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Factor Af
F
rs ffectin Im menta
ng mplem ation
of the Har
o e rdest Hit F
H Fund Program

Apr 12, 2012
ril
S
SIGTARP 12-002

Off
fice of th specia inspect
he
al
tor gene
eral
For the Tr
roubled As
sset Relief Program
f
m
1801 L Street NW, 4th floo
t,
or
Washington D.C. 20220
n,

 

April 12, 2012
M
MEMORAN
NDUM FOR:

Mr. Tim
mothy Massad – Assistan Secretary f
d
nt
for
Financia Stability, Department of the Treasury
al
D

 

 

F
FROM:

Ms. Chri L. Rome – Specia Inspector G
isty
ero
al
General
for the Troubled Ass Relief Pr
T
set
rogram

S
SUBJECT:

Factors Affecting Im
A
mplementatio of the Har
on
rdest Hit Fu Program
und
(SIGTAR 12-002)
RP

W are provi
We
iding this rep for your information and use. I discusses t Factors A
port
r
n
It
the
Affecting
I
Implementat
tion of the Hardest Hit Fund Program
H
m.
 

T Office of the Specia Inspector General for the Troubled Asset Relie Program c
The
o
al
G
t
d
ef
conducted th audit
his
(
(engagement code 022), under the au
t
uthority of Public Law 1 10-343, as a
P
amended, wh also
hich
incorporates the duties an responsib
nd
bilities of ins
spectors gen
neral under th Inspector General Ac of
he
r
ct
1
1978, as ame
ended.
W consider comment from the Department of the Treasu when preparing the r
We
red
ts
D
o
ury
report. Trea
asury’s
c
comments ar addressed in the repor where app
re
rt,
plicable, and a copy of T
d
Treasury’s re
esponse is in
ncluded
in Appendix L.
W appreciate the courte
We
esies extende to our staf For addit
ed
ff.
tional inform
mation on th report, ple
his
ease
c
contact Mr. Kurt Hyde, Deputy Spec Inspecto General fo Audit and Evaluation
K
D
cial
or
or
(
(Kurt.Hyde@
@treasury.go / 202-622-4633), or Ms. Kimberle A. Caprio Assistant D
ov
M
ey
o,
Deputy Spec
cial
I
Inspector Ge
eneral for Au and Eva
udit
aluation (Kim
m.Caprio@tr
reasury.gov / 202-927-89
978).

April 12, 2012

F
Factors Affecting Implementation
A
o the Hardest Hit Fund Pro
of
ogram
 

S
Summa
ary
In authorizing the Troubled Asset Relief
d
f
P
Program (“TA
ARP”), Congre explicitly stated
ess
s
that one purpo of TARP was to preserve
ose
h
homeownersh
hip. In early 2010, despite U.S.
2
G
Government programs to address the
p
a
fo
foreclosure cr
risis such as TARP’s Home
T
e
A
Affordable Mo
odification Pro
ogram (“HAMP”),
h
homeowners still faced a housing marke
h
et
u
under significa stress. On
ant
O
F
February 19, 2010, the Adm
2
ministration
a
announced the Housing Fin
nance Agenc
cy
Innovation Fund for the Ha
ardest Hit Hou
using
M
Markets (the “Hardest Hit Fund,” or “HHF”).
“
F
U
Under HHF, TARP dollars would fund
T
“innovative me
easures” developed by sta
ate
h
housing financ agencies (“HFAs”) and
ce
(
a
approved by Treasury to he families in the
T
elp
n
s
states that hav been hit th hardest by the
ve
he
y
a
aftermath of th housing bu
he
ubble.
O
Originally ann
nounced as a $1.5 billion TARP
T
p
program for fiv states with home price
ve
h
d
declines great than 20%, HHF grew to
ter
,
o
$
$7.6 billion to 18 states and the District of
d
o
C
Columbia thro
ough four roun of funding
nds
g.
T
Treasury appr
roved HHF pr
rograms in fiv
ve
c
categories of assistance: (1) principal
(
r
reduction; (2) second-lien reduction or payoff;
r
p
(3) reinstatem
ment through payment of pa
p
ast
d amounts; (4) unemploy
due
yment or
u
underemploym
ment assistan
nce; or
(5) transition assistance su as a short sale,
a
uch
t
d
deed-in-lieu of foreclosure, or relocation
n
a
assistance.
A part of the Office of the Special Inspe
As
ector
G
General for th Troubled Asset Relief
he
A
P
Program’s (“S
SIGTARP”) co
ontinuing over
rsight
o TARP and in response to a request fr
of
rom
C
Congressman Darrell Issa, SIGTARP
n
p
performed a review of Trea
asury’s
d
decision making related to HHF. SIGTA
ARP
a
assessed whe
ether Treasur applied
ry
c
consistent and transparent criteria in
d
t
s
selecting the states and pro
s
ograms, asse
essed
the extent to which Treasury determined that
w
d
the programs were innovat
tive and not
d
duplicative of existing programs, and
id
dentified Trea
asury goals and metrics for the
p
program.

