What happened to the $71 billion?

By: Sam Pompeo

The Obama administration’s signature foreclosure prevention program will help only 700,000 Americans save their homes, according to a scathing report released Tuesday by the Congressional Oversight Panel (COP).

The group’s assessment falls far short of the 3 to 4 million homeowners that the president pledged would receive more sustainable mortgage loans when the Home Affordable Modification Program (HAMP) was launched in March of last
year, and is well below the 8 to 13 million foreclosures COP says are expected by 2012.

Treasury initially committed $75 billion of Troubled Asset Relief Program (TARP) funds to the HAMP initiative, which pays incentives to servicers, investors, and homeowners for each loan that is successfully modified. COP, which is charged with overseeing the use of TARP money, says it now appears Treasury will spend only $4 billion on HAMP incentives. The big question is, what happens to the unused $71 Billion?

“Absent a dramatic and unexpected increase in HAMP enrollment, many billions of dollars set aside for foreclosure mitigation may well be left unused. As a result, an untold number of borrowers may go without help,” the report said.

The members of the congress appointed panel went so far as to call the government’s loan modification program “ineffective,” and they said Treasury’s reluctance to acknowledge HAMP’s shortcomings has had “real consequences.”

Since COP’s last report on HAMP eight months ago, the panel noted that Treasury has made “minor tweaks” to the program, but COP says the changes have not resolved its core concerns.

Treasury’s authority to restructure HAMP ended on October 3, when TARP expired, and COP says because the deadline has come and gone for any major overhaul, “the program’s prospects are unlikely to improve substantially in the future.”

“Many of the problems now plaguing HAMP are inherent in its design and cannot be resolved at this late date,” the panel said in its latest report. “Other problems, however, can still be mitigated.”

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