Tuesday, October 2, 2012

The Hardest Hit Fund

As part of the financial relief package known as TARP, the Federal government has an array of homeowner assistance programs.  You may have heard of some of them: the Home Affordable Modification Program (HAMP), the Home Affordable Refinance Program (HARP), and possibly even the FHA Second Lien Program (FHA2LP).  

You probably remain unaware of the Hardest Hit Fund (HHF).  In 2010, Treasury allocated $7.6 billion to the HHF for distribution to the following 18 States and D.C.:

  • Alabama
  • Arizona
  • California
  • Florida
  • Georgia
  • Illinois
  • Indiana
  • Kentucky
  • Michigan
  • Mississippi
  • Nevada
  • New Jersey
  • North Carolina
  • Ohio
  • Oregon
  • Rhode Island
  • South Carolina
  • Tennessee
  • Washington D.C.

In its most recent report (.pdf), the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) came down hard on Treasury's neglect of HHF.  

SIGTARP reported that as of December 31, 2011, the latest data then available, HHF had spent only $217.4 million to provide assistance to 30,640 homeowners — approximately 3% of the TARP funds allocated to HHF and approximately 7% of the minimum number of homeowners the state HFAs estimate helping over the life of the program. 
Treasury has not set measurable goals and metrics that would allow Treasury, the public, and Congress to measure the progress and success of HHF. Treasury set a single goal for HHF: help prevent foreclosures and help preserve homeownership. Treasury deferred to individual states to set goals but did not require those states to set measurable goals. 
Treasury has stated that establishing static numeric targets is not suited to the dynamic nature of HHF. Taxpayers that fund this program have an absolute right to know what the Government’s expectations and goals are for using $7.6 billion in TARP funds. By refusing to set any goals for the programs, Treasury is subject to criticism that it is attempting to avoid accountability.
[bold is mine]

The SIGTARP report also remarks that Treasury has failed to even track the progress of the program and has refused to publish the progress recorded by the various states.

States have experienced various amounts of success with HHF.  For example, Kentucky's Unemployment Bridge Program (UBP) has averted 1,500 foreclosures.  The UBP has broad eligibility and provides generous benefits.

The maximum amount of assistance is $25,000 or 12 months, whichever occurs first.  Of the $25,000, the maximum amount that may be used for reinstatement, all related fees and payments to bring your loan(s) current, is $12,500 (effective with closings on or after May 7, 2012).  To get started, click on Get Free Help at the top of the page.
Applicants must meet the following guidelines and the mortgage must be with a participating servicer.
  • Maximum amount of liens on the property cannot exceed $275,000.
  • Maximum of two liens permitted on the property.
  • Applicant(s) must demonstrate a need for assistance.
Notably, Kentucky's UBP still has $93 million left to disburse.  

South Carolina's Homeownership and Employment Lending Program (HELP) extends relief even to those who have suffered divorce, a death in the family, or medical disaster. But HELP has only expended 12% of its total reserves. Officials speculate on why the South Carolina has delivered so little aid:

The reasons range from people being too embarrassed to seek help to those assuming the free, too-good-to-be-true offer is a scam, he said. 
An advocate for the poor says South Carolina's program is too limited in who it can help, while a legislator in charge of the House budget for economic development blames poor marketing. 
"A lot of people don't believe it will help them," Ingram said. "We're constantly telling people not to self-exclude. At least apply. The worst that can happen is you're turned down. The best is, you'll save your home."

Treasury deserves only some of the blame for HHF's obscurity, as states reveal varying degrees of participation. Through HHF, California has averted over 16,000 foreclosures, North Carolina nearly 8,000, Ohio over 7,000, but New Jersey's Homekeeper a paltry 750.

In the larger scheme of financial relief, HHF's $7.6 billion constitutes a mere drop in the bucket. Last month, the Federal Reserve launched QE3. Banks appear to reap the lion's share of the benefit from the Federal Reserve's $40 billion per month purchase of Mortgage-Backed Securities. Too Big to Fail's corollary may well soon become Too Small to Save.

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