Wha SIGTAR Found
at
RP
A sen Treasury official told S
nior
SIGTARP that
t
the id of the Har
dea
rdest Hit Fund came from
d
an ov
verall examina
ation of option to tackle
ns
home foreclosure economic cha
e
allenges such
h
as ne
egative equity and unemplo
y
oyment not
being addressed b TARP’s ho
g
by
ousing
progr
ram HAMP. T Treasury official told
The
SIGT
TARP that at t end of 200 (when HHF
the
09
was b
being develop
ped), unemplo
oyment was
hover
ring around 9 and one in four homes
9%
n
was u
underwater. A
After two yea the
ars,
Harde Hit Fund h experienc significan
est
has
ced
nt
delay in providing help to home
y
eowners due t
to
sever factors inc
ral
cluding a lack of
comp
prehensive pla
anning by Tre
easury and a
delay and limitatio in participation in the
y
on
progr
ram by large s
servicers and the
d
Gove
ernment-sponsored enterprises (“GSEs”
”)
(Fann Mae and F
nie
Freddie Mac) As of
).
Dece
ember 31, 201 the latest data available
11,
e,
the H
Hardest Hit Fu has spent only
und
t
$217 .4 million to p
provide assist
tance to
30,64 homeowne – approxim
40
ers
mately 3% of
the TA
TARP funds alllocated to HH and
HF
appro
oximately 7% of the minimum number o
of
home
eowners whom the state H
m
HFAs estimate
e
helpin over the lif of the prog
ng
fe
gram, which
ends in 2017.
Nearlly all (98%) of the help pro
f
ovided to
home
eowners unde the Hardes Hit Fund ha
er
st
as
been related to un
nemployment assistance or
reinst
tatement of p
past due amou
unts, the only
y
types of assistanc e for which th GSEs
s
he
direct servicers to participate The great
ted
e.
bulk (
(78%) of the H
HHF help to h
homeowners
has b
been for unem
mployment as
ssistance.
Unles there is a d
ss
drastic change in the
assis tance the GS and their conservator,
SEs
the F ederal Housin Finance A
ng
Agency, will
suppo the Harde Hit Fund m be much
ort,
est
may
narro
ower in scope and scale tha what was
an
origin
nally expected due to the la of service
d
ack
er
and G
GSE support f certain pro
for
ograms.
Witho significant change, while the Hardes
out
t
st
Hit Fu may be a
und
able to reach unemployed
home
eowners as w originally intended, it is
was
s
likely to be limited in addressing negative
g
equity for homeow
y
wners who are underwater.
e
.
April 12, 2012

F
Factors Affecting Implementation
A
o the Hardest Hit Fund Pro
of
ogram
 
 
S
SIGTARP found that Treas
sury consisten
ntly
a
applied its crit
teria to choos states to
se
p
participate in the first three rounds of fun
t
nding
fo HHF. How
for
wever, in the second round it
s
d,
w unclear why Treasury determined that
was
w
s
states with hig percentage of their
gh
es
p
population in counties with an unemploy
c
yment
r
rate greater th 12% were economically
han
e
d
distressed, bu that states with 11%
ut
w
u
unemploymen were not. The cutoff for
nt
T
T
Treasury’s selection of stat in Round Two
tes
w not transp
was
parent because one perce
entage
p
point divided Ohio (with 22% of its popu
O
ulation
li
iving in count
ties with a gre
eater than 12%
%
u
unemploymen rate), which was selected,
nt
h
v
versus Tennessee (with 21
1%), which wa not
as
s
selected until five months later, when
T
Treasury mad another rou of funding to
de
und
g
a states with above-avera unemploy
all
age
yment.
F the fourth round, no ne states were
For
ew
s
selected. Rat
ther, Treasury nearly doub
y
bled
the funds four days before the expiration of
r
n
T
Treasury’s TA
ARP investme authority.
ent
T
Treasury dete
ermined that the five catego
ories
o assistance it approved were complian with
of
w
nt
T
TARP’s requir
rement that programs prev
vent
a
avoidable fore
eclosures and rejected other
d
p
proposed prog
grams for not having a suff
t
fficient
li to this req
ink
quirement. Tr
reasury did no
ot
d
define “innova
ative” or perfo an analys of
orm
sis
w
whether the proposed prog
grams were
in
nnovative or duplicative of other programs,
d
f
in
nstead consid
dering the pro
ogram design to be
in
nnovative bec
cause it provides for locally
y
tailored solutio
ons.
T
Treasury has not set meas
surable goals and
m
metrics that would allow Tr
w
reasury, the public,
p
a Congress to measure the progress and
and
s
s
success of HH Treasury set a single goal
HF.
y
fo HHF: to help prevent fo
for
oreclosures and
p
preserve hom
meownership. Treasury doe
es
r
require states to estimate the number of
t
f
h
households to be assisted by their HHF
o
p
programs, but this number has limited
t
u
usefulness be
ecause states can, and hav
ve,
c
changed estim
mates, creatin a shifting
ng
b
baseline that makes it diffic to measure
m
cult
p
performance against expec
a
ctations. The
e
s
states’ estima
ated number of homeowners to
o
b assisted by the Hardest Hit Fund has
be
y
t
s
s
steadily decre
eased over the last year.
e

