The “Hardest Hit Fund” launched by the U.S. Treasury in early 2010 to provide more than $7.6 billion for struggling homeowners has vastly underperformed because of delays and poor organization, according to the official watchdog overseeing its funding.
Only about 3 percent of the money has been used to help borrowers thus far, said Christy Romero, Special Inspector General for the Troubled Asset Relief Program (TARP), in a report released today. TARP is the primary U.S. bailout program, part of which has been diverted to fund foreclosure prevention programs.
As of February 2012, two years after the launch of the fund, only $828.6 million has been drawn to assist borrowers – with most of the money “identified for administrative expenses and cash on hand,” according to Romero’s report.
The Hardest Hit Fund (HHF) targets homeowners facing possible foreclosure, including those unemployed, in 18 states hit hardest by economic hardship.
As of December 31, 2011, state Housing Finance Agencies (HFAs) responsible for helping these families, with the assistance of lenders and investors, have spent $217.4 million (or 3 percent of $7.6 billion) to assist 30,640 homeowners.
That’s only 7 percent of the 458,632 to 486,536 homeowners whom HFAs plan to assist by December 31, 2017, when the program’s funding expires.
Romero said Treasury could have improved its planning and execution of HHF and increased participation by:
- Bringing all key stakeholders, such as HFAs, servicers, and GSEs (Fannie Mae, Freddie Mac and the Federal Housing Administration), together significantly earlier than seven months after the program launch to ensure that stakeholder needs would be addressed;
- Anticipating common implementation issues early on and resolving them in a timely manner;
- Supplying critical guidance, information, and support to GSEs and other stakeholders earlier than the Treasury did;
- Taking a stronger role in securing early participation of the largest mortgage servicers – some states told SIGTARP that without large servicers on board, they would not be able to help a significant portion of homeowners.
The Hardest Hit Fund (HHF) is one of three TARP-funded housing programs, along with the Home Affordable Modification Program (HAMP) and an FHA refinancing program. Treasury has allocated $45.6 billion to these programs.
The Hardest Hit Fund programs vary state to state, but may include:
- Mortgage payment assistance for unemployed or underemployed homeowners.
- Principal reduction to help homeowners get into more affordable mortgages.
- Funding to eliminate homeowners’ second lien loans.
- Help for homeowners who are transitioning out of their homes and into more affordable places of residence.