest Hit Fund is really struggling to get off the ground and it’s a real concern about whether this money can get out to these homeowners,” Romero said.
The 76-page report reads like the autopsy of a dead housing program, placing the blame for the program’s paltry performance squarely on the Treasury Department, the government agency responsible for TARP and, in turn, the Hardest Hit program.
According to the report, Treasury initially dragged its heels in getting the largest mortgage servicers to participate in the initiative, instead relying on the individual states to broker arrangements with the servicers. Some of the states lacked the necessary clout to secure servicer participation, thus limiting the program’s ability to reach needy homeowners, concluded the report.
“These states don’t have the bargaining power that Treasury has with these large servicers,” Romero said. “Treasury is already working with these same servicers, having similar conversations with them for other housing programs, so Treasury should be using its influence to really get these servicers on board.”
The Treasury Department was similarly slow in securing support from Fannie Mae and Freddie Mac, the government-owned mortgage giants that collectively control nearly half of all outstanding loans, further curtailing the initiative’s reach. The report also blames the Treasury Department for giving states too little time to roll out the program and for failing to establish clear, specific goals that would let the government and the public measure the program’s success.
“Treasury actively and consistently engaged with servicers and [Fannie and Freddie] from the earliest stages of the program, encouraging support and addressing impediments to participation,” wrote Tim Massad, the department’s assistant secretary for financial stability, in a letter responding to the report’s findings.