As of December 3 2011, the 19 HFAs
f
31,
collec
ctively estima helping be
ate
etween
458,6 and 486,5 homeown
632
536
ners over the
lifetim of HHF, wh
me
hich will end in 2017.
Treas
sury has not a
adopted this e
estimate or
even reported it. I is not too la for
It
ate
Treas
sury to set me
easurable goa including
als,
at a m
minimum, ado
opting the HFAs’ collective
e
estim
mate or develo
oping its own goal of how
many homeowner Treasury ex
y
rs
xpects HHF to
o
help. Treasury ca also do mo to improve
an
ore
e
parency by publishing agg
transp
gregate
inform
mation on the program, and other usefu
e
ul
inform
mation, so tha taxpayers d not have to
at
do
o
track performance on 19 HFA w
e
websites.
Desp Treasury’s statement a
pite
s
about state
HFAs – “This is no our program These are
s
ot
m.
their p
programs.” – HHF is a TARP program,
and T
Treasury is th e steward ov TARP.
ver
SIGT
TARP found th several fa
hat
actors
contr ibuted to the Hardest Hit F
Fund’s
signif
ficant delay in getting assis
n
stance to
home
eowners. HHF lacked com
mprehensive
plann
ning by Treasury, which rus
shed out the
progr
ram without a
appropriate co
ollaboration of
f
key s
stakeholders. Treasury’s d
decision to
give o to two da
one
ays’ notice to states and six
x
to eig weeks to d
ght
develop progr
rams caught
sever states off g
ral
guard. Sever states
ral
delay HHF prog
yed
grams becaus the large
se
mortg
gage servicer were not pa
rs
articipating.
Seve ral HFAs told SIGTARP th their
d
hat
ary
k
prima challenge was the lack of large
servic participatiion. Without large
cer
servic
cers, the HFA could not r
As
reach a large
portio of strugglin homeowne
on
ng
ers. One HFA
A
expla
ained, “Withou big servicers, it would
ut
take m
much, much llonger to get the funds out
t,
ty
with j ust communit banks and credit unions
s.
It wou be a trickle of eligible a
uld
applicants.”
One g
great shortco
oming in HHF’
’s
imple
ementation wa Treasury’s lack of timely
as
s
y
action to enlist larg servicer su
n
ge
upport for and
d
partic
cipation in sta HHF progr
ate
rams while
ate
leavin it to the HF to negotia with
ng
FAs
servic
cers. Treasury failed to re
ecognize the
lack o bargaining power that st
of
tates had for
recru iting servicers A Florida H
s.
HFA official
expla
ained to SIGT
TARP, “The on billion
ne
dollar has been a nice carrot t use for
rs
to
servic
cers in Florida but there is no stick with
a,
s
h
Apr 12, 2012
ril

F
Factors Affecting Implementation
A
o the Hardest Hit Fund Pro
of
ogram
 
 
the carrot to fo
orce servicers to participat
s
te.”
L
Large servicers did not par
rticipate for nine
m
months, citing administrativ burden of 50
g
ve
5
d
different progr
rams, lack of program
u
uniformity, and lack of GSE guidance.
E
S
Servicers cited the need fo GSE guidan
or
nce
b
before they co
ould begin participating in the
t
p
program. Treasury did not gain GSE su
t
upport
fo HHF progr
for
rams for eight months.
t
T
Treasury, resp
ponsible for HHF oversight and
H
t
a
accountable fo HHF result should hav
or
ts,
ve
b
been, and still should be, th driving forc to
l
he
ce
e
ensure that th GSEs and large servicers
he
s
support the HFAs’ program
ms.
In order to rea the number of homeow
ach
wners
w
whom the HFA collectively estimate he
As
y
elping
through HHF, there needs to be a dramatic
in
ncrease in the number of homeowners
e
h
h
helped. As was clear in the beginning of
e
o
H
HHF, states need Treasury help and
n
y’s
s
support to increase the num
mber of
h
homeowners helped, and Treasury shou do
T
uld
e
everything it can to ensure the program’
c
’s
s
success. Trea
asury should set measurab
ble
g
goals, measur progress against those
re
a
g
goals, and dev
velop an actio plan to ens
on
sure
that the next five years result in the Hard
f
dest
H Fund fulfilling TARP’s goal to preserv
Hit
g
ve
h
homeownersh
hip.

