BUSINESS

Hardest Hit Fund Tapped Most By Oregon For States' Shares

07/27/2012 06:07 pm ET

Long a national leader in keeping its populace caffeinated, Oregon can claim bragging rights in another category: spending federal dollars to help its homeowners avoid foreclosure.

As of June 30, Oregon had drawn down $107 million of the $220 million allocated under the Hardest Hit Fund, a $7.6 billion program administered by the Treasury Department that pushes bailout dollars to housing agencies in states especially battered by the foreclosure crisis. Oregon has spent $63 million of the funds it has withdrawn, mostly in the form of no-interest loans to help unemployed homeowners make their mortgage payments, according to state housing officials.

The other 17 states in the program could use a jolt of what Oregon housing officials have been drinking. The fund was set up more than two years ago, but as of March 30, fewer than 50,000 homeowners nationwide had received a no-interest loan or gotten some other kind of mortgage aid under the program. The average state has drawn down just 14 percent of the money made available to it, according to a calculation by The Huffington Post from data included in a report released earlier this week by the special inspector general of the Troubled Asset Relief Program -- the government watchdog over the controversial $700 billion bailout fund.

The program is off to a "stunningly slow start," Christy Romero, inspector general of the watchdog agency with oversight of TARP, said in an interview with The Huffington Post earlier this week.

Both Romero and her predecessor, Neil Barofsky, have been broadly critical of Treasury's management of the $700 billion TARP bailout fund -- particularly with respect to the $45 billion flagged to assist borrowers in danger of losing a home to foreclosure. Just 10 percent of the $45 billion has been spent so far, and much of that has gone to banks and mortgage loan holders as incentive payments to encourage them to reduce the interest rates on loans. Banks, meanwhile, have soaked up hundreds of billions of dollars in emergency aid in the first few months after TARP was established.

Oregon -- long a national leader in espresso carts and artisanal cupcake bakers -- can add another feather to its cap. The state has proven relatively efficient at getting Hardest Hit Fund aid into the hands of residents in danger of losing their homes to foreclosure.

"We took a lot of homeowner applications at the beginning," said Margaret Van Vliet, the director of Oregon's housing finance agency, which oversees the state's program, in explaining why her state's program has distributed more aid than average. "We got out of the gate faster."

At the other end of the spectrum is New Jersey, which as of June 30 had drawn down just 7.5 percent of the money made available to it, based on figures included in the IG report.

Tammori Petty, a spokeswoman for the New Jersey's housing finance agency, said that the agency has recently made "significant changes" to its program in order to expand the number of households served. To date, the agency has pledged $30 million in mortgage payment assistance to more than 750 New Jersey families, she said. (Oregon, with a smaller allocation, has helped 4,486 families, by way of comparison).

The agency anticipates making additional changes in the near future to streamline the approval process, Petty said.

What's the hold up in most of the states?

An earlier TARP inspector general's audit of the fund, released in March, faults Treasury for rushing the program out "without appropriate collaboration by key stakeholders." One "great shortcoming," the report says, was Treasury's lack of timely action to enlist the support of large loan servicers, mostly major banks, leaving it to the individual state agencies to negotiate their own agreements.

Large servicers did not participate for months, citing the difficulty of administering many different programs, the inspector general says. "The one billion dollars has been a nice carrot to use for servicers in Florida, but there has been no stick with the carrot to force the servicers to participate," one unnamed housing official told the inspector general, according to the report.

The Treasury Department disagreed with the inspector general's analysis.

Treasury "actively and consistently" engaged with banks from the earliest stages of the program, "encouraging support and addressing impediments to participation," Timothy Massad, the assistant secretary for financial stability, said in a letter in response to the audit. "This unprecedented level of collaboration with states and stakeholders will be a lasting legacy of the program."

Andrea Risotto, an agency spokeswoman, said that the states developed their individual programs to disburse the money from scratch. "Now that all states are operating their programs widely, we continue to see steady growth in the program each month," she said in an email.

"We continue to facilitate regular dialogue between states and servicers about program implementation and provide technical assistance whenever operational questions arise," Risotto said. "We also host a regular bi-weekly call between states and the largest servicers, and a monthly call between states and other participating servicers."

Other states that have done a relatively good job so far in distributing aid include North Carolina (drawn down 27 percent of its allocation) and Rhode Island (drawn down 33 percent). The states that have withdrawn the least -- less than 10 percent of their allocation -- include Arizona, Mississippi, Florida, Nevada, Indiana and Michigan. (Drawn down doesn't mean spent, but it is the best available indication of the states' success in distributing aid.)

More than 1 million U.S. homes are in some stage of foreclosure, according to RealtyTrac.

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