Lax oversight by the Treasury Department has helped to prevent billions of dollars in aid from reaching struggling homeowners, according to a report released Tuesday by the Special Inspector General for the Troubled Asset Relief Program.
The Hardest Hit Fund, established in February 2010 as part of the Troubled Asset Relief Program, was created to provide assistance to homeowners in areas most damaged by the housing crisis. The Treasury was charged with overseeing homeowner assistance programs administered by state housing finance agencies in 18 states and Washington, D.C.
Three and a half years into the program, the vast majority of $7.6 billion fund has yet to reach underwater and unemployed borrowers. Just 22%, or $1.7 billion, had been spent on relief efforts as of June 30, according to the report. States held 9% of the fund as cash on hand and spent 4% on administrative costs. The rest remained untouched.
Rather than ramp up efforts to funnel aid to troubled borrowers, the Treasury has allowed states to significantly reduce estimates of how many homeowners will receive aid, according to the report. In the first few months of 2011, states collectively predicted that they would help up to 546,572 homeowners. As of June 30, they had slashed that number by a third, to 367,290.
The report faults the Treasury for failing to heed SIGTARP's earlier warning about flaws in the program. In April 2012, SIGTARP recommended that the Treasury set performance goals for the fund and instruct state housing finance agencies to develop metrics that measure progress toward short- and long-term objectives.
"Rather than fix the problem that SIGTARP warned Treasury about…Treasury allowed the problem to get worse," the report said.