at
RP
mmends
Wha SIGTAR Recom
SIGT
TARP recomm
mends that Tre
easury:
(a) se meaningful and measura
et
able
perfo rmance goals for HHF including at a
s
minim
mum the number of homeo
owners to be
helpe and measu progress a
ed
ure
against those
e
goals (b) instruct state housing finance
s;
g
cies in the Ha
agenc
ardest Hit Fun to set
nd
mean
ningful and measurable ov
verarching and
d
interim performanc goals; (c) s milestone
m
ce
set
es
at wh
hich the state housing finan agencies
nce
in the Hardest Hit Fund must re
e
eview the
progr
ress of individ
dual state prog
grams and
make program adjjustments from the review;
e
m
;
(d) pu
ublish on its w
website and in the Housing
n
g
Score
ecard on a qu
uarterly basis the total
numb of homeow
ber
wners assiste amounts
ed,
drawn down by sta
n
ates, and doll
lars expended
d
for as
ssistance prov
vided to home
eowners,
assis tance commit
tted to homeo
owners, and
cash on hand; (e) and develop an action pla
an
for th e Hardest Hit Fund that includes steps
t
to inc
crease the numbers of hom
meowners
assis ted and to ga industry su
ain
upport for
Treas
sury-approved HHF progra
d
ams. If
Treas
sury cannot a
achieve the de
esired level of
f
home
eowners assis
sted in any on program
ne
area in the defined time period, Treasury
d
,
shoulld put the funds to better u toward
use
progr
rams that are reaching hom
meowners.
In com
mmenting on a draft of this report,
s
Treas
sury stated th it will addre
hat
ess
SIGT
TARP’s recom
mmendations a a later date
at
e.
A len gthier discuss
sion of Treasury’s
onse is contaiined in the Ma
anagement
respo
Comm
ments section of this repor
n
rt.

Apr 12, 2012
ril

F
Factors Affecting Implementation
A
o the Hardest Hit Fund Pro
of
ogram
 

T
Table of Conten
f
nts
I
Introduction ..........................................................
....................
....................
....................
....................
.............1
B
Background ..........................................................
....................
....................
....................
....................
.............3
ting Market Conditions and Increasin Unemplo
C
a
ng
oyment Led t the Devel
to
lopment of H ..... 3
HHF
Deteriorat
Treasury Held Four Rounds of Fu
H
R
unding and Approved Fiv Categorie of Program ...............
A
ve
es
ms
............ 4
T
Treasury Announced the Selection of States at th Same Tim It Announ
e
he
me
nced the Pro
ogram. In the Fourth
R
Round, Treasury Nearly Doubled the Funds Ava
e
ailable for HH Four Da Before T
HF
ays
Treasury’s Sp
pending
A
Authority Un
nder TARP Ended.............................
E
....................
....................
....................
....................
.............6
Round On Targeted States with Home Price Declines Ex
ne
S
H
D
xceeding 20% .................
%
....................
............ 6
In Round Two, Treasu Expande HHF to Fi Addition States wi High Une
ury
ed
ive
nal
ith
employment ........... 7
t
Round Three Used Ne Criteria To Target Sta with Hi Unemplo
ew
T
ates
igh
oyment and F
Focus on Programs
for the Un
nemployed .........................................
....................
....................
....................
....................
............ 8
In Round Four, Treasu Added No New State but Alloc
F
ury
N
es,
cated an Add
ditional $3.5 Billion to
5
Previously Funded HF .................................
y
FAs
....................
....................
....................
....................
............ 9
Treasury Rejected Pro
R
ograms as No
oncompliant with EESA ...................
t
A
....................
....................
............ 9
Treasury Considered the Design of the Progra To Be Inn
C
t
o
am
novative and Did Not Ev
d
valuate Whe
ether
State HHF Programs Were Duplic
F
W
cative of Oth Programs ..................
her
s
....................
....................
.......... 11
T Hardest Hit Fund Ha Experienc Significa Delay in Providing H to Hom
The
as
ced
ant
n
Help
meowners; Assistance
M Dramatically Increase To Meet the Numbe of Homeow
Must
t
er
wners Whom HFAs Inte To Help ..........13
m
end
p
Treasury’s One to Two Days of Notice to Stat Selected in the First T Rounds Caught the States
s
N
tes
Two
s
e
Off Guard .........................................................
d
....................
....................
....................
....................
.......... 17
The Prima Challeng for HFAs Was Lack of Participati on by Large Servicers ...
ary
ge
o
e
....................
.......... 19
Administr
rative Burden Lack of Program Unif
n,
formity, and Lack of GS Guidance Made Servicers
d
SE
e
Hesitant To Participate in HHF........................
T
....................
....................
....................
....................
.......... 21
Treasury Did Not Gain GSE Supp for HHF Before App
D
n
port
F
proving Stat Programs .
te
....................
.......... 23
Treasury Convened a Servicer Sum
C
mmit with Key Stakehol
K
lders Seven Months Afte Program L
er
Launch
..........................................................................
....................
....................
....................
....................
.......... 24
E
W
ation in Une
employment and Reinsta
atement
Once GSE Guidance Was Issued, Large Servicer Participa
Programs Greatly Incr
reased .............................
....................
....................
....................
....................
.......... 25
G
GSEs and Se
ervicers Reje
ected Some HHF Progra
H
ams, Leading States To F
g
Focus on Oth Program ........26
her
ms
T
Treasury’s Goals and Me
G
etrics Fall Sh and Ma Effective Evaluation Difficult.....
hort
ake
e
....................
...........32
Treasury and Most HF Did Not Set Numeri Goals ......
a
FAs
t
ic
....................
....................
....................
.......... 32
April 12, 2012

