Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program (SIGTARP), is tasked with dissecting and scrutinizing the federal government’s monumental
efforts to stabilize the nation’s banking system and still-shaky housing market. Barofsky’s been one of the Treasury’s most candid and uncompromising critics when it comes to the Department’s response to the financial crisis, and Wednesday he released his quarterly report to Congress.
Taxpayer support for the U.S. financial system has ballooned by $700 billion over the past year to $3.7 billion, primarily due to the federal government’s outlays for housing commitments, Barofsky concluded. The 23 percent increase in taxpayer aid for the financial sector “can largely be attributed to greater support for the government-sponsored enterprises (GSEs), the housing market, and the financial institutions they participate in,” Barofsky wrote in his report.
The inspector general says TARP programs have been successful in putting the nation’s lenders back on solid footing, but his assessment is far different when it comes to housing. Barofsky calls the administration’s actions to temper the turmoil in real estate markets expensive and ineffective at stemming the foreclosure crisis.
He says the results of the Home Affordable Modification Program (HAMP), in particular, are “anemic,” and as he’s done for months now, Barofsky abrasively criticized Treasury for not establishing meaningful goals for the program.
“One continuing source of frustration is that Treasury has rejected calls to announce publicly any goals or performance benchmarks for HAMP or its related initiatives concerning how many homeowners it actually expects to help stay in their homes, despite repeated
recommendations that it do so from SIGTARP, the Congressional Oversight Panel, and the Government Accountability Office (GAO),” Barofsky said in his report.
Instead, he says Treasury clings to its earlier proclamations that HAMP will allow servicers to offer trial modifications to three to four million homeowners – “a measure that SIGTARP has previously shown to be essentially meaningless,” Barofsky emphasized.
“Treasury’s refusal to provide meaningful goals for this important program is a fundamental failure of transparency and accountability that makes it far more difficult for the American people and their representatives in Congress to assess whether the program’s benefits are worth its very substantial cost,” according to Barofsky.
The inspector general says HAMP continues to struggle to achieve its original stated objective, to help millions of homeowners avoid foreclosure by reducing monthly payments to sustainable levels.
Despite a seemingly ever increasing array of HAMP-related initiatives designed to encourage participation in the program, Barofsky says “the number of homeowners being helped through permanent modifications remains anemic.”
On Tuesday, Treasury released its monthly HAMP progress report, which shows that fewer than 400,000 homeowners have received permanent mortgage restructurings through the federal program.
“HAMP has not put an appreciable dent in foreclosure filings,” Barofsky said, pointing out that the number of trial and permanent modifications that have been cancelled (529,637) far exceeds the number of homeowners helped through permanent modifications (389,198).
The Treasury has earmarked $50 billion of TARP funds to pay for its housing programs.
Barofsky said in his report, “The American people are essentially being asked to shoulder an additional $50 billion of national debt without being told, more than 16 months after the program’s announcement, how many people Treasury hopes to actually help stay in their homes as a result of these expenditures…. Without such clearly defined standards, positive comments regarding the progress or success of HAMP are simply not credible, and the growing public suspicion that the program is an outright failure will continue to spread.”
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