WASHINGTON -- Republicans are thrilled with a new tell-all book by former U.S. Treasury Department watchdog Neil Barofsky, who is heavily critical of the Obama administration's handling of the Wall Street bailout and the U.S. housing crisis.
Barofsky frequently criticized the administration's anti-foreclosure efforts during his tenure as the Special Inspector General for the Troubled Asset Relief Program, the $700 billion bank bailout from which the Treasury carved a small slice to help struggling homeowners in 2009. In his new book, "Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street," Barofsky revives many of his criticisms, even going so far as to call the signature effort -- the Home Affordable Modification Program -- a "disaster."
Republicans love it. "Obama promised that his housing programs -- including HAMP -- would help millions of Americans on the verge of foreclosure but this is another example of how his policies failed and millions of families are worse off today," Tim Miller, spokesman for the Republican National Committee, said in an email.
President Barack Obama promised in 2009 that 3 to 4 million homeowners would see their payments reduced thanks to mortgage modifications under HAMP. But the Treasury Department put banks in charge of the modification process, and during the program's first year and a half, homeowners widely reported that banks had deliberately lost their paperwork or charged them fees when they tried to apply. Fewer than 1 million borrowers remain in permanent HAMP modifications today.
"One particularly pernicious type of abuse was that servicers would direct borrowers who were current on their mortgages to start skipping payments, telling them that that would allow them to qualify for a HAMP modification," Barofsky writes in his book. "Home owners who might have been able to ride out the crisis instead ended up in long trial modifications, after which servicers would deny them a permanent modification and send them an enormous 'deficiency' bill ... Borrowers who might otherwise never have missed a payment found themselves hit with whopping bills that they couldn’t pay and now faced foreclosure. It was a disaster."
Several homeowners who applied for HAMP modifications told HuffPost of the same bait-and-switch process described in Barofsky's book. (He also detailed the phenomenon in his reports as the Special Inspector General.)
The Treasury Department, for its part, has denied that anyone wound up in foreclosure as a result of applying for assistance under HAMP. And Treasury has said it tightened up its eligibility requirements halfway through 2010, resulting in fewer strung-out trial modifications.
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