F
Factors Affecting Implementation
A
o the Hardest Hit Fund Pro
of
ogram
 
 

HFAs Pub
blish Quarter Numeric Data on The Own Web
rly
eir
bsites, but W
Without State Numeric Goals, It
ed
Is Difficul To Assess Performanc .................
lt
ce
....................
....................
....................
....................
.......... 34
Estimates of the Numb of Partic
ber
cipating Hou
useholds Tha Change Ea Quarter Have Limite Value
at
ach
ed
sing Perform
mance ..............................
....................
....................
....................
....................
.......... 35
for Assess
Best Pract
tices Call for Setting Goa and Mea
r
als
asuring Progr
ram Perform
mance ...........
....................
.......... 35
C
Conclusions ..........................................................
....................
....................
....................
....................
...........38
R
Recommend
dations ................................................
....................
....................
....................
....................
...........45
M
Management Comments and SIGTA
t
ARP’s Respo ..............
onse
....................
....................
....................
...........46
A
Appendix A – Objectives, Scope, and Methodolo ..............
ogy
....................
....................
....................
...........47
A
Appendix B – Acronyms and Abbrev
s
viations .......
....................
....................
....................
....................
...........50
A
Appendix C – Timeline of Key HHF Events .......
o
F
....................
....................
....................
....................
...........51
A
Appendix D – HHF State Selection and Funding Allocation Methodolog ................
e
a
g
gy
....................
...........52
A
Appendix E – HHF Fund
ding Allocat
tions and Am
mounts Oblig
gated by Stat Total Fin
ate,
nalized
S
September 29, 2010 .............................................
....................
....................
....................
....................
...........53
A
Appendix F – HHF Prog
grammatic Ex
xpenses and Homeowne Assisted, by State, as of
d
ers
s
D
December 31 2011 ..............................................
1,
....................
....................
....................
....................
...........54
A
Appendix G – HHF Fund
ding Allocat
tions and Am
mount Drawd
down by HF
FAs, by State as of
e,
F
February 201 ......................................................
12
....................
....................
....................
....................
...........55
A
Appendix H – HFAs’ Tim
meline of Pi and State
ilot
ewide Progr
ram Launche and Date First Large Servicer
es,
P
Participates, as of Augus 1, 2011 ........................
st
....................
....................
....................
....................
...........56
A
Appendix I – State Selec
ction Rankin for Roun One, Two and Three ..................
ngs
nds
o,
e
....................
...........57
A
Appendix J – HFA Quar
rterly Perform
mance Report Template/
/Data Dictio
onary ............
....................
...........63
A
Appendix K – HHF Prog
gram Goals by State and Program, as of Decemb 31, 2011 ...................
b
d
s
ber
...........68
A
Appendix L – Management Commen ...............
nts
....................
....................
....................
....................
...........73
A
Appendix M – Audit Tea Members ..................
am
....................
....................
....................
....................
...........76

Apr 12, 2012
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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

