Issa Hits Geithner on Housing Foreclosure Program’s Lack of Transparency and Vulnerability to Fail |
Friday, 21 May 2010 11:56 |
“I am disappointed to learn that the Hardest Hit Fund displays the same opacity, waste, and poor planning as do the other foreclosure-mitigation programs being administered by the Department of the Treasury,” Issa wrote. “The American people have a right to know whether the unprecedented debt spending their government authorized in 2008 is being wasted. Therefore, I am writing to request that Treasury publish basic information about how the projects subsidized by the Hardest Hit Fund will be proposed, evaluated, and assessed.” Issa pointed to the California Housing Finance Agency’s (“CalHFA”) proposal to spend the majority of its $700 million Hardest Hit Fund allocation – over $419 million – on a mortgage principal reduction program that, by design, will assist only 5,500 homeowners. The program will not provide assistance to bring loan to value (LTV) ratios lower than 125%, which means that even the few homeowners assisted will remain deeply underwater, with a high statistical likelihood of default and a strong incentive to abandon their mortgages later. “The proposals that have been released by HFAs reveal that Hardest Hit Fund monies, if spent as the agencies are proposing, will almost certainly be wasted,” wrote Issa. “The programs being proposed by the HFAs will fail to help many homeowners and likely leave some worse off. The experts most qualified to judge foreclosure-mitigation programs are the community organizations that counsel distressed borrowers and help them to navigate the Byzantine regulations of Treasury’s and the states’ assistance programs.” The Mabuhay Alliance, based in Issa’s district, has worked directly with thousands of homeowners and has helped these clients to achieve a far lower-than-average redefault rate in Treasury’s Making Home Affordable programs, and has grown to understand which programs work and which do not. The Mabuhay Alliance recently wrote to CalHFA requesting that the principal reduction program be reconsidered: …[T]he principal reduction, even if all goes well (including full matches by the financial institutions), may be the wrong decision for families deeply underwater. It will prolong a futile hope… “Apparently, California’s bureaucrats do not plan to explain to homeowners how to combine federal and state sources of foreclosure-mitigation assistance, and will leave that complicated task to the overstressed homeowners themselves – and to private nonprofits such as the Mabuhay Alliance,” Issa wrote. “ In another example, the Florida Housing Finance Corporation plans to use part of its deficit-funded federal allocation on a down payment assistance program that will subsidize new home purchases. In other words, “These problems are compounded by Treasury’s lack of transparency and accountability. Treasury’s guidelines for the state HFA proposals call for “innovation,” but are vague enough that programs which substantially duplicate existing federal and private ones – as several of California’s do – appear to qualify,” said Issa. “Treasury has not clarified what it considers to be “innovation,” has not published the state HFAs’ proposals, and has not solicited or accepted input from the public and Congress on the best use of these taxpayer funds.” Issa requested that Treasury provide the following information as soon as possible, but in no case later than 5 pm EDT on Friday, June 4, 2010:
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