Special Inspector General Says Foreclosure Relief Program Needs to Be Strengthened
February 1, 2011 - Posted by Avril Lighty
A government official appointed to review the federal government's foreclosure relief program says that the program is failing, but could work better if the Treasury Department re-evaluates, sets clear and realistic goals, and holds loan servicers accountable for frequent errors and misconduct.
"It is TARP's failure to realize its most specific Main Street goal, preserving homeownership, that has had perhaps the most devastating consequence," said Neil Barofsky, special inspector general for the Troubled Asset Relief Program, in testimony before the House Committee on Oversight and Government Reform. Barofsky lamented that the Home Affordable Modification Program (HAMP) "has been beset by problems from the outset and, despite frequent retooling, continues to fall dramatically short of any meaningful standard of success."
Initially, the Treasury predicted that HAMP would "help up to 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly payments to sustainable levels," but Barofsky said that only 238,000 of the 522,000 modifications completed by December 31, 2010, can even be attributed to the program.
Civil rights groups have been supportive of the program – and oppose recent calls by some conservatives on Capitol Hill to abolish it – but have long expressed concern that it was too modest to really address the depth of the foreclosure crisis, which has continued unabated. According to RealtyTrac, a record 2.9 million homes received foreclosure filings in 2010 and the number of filings will increase by 20 percent in 2011. In addition, the number of bank repossessions continues to increase, rising above one million in 2010.
"The time has come for Treasury to set realistic and meaningful goals for its collective foreclosure prevention efforts," said Barofsky. "Doing so, in conjunction with a thorough reevaluation of its failing programs and imposing discipline on servicers with real penalties for violating program guidelines, will maximize the potential benefits for struggling homeowners going forward."