1

Introduction
When Congress authorized the creation of the Troubled Asset Relief Program
(“TARP”) in 2008, the nation was in the midst of a housing crisis with a record
number of foreclosures. Congress explicitly stated in the TARP legislation that
one purpose of TARP was to preserve homeownership and specifically required
the Secretary of the U.S. Department of the Treasury (“Treasury”) to take into
consideration “the need to help families keep their homes and to stabilize
communities” when exercising authority.
The U.S. Government took several actions in response to the housing crisis that
included rolling out in February 2009 the Making Home Affordable (“MHA”)
Program, which contained TARP’s signature housing program, the Home
Affordable Modification Program (“HAMP”). Treasury intended for HAMP to
help as many as three to four million financially struggling homeowners avoid
foreclosure by modifying loans to a level that is affordable for homeowners now
and sustainable over the long term.
Despite these Government programs, in 2009 and early 2010, homeowners faced
a housing market still under significant stress, with nearly 2.8 million foreclosures
initiated in 2009, and 932,000 foreclosure filings in the first quarter of 2010. At
the end of 2009, 66,465 homeowners were in permanent mortgage modifications
under HAMP. In the first quarter of 2010, Treasury announced the expansion of
MHA through several new efforts and program revisions.
In addition, on February 19, 2010, the Administration announced a new
foreclosure prevention program under TARP called the Housing Finance Agency
Innovation Fund for the Hardest Hit Housing Markets (“Hardest Hit Fund,” or
“HHF”). Phyllis Caldwell, former Chief of Treasury’s Homeownership
Preservation Office (“HPO”), told the Office of the Special Inspector General for
the Troubled Asset Relief Program (“SIGTARP”) that the idea of the Hardest Hit
Fund came from an overall examination of options to tackle home foreclosure
economic challenges such as negative equity and unemployment not being
addressed by HAMP. According to the program announcement, TARP dollars
would fund “innovative measures to help families in the states that have been hit
the hardest by the aftermath of the housing bubble.” Two years have passed since
HHF was announced, and 30,640 homeowners have received assistance as of
December 31, 2011.
In a letter to SIGTARP dated June 23, 2010, Chairman Darrell Issa of the House
Committee on Oversight and Government Reform requested that SIGTARP
initiate a review of HHF, stating, “First, Treasury has not revealed, in a fully
transparent manner, the scope and objectives of the state programs that will
receive Hardest Hit Fund monies. … Second, the details of Hardest Hit Fund
programs that have so far emerged suggest that they will not effectively address
April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

2

the national foreclosure crisis … .” Consequently, SIGTARP began a review to
meet the following objectives:






assess the extent to which Treasury applied consistent and transparent criteria,
including applicable provisions of the Emergency Economic Stabilization Act
of 2008 (“EESA”), in selecting the states and programs to receive money from
HHF;
assess the extent to which Treasury determined that the programs to be funded
by HHF are innovative and not duplicative of existing state and Federal
programs; and
identify the goals and metrics that Treasury adopted and reported to the public
for the operation of HHF.

SIGTARP will address a fourth objective, to determine whether Treasury put
sufficient mechanisms in place to prevent waste, fraud, and abuse of HHF, in a
future audit report.
In conducting this audit, SIGTARP gathered information from officials from
Treasury, Government-sponsored enterprises (“GSEs”) – the Federal National
Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage
Corporation (“Freddie Mac”) – the Federal Housing Finance Agency (“FHFA”),
state housing finance agencies (“HFAs”) participating in the program, and the
largest mortgage servicers. For discussion of the audit scope and methodology,
see Appendix A.

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

3

Background
HHF is one of three TARP-funded housing programs, along with MHA programs
and a Federal Housing Administration (“FHA”) refinancing program.1 Treasury
has allocated $45.6 billion to these programs. MHA includes subprograms such
as Treasury’s principal housing program, HAMP. HAMP focuses on loan
modifications and is intended to use incentive payments to encourage loan
servicers (“servicers”) and investors to modify eligible first-lien mortgages so that
the monthly payments of homeowners who are currently in default or at imminent
risk of default will be reduced to affordable and sustainable levels.

Deteriorating Market Conditions and Increasing Unemployment Led
to the Development of HHF
Treasury officials told SIGTARP that HHF program development began around
the end of 2009, when the housing crisis had grown worse and encompassed more
of the housing market. At that time, home prices declined and unemployment
rose to 9.9%. As part of the program development, the Administration, the
National Economic Council, the Council of Economic Advisers, the U.S.
Department of Housing and Urban Development (“HUD”), and Treasury officials
discussed how to address the evolving housing crisis. Housing and mortgage
sector participants, including the Mortgage Bankers Association, the National
Council of State Housing Agencies, and HOPE NOW,2 also advised Treasury on
the development of HHF.
Former HPO Chief Caldwell told SIGTARP that Treasury wanted to do more
regarding home foreclosure prevention. She told SIGTARP that the idea of HHF
came from an overall examination of options to tackle foreclosure challenges,
such as negative equity and unemployment, which were not addressed by HAMP
or other MHA programs, and that at the end of 2009, unemployment was
hovering around 9%, and one in four homes was underwater.3 Treasury stated
that HHF’s goals are to help families in states hit the hardest by the burst of the
housing bubble, allow for “locally focused” programs, support “innovative”
foreclosure prevention efforts, prevent foreclosures, and stabilize the housing
market. Treasury designed the HHF program to provide TARP funding for
foreclosure prevention programs designed and run by HFAs. HFAs are
authorities created by state law that help provide affordable housing. One
Treasury official noted that HHF offered locally tailored solutions, something that
1

FHA in the U.S. Department of Housing and Urban Development (“HUD”) provides mortgage insurance on loans
made by FHA-approved lenders.
2
HOPE NOW is an alliance of mortgage counselors, mortgage companies, investors, and other mortgage market
participants that aims to maximize outreach efforts to homeowners in distress.
3
Declining home prices may result in “negative equity,” when the value of the home is less than the mortgage loan
balance. Being “underwater” is a term also used to describe negative equity.

