USA TODAY US Edition
Homeowners’ aid delayed
A $7.6 billion federal program to help avoid foreclosure spent 3% of funds in two years.
A $7.6 billion federal program to help homeowners avoid foreclosure had spent just 3% of its money almost two years after the program was announced, a government report shows.
As of Dec. 31, the “Hardest Hit” program had helped 30,640 homeowners — or 7% of the almost 475,000 homeowners it was intended to assist — says the report released today from the Office of the Special Inspector General for the Troubled Asset Relief Program.
The program, available in 18 states and the District of Columbia, suf- fered a “significant delay” given lack of planning by the U.S. Treasury Department and slow uptake by mortgage loan servicers and mortgage giants Freddie Mac and Fannie Mae, the report says.
Unless changes are made, not all of the funds may be spent by the program’s end in December 2017, warns Christy Romero, deputy special inspector general.
She also says its in danger of having a “limited” impact on the foreclosure crisis, which is a criticism that’s been lobbed at other Obama administration programs.
Treasury officials say the report “misses the mark.” The program, geared toward helping the unem- ployed or underemployed in states hard hit by recession or home price declines, has “kept tens of thousands of families in their homes,” Treasury official Tim Massad says.
Treasury allowed states to tailor their programs to their needs, with Treasury approval. While an innovative approach, that also created problems because mortgage servicers, who manage home loans, had to deal with dozens of different programs and were often slow to do so.
Eight months after the program was announced, not one of the four largest servicers had agreed to participate, the report says.
State programs to reduce the amount of principal owed on mortgage loans have also struggled. One reason: Freddie Mac and Fannie Mae, which own or guarantee 60% of home loans, don’t allow principal reduction.
Treasury didn’t do enough early on to get big servicers and Freddie and Fannie on board, the report says.
Now that states have set up programs and systems, funds are flowing more rapidly. The amount spent as of Dec. 31 was almost double that of three months prior, the report notes. “Things have picked up significantly,” says Di Richardson, head of California’s program. That state will get almost $2 billion.