Making the argument that the Treasury Department has done “very little” to improve a foreclosure prevention program that has failed to meet its goals, the government’s TARP watchdog testified at a hearing on Wednesday that the case for keeping the program alive has worn thin and is “all but exhausted” [PDF].
We’ve documented many of the major weaknesses in the government’s loan modification program—not least of which is its failure to hold banks accountable for withholding permanent loan modifications from struggling homeowners that the program was intended to help.
House Republicans are now considering a bill to end the troubled program. As the Washington Post reports, consumer advocacy groups have argued for fixing the program rather than ending it at a time when so many homeowners still need housing help.
That’s also what the program’s watchdogs have advocated—though they’re now voicing doubts that Treasury will make any meaningful fixes.
“Treasury, it seems, stands alone in defending the status quo,” testified Neil Barofsky, the special inspector general for the TARP program. Barofsky noted that last month, a Treasury official attended a Mortgage Bankers Association conference to discuss enhancements to the loan modification program and said there would be no “major new programs coming out.”
“We may tweak around the edges,” HousingWire reported the official as saying.
The Treasury Department has continued to defend the program, arguing that while the program has fallen short of its goals, it has still helped modify about 600,000 mortgages. Ending the program, Treasury has argued, would hurt the housing market.
“It would cause a huge amount of damage to a very fragile housing market and leave hundreds and hundreds of thousands, if not millions, of Americans without the chance to take advantage of a mortgage modification that would allow them to stay in a home they can afford,” Treasury Secretary Tim Geithner said yesterday.
Geithner may be right about one thing. As our data shows, by the end of last year, the program had given nearly 1.5 million households “a chance” of a mortgage modification through a trial modification. For most, that chance never turned developed into permanent help.