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

4

nationally focused HAMP did not. The Administration noted in announcing HHF
that HFAs were “already familiar with the urgent challenges facing their
communities and have demonstrated the ability to address these challenges.”

Treasury Held Four Rounds of Funding and Approved Five
Categories of Programs
Initially, Treasury announced that TARP funds would be allocated to states where
home prices had declined more than 20%. Former HPO Chief Caldwell told
SIGTARP that there were differences in the housing crisis at the state level, citing
the example of the “sand states” of Arizona, California, Nevada, and Florida,
which had substantial negative equity. Although Treasury had not specifically
contemplated a total funding amount for HHF, Treasury later expanded the
program in four rounds of funding in 2010. Treasury allocated $7.6 billion in
TARP funds for HHF programs at 18 Treasury-selected states and the District of
Columbia. The funds remain available until December 31, 2017. Treasury
announced the four rounds as follows:4








Round One: Announced February 19, 2010, $1.5 billion for five states with
home price declines greater than 20% (Arizona, California, Florida, Michigan,
and Nevada);
Round Two: Announced March 29, 2010, $600 million for five states with
high concentrations of people living in economically distressed areas defined
by Treasury as counties with unemployment rates that exceeded 12% (North
Carolina, Ohio, Oregon, Rhode Island, and South Carolina);
Round Three: Announced August 11, 2010, $2 billion for states with
unemployment above the then-national average of 9.8% (17 states and the
District of Columbia); and
Round Four: Announced September 29, 2010, $3.5 billion for states already
in HHF.

Treasury subsequently approved HHF programs in five categories of assistance:
(1) principal reduction; (2) second-lien reduction or payoff; (3) reinstatement
through payment of past due amounts; (4) unemployment/underemployment
assistance; or (5) transition assistance such as a short sale (in which the home is
sold for less than the mortgage loan balance), deed-in-lieu of foreclosure (in
which the homeowner transfers ownership to the lender or investor), or relocation

4

For a timeline of key HHF events, see Appendix C, and for the amount of HHF funding obligated to each state by
round, see Appendix E.

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

5

assistance. Each HFA could offer multiple programs under HHF, with Treasury
approval.5

5

For all HHF participation agreements and amendments by HFAs containing program descriptions, the estimated
number of households served, and the funds allocated to each program, see the Contracts & Agreements tab at
http://www.treasury.gov/initiatives/financial-stability/programs/housing-programs/hhf/Pages/default.aspx.

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

6

Treasury Announced the Selection of States at
the Same Time It Announced the Program. In the
Fourth Round, Treasury Nearly Doubled the
Funds Available for HHF Four Days Before
Treasury’s Spending Authority Under TARP
Ended
For each round, Treasury internally decided on criteria for that round, applied
the criteria to all states and the District of Columbia, decided the states and the
amount of funds to distribute among the states, and then publicly announced the
decisions. Treasury used a different method and criteria for selecting states for
each round. Treasury consistently applied its announced criteria in the first three
rounds, but in Round Two, the choice of the cutoff for its selection of states was
not transparent. Four days before Treasury’s TARP investment authority expired,
Treasury nearly doubled the funds for the program, giving the funds to the
participating states without expanding the program to additional states.

Round One Targeted States with Home Price Declines
Exceeding 20%
As first announced, HHF would fund states where the average home price had
declined more than 20%. In the first round, Treasury selected five states,
applying the 20% criteria. Former HPO Chief Caldwell told SIGTARP, “We
focused on price declines, which were expected to include the ‘sand states’ since
they had homes that were greater than 20% underwater. We thought about
principal reduction and negative equity to address that in places where
homeowners had put down 20% or more and were still underwater.” Caldwell
explained that Treasury thought it “could capture the responsible borrower caught
in the bubble and then price declines.”
Treasury used the FHFA seasonally adjusted purchase-only house price index to
calculate the statewide percentage decline from each state’s home price peak
(which most frequently occurred in 2007).6 Former HPO Chief Caldwell told
SIGTARP the breakpoint for the first five states selected made sense, and that
after the first five, there was a big gap. Michigan, the fifth state selected for
6

The FHFA seasonally adjusted purchase-only house price index measures changes in single-family house prices. It is a
repeat-sales index, using price changes from repeat sales of the same properties. The index is based on sale prices of
detached houses with mortgages that were conventional, were conforming, and were securitized or purchased by
Fannie Mae or Freddie Mac. A conventional mortgage is one that is not insured by FHA or guaranteed by the U.S.
Department of Veterans Affairs. A conforming mortgage is one that has a loan balance no greater than that allowed by
GSEs, and meets minimum underwriting standards.

