SIGTARP and the Failure of HAMP

Includes: KBE, KME, KRE
by: Rortybomb

Via Annie Lowrey we have SIGTARP reporting on HAMP. This is Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP writing (my bold):

Unfortunately, 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, the number of homeowners being helped through permanent modifications remains anemic, with fewer than 400,000 ongoing permanent modifications…and HAMP has not put an appreciable dent in foreclosure filings. Indeed, the number of trial and permanent modifications that have been cancelled substantially exceeds the number of homeowners helped through permanent modifications.

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”).

Instead, Treasury clings to its prior statements that it plans to offer trial modifications to three to four million homeowners, a measure that SIGTARP has previously shown to be essentially meaningless. 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.

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.

This isn’t some dirty hippie talking. These are the experts and they find the program to be seriously not working. And now check out the bold above. What’s more interesting is that they find that Treasury has been terrible with transparency and accountability in one of the most important programs of the Obama administration. Can we just admit this isn’t working and start working on new solutions?

Here is the list of prepared testimony. Elizabeth Warren also testified (my bold):

Our mandate under EESA specifically requires the Panel to report to Congress on the effectiveness of foreclosure mitigation efforts. To that end, the Panel’s April report was our third focused on the HAMP program and the health of the residential mortgage market. When I last appeared before this Committee, I testified that the Panel had included in our March 2009 report a checklist of characteristics any successful foreclosure mitigation strategy must include. The Panel was concerned that Treasury’s program was too small, that it was too slow and that it did not create permanent solutions. The Panel raised specific concerns about the program’s failure to address second mortgages or homeowners who are “underwater”—that is, the balance of their mortgage exceeds the value of their home. While some progress has been made in these and other areas of the program, HAMP continues to suffer from the constraints the Panel identified at the outset.

Congress was clear when it passed TARP that Treasury should make foreclosure prevention a priority. The Panel found in our April report, however, that Treasury’s response is lagging behind the pace of the crisis. For every family that Treasury has helped into a sustainable mortgage modification, ten other families have lost their homes to foreclosure. Foreclosures show no clear signs of abating. Treasury has lost its opportunity to get ahead of the problem. Instead, its programs trail behind, while millions of homeowners continue to receive foreclosure notices and the real estate market shows little sign of recovery.

Check out that bold. Warren and the Congressional Oversight Panel pointed out back in March of 2009, so on day 1 of this program, on how Treasury would screw up HAMP and mortgage modification, and she turned out to be exactly right on each of the calls. This has had major consequences for millions of Americans who need to move on from bad housing debt to pursue new jobs and rebuild their lives and the economy. And all that devastation has gotten us is the ability for four of the largest banks to keep second liens marked at 86 cents on the dollar, a ridiculously high rate, on their books. To play a game of make believe for the largest and most concentrated of our banks.

Given that this is one of the most important consumer finance issues, who would you rather have overseeing the creation of a consumer financial agency – Warren or someone from Treasury?