“Hardest Hit” Funds Apparently Hard for Government to Spend



So, it appears that there are two unprecedented developments in the news this week related to the housing market and ongoing foreclosure crisis.

ONE: At both state and federal levels throughout the country, governments are having an incredibly difficult time spending hundreds of millions of taxpayer dollars.  TWO: Someone apparently woke up the guy who I presume usually sleeps in the office that says, “Office of the Special Inspector General,” or something like that on the door… and he actually investigated this lack of spending difficulty and reported on it.

Don’t ask me how it all happened… I’d rather field questions on the harmonic analysis of differential equations or black hole thermodynamics.

(I guess you could point out the irony and at least double entendre of “uncertainty principle,” as applied to this situation, but that would make you such a Heisenberg… an uber-nerd or highly respected mathlete because those are the only ones who will get that joke.)

It’s no surprise, however, that people are lining up to explain the phenomena… that was a fait accompli destined to happen.  None, it should go without saying, have the foggiest idea what they are talking about, I mean, it’s quite clear at least half didn’t even know about any of this until the OIG report came out this past Tuesday.


I, on the other hand, have written about the topic so many times and for so long that I’m entirely bored to tears with it.  In case you ever wonder, it’s weird at first, but then it gets kind of fun to be completely ignored when you’re the only guy with umbrellas during a 40-day and 40-night Biblical sort of rainstorm.

But, no matter… moving on.

What I’m talking about are the “Hardest Hit Funds,” which were the roughly $8 billion provided by the federal government in the beginning of 2010 to the states hardest hit by foreclosures in order to help their respective housing markets.

Off the top of my head, for example, California received almost $2.8 billion… Arizona got something like $270 million… Florida just over a billion… New Jersey for $300 million… Ohio, Michigan, North Carolina and Illinois each picked up $500 million, give or take… currently, I think the number of hardest hit states is 18-19.

None did anything to help housing markets in any meaningful way with the money… a whole bunch barely even spent any of it in the first place.  For so many reasons, the whole thing should be a national embarrassment … our nation’s flag atop the Capitol should fly at half-mast over the way this was handled.  It truly is a “Bury My Heart at Wounded Knee,” kind of tragedy.

To give you an idea of what type of Band Aides were to be offered, California’s “Keep You Home” programs included:

  1. UMA: Unemployment Mortgage Assistance – You know, out of work, help making mortgage payments.
  2. MRAP: Mortgage Reinstatement Assistance Program – Hard to qualify for, but provides money to bring loan current.
  3. PRP: Principal Reduction Program – Pure pipe dream, nothing more.
  4. TAP: Transition Assistance Program – U-Haul money for people who didn’t make a mortgage payment for 3 years?

And all the other states have some variation on the same themes, a little more of this and a little less than that… but none handled this endeavor well at all.  The creativity exhibited would rival what you might expect to see from a gold fish in a bowl.

For example, Ohio offered the same list of programs as seen in California, while in Illinois they only offered Monthly Mortgage Payment Assistance and Reinstatement Assistance.  New Jersey describes its program as follows…

“The New Jersey HomeKeeper Program offers up to $48,000 in forgivable mortgage assistance to New Jersey homeowners who are at risk of losing their homes to foreclosure as direct result of unemployment or underemployment through no fault, decision or personal circumstance of their own.”

New Jersey’s not even sure why the funds were awarded, in fact, their Website says the funds were, “awarded to states most impacted by unemployment and underemployment,” which I suppose is… well, no… actually it’s not even close.

North Carolina’s “N.C. Foreclosure Prevention Fund™” was said to help homeowners “struggling to make their mortgage payments due to job loss or unforeseen financial difficulties.”  And they actually thought about the name of the program enough to put a “TM” after it, you know… in case someone were to come along and try to steal the name for their own failed mortgage relief program, I suppose.

Shortly after the National Mortgage Settlement was announced, and one by one states started to announce that they would use the funds from the settlement, not to help struggling homeowners avoid foreclosure, but rather for every purpose under the sun, I wrote an article titled, “Should States Use Settlement Money for Deficits or Housing?  Oh, So What and Who Cares?”  And some folks got kind of upset with me, thus demonstrating that they should not be reading my blog in the first place.

My point was that since it was June of 2012, and these same states had their federal funds from the Hardest Hit program for 2.5 years at that point.  And since they weren’t spending those dollars on foreclosure rescue programs in any meaningful way, what difference would it make whether they had more money with which to do nothing?  I suggested some states use the settlement money to build a new stadium, because at least that would provide something the people of the state could use.


I was only half kidding.

Ohio was my personal favorite.  The Buckeye State set aside $75 million to tear down homes.  I don’t know, but it just occurs to me that you have to be something special to receive that kind of money earmarked to help stop foreclosures, and instead use it to raze neighborhoods.

Imagine being one of the families that lost one of those homes to be torn down to foreclosure.  You got denied for a loan modification because the bank said that it wouldn’t be in the best interests of investors… you had to be out in 30 days… and then you watched the place deteriorate until the state started bulldozing the place you used to live to the ground.  Well, if you didn’t feel like a worthless deadbeat before, you sure would after that circle-jerk of an experience.

Arizona got $97,800,000 from the national mortgage settlement and immediately grabbed $50 million for the state’s general fund.  And people in Arizona actually got kind of upset about that… I think some group may have even sued over it.

But the State of Arizona had $267 million to spend on the foreclosure crisis for two and a half years and during that time they accomplished… well, almost nothing.

I thought the outcome was entirely foreseeable, by the way.  In fact, when Arizona announced the details of its program, I went ahead and wrote: “not a single Arizona homeowner would be helped by the program.”  As it turned out I was wrong because a year later the state announced that ONE homeowner had actually received assistance under the state’s program.

According to the Phoenix Business Journal, Executive Vice President Greg Wessel says: Of the 1,055 Arizona home­owners who have applied, ONLY ONE has qualified for help from the program.”

I’ll admit, it was embarrassing for me, but I didn’t hide from my failed forecast.  I ran a headline about how I’d been wrong to say “not a single Arizona homeowner would be helped by the program,” because one homeowner had been helped.  I still don’t know how I got it so wrong.

And when the program’s spokesperson also said that there were two or three other homeowners in the pipeline awaiting to receive assistance, I ran the headline: “Arizona’s Housing Rescue Program Poised to Increase in Effectiveness by 300%.”

The only thing the Hardest Hit money could not be used for, interestingly enough, was the funding of legal aid, and I wrote about that in December of 2010.  Today, it seems every bit as preposterous as it did at the time.

So, now… in an audit released last Tuesday, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) named eight of those 19 states — Alabama, Arizona, California, Florida, Georgia, Indiana, Michigan, and Mississippi — for spending less than 22% of their funds on homeowner assistance.

Not that the SIGTARP, or anyone else at Treasury or within the federal government for that matter have the slightest idea where the money should be spent to stop foreclosures.  But it must be nice to for Treasury to be able to point fingers at someone else for a change.

According to the report, Indiana was at the bottom of the list, having only spent 8 percent of the $221 million received from the federal government.  Originally, the state said it would help roughly 16,000 homeowners at risk of foreclosure, but as of June 30, 2013… only 1,859 have received any kind of assistance.

Alabama only used 13 percent of its hardest hit money and Arizona only used 11 percent of the $267 million it received, according to the SIGTARP’s report.  But, let’s not be too hard on Arizona… I mean… it’s not like they had that many foreclosures to stop, right?

Here’s a quote from the recent report, as quoted by Mortgage Professional America…

“Treasury has rejected SIGTARP’s important recommendations. Treasury’s failure to set meaningful goals and metrics to identify program successes and failures results in a lack of accountability on both the part of Treasury and the 19 HHF states. Treasury’s failure to implement these recommendations harms oversight, reducing Treasury’s ability to identify and assess weaknesses in a timely manner and bring prompter corrective changes.It is important that Treasury fulfill its role as steward over TARP programs, make determinations of which programs are successful and which programs are not working and ensure that HHF funds are reaching homeowners.”

Oh yeah, I’m sure it’s very important that Treasury “fulfill its role as steward over these programs,” after all, they’ve done such crackerjack work stopping foreclosures with its other programs.


The only fun part about the whole thing was reading on AZCentral.com how Arizona was disputing the SIGTARP’s findings…

“State officials dispute findings: Arizona Housing Department officials, including Director Michael Trailor, reject the view that the department has failed to distribute aid in a timely manner.”

Apparently, the state said that there were more up-to-date numbers that were calculated and they indicate that 2,263 families have avoided foreclosure through its program, 300 more than SIGTARP reported.

And considering that we’re almost four years since the funds were made available… that just laugh-out-loud hysterical.  So, fine… give AZ the 300… who cares about that one way or the other?

Special Inspector General Christy Romero came out stating the obvious about the program by saying its record in helping struggling homeowners is “not good.”

Oh, come on… don’t tell me I’m the only one laughing here.  That’s funny stuff… like something out of a Marx Bros. movie.

Romero told the press that the money should have been pushed out and spent in the first three years of the program when struggling homeowners needed the money as soon as possible to avoid losing their homes.  Boy, I hadn’t realized it until now, but this Romero woman isn’t just a pretty face… she’s real a thinker, I tell you.

According to AZCentral.com, Romero also said…

“Homeowners who are struggling don’t have the luxury of time to wait six months, a year, or more while states and the Treasury figure it out.  It’s very frustrating when we see only 11 percent of the funding going to help homeowners after three years.”

Frustrating to whom, Christy?  To you?  Were you frustrated before this SIGTARP report came out, or is this newfound frustration on your part?  Because all I know is that if I had been in charge of $267 million to help stop foreclosures, there’s not a chance in the world I would have only spent 11 percent of the money four years later, as I watched record numbers of foreclosures happening all around me.

The SIGTARP’S report also blamed the U.S. Treasury Department for not setting benchmarks that states needed to meet, as if that was in any way responsible for the spectacular failure all around.

The truth is that I don’t actually care who does what in this area anymore.  That’s right… you heard me… I don’t care at all.  Do… don’t do… take the money and set it on fire for all I care.  Since I see absolutely no reason to expect an outbreak of competence in Washington D.C. there’s no reason to expect anything but more of the same, even under the best of circumstances.

Here’s a link to a chart showing all the programs that followed in the footsteps of the countless other failed programs related to preventing foreclosures in this country over the last five years… in case you feel like looking more closely at the proof that no one in our state or federal government cares about people losing homes to foreclosure.  Because that’s what it’s proof of, right?

So, let’s stop lying about this issue, shall we?  They don’t care about stopping foreclosures, which is why we NEVER hear President Obama even mention it as part of any sort of plan… it’s like he’s forgotten about the whole problem.

And here’s a tip for the states under fire from the recent SIGTARP report:

Don’t let the SIGTARP bust your bananas over not spending the money that was allocated to help prevent foreclosures at the state level.  Simply remind them and the media how HAMP was budgeted to spend $75 BILLION, and last I checked, which wasn’t that long ago, less than $5 BILLION has been spent on that failed program.

So, you’re not alone.  You’re still record-breaking incompetent, don’t get me wrong… but you’re not alone.  When it comes to programs designed to stop foreclosures the only question unanswered is whether disingenuous liars outnumber morons in positions of authority.

Other than that, I think all the questions have been addressed and we’ve heard the message loud and clear.


Mandelman out.

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