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

7

Round One, had a price decline of 24.1%, whereas Maryland – which was not
selected for Round One – had a price decline of 19%. She explained that for the
next five states, “there was not a good breakpoint, and the next five in the first
criteria list did not meet our objectives.”7 After the five states Treasury selected,
the remaining states fell under 20% in home price decline.8

In Round Two, Treasury Expanded HHF to Five Additional States
with High Unemployment
On March 29, 2010, Treasury announced the expansion of HHF to states with
high concentrations of people living in economically distressed counties in which
the unemployment rate exceeded 12% in 2009. Treasury selected five states:
North Carolina, Ohio, Oregon, Rhode Island, and South Carolina. Former HPO
Chief Caldwell told SIGTARP that home foreclosures caused by concentrated
unemployment were not being addressed by HAMP, and Treasury wanted to use
HFAs to address the issue. Former Treasury Assistant Secretary for Financial
Stability Herbert Allison told SIGTARP, “We heard from lots of other states after
the first round. … Members of Congress and community groups spoke out.”
Treasury received letters from elected officials of Ohio and Pennsylvania,
expressing concern as to why their states were not funded through the program
and urging Treasury to expand the program to other states.
Unlike for Round One, Treasury was unable to clearly explain how it selected the
criteria of a greater than 12% unemployment rate other than to call it a “policy
decision,” and explain how it drew a cutoff line for the five states that received
funding when there was not a clear statistical cutoff point. Treasury’s press
release stated, “Less than 15 percent of the U.S. population lives in such high
unemployment rate counties.” In Round Two, Treasury selected North Carolina,
Ohio, Oregon, Rhode Island, and South Carolina, states that had a range of 22%
to 60% of their population living in counties with concentrated unemployment.9
Unlike Round One, Round Two did not have a clear statistical cutoff point for
state eligibility. There was a small gap between states included and excluded for
the second round, with Ohio included at 22% of state population in high
unemployment counties and Tennessee excluded at 21%. Treasury’s
7

The state price decline percentages as calculated from the FHFA’s seasonally adjusted purchase-only house price index
are identified in Appendix I.
8
Treasury allocated the $1.5 billion in TARP funds among the states using a Treasury-created formula that included
housing price declines calculated from the FHFA seasonally adjusted purchase-only house price index, unemployment
data from the U.S. Department of Labor’s Bureau of Labor Statistics (“BLS”), and the number of delinquent loans in
the state. The methodology was based on the sum of two ratios. The ratio of a state’s unemployment rate compared to
the highest unemployment rate in any state and the ratio of a state’s price decline compared to the largest price decline
in any state were summed. Then, the sum of the ratios was multiplied by the number of delinquent loans in each state,
and funding was allocated based on the “weighted share” of delinquencies. Treasury used the number of loans that
were at least 60 days delinquent but not in foreclosure, from the Mortgage Bankers Association, fourth quarter of 2009.
9
California and Michigan met the statistical requirements for Round Two, but Treasury disqualified them because they
had already been selected for Round One.

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

8

Frequently Asked Questions stated, “In order to help significant quantities of
borrowers and test the effectiveness of these efforts, funding levels need to be
high enough to make a significant impact. For this reason, HFAs in the five states
most severely impacted will be allocated funding.” After selecting the states,
Treasury allocated funds among the states in proportion to the number of people
in each state living in counties with high unemployment.
Treasury selected the states based on the greater than 12% unemployment rate in
specific counties, but allowed the states to spend HHF dollars throughout the
state, even if other areas of the state had unemployment of 12% or less because,
according to a senior Treasury official, the White House wanted to provide states
more flexibility and not be seen as being prescriptive.

Round Three Used New Criteria To Target States with High
Unemployment and Focus on Programs for the Unemployed
On August 11, 2010, Treasury announced Round Three and an additional
$2 billion. Although all states were eligible, even if already participating in HHF,
Treasury selected states with unemployment at or above 9.8%, the national
average at the time, using the U.S. Department of Labor’s Bureau of Labor
Statistics (“BLS”) data.10 Applying these criteria, Treasury selected 17 states and
the District of Columbia for Round Three and allocated funds based on the
population size of eligible states. For detailed state selection rankings and
allocations for Rounds One, Two, and Three, see Appendix I.
A Treasury press release announcing Round Three said the funds had to be used
for “targeted unemployment programs that provide temporary assistance to
eligible homeowners to help them pay for their mortgage while they seek reemployment, additional employment or undertake job training.” Half of the states
eligible for Round Three had previously received HHF funds and were allowed to
amend their approved plans to create or modify programs to target
unemployment.11 One HFA pointed out to SIGTARP the need for a targeted
unemployment program building on HAMP, which focused on loan modification.
The HFA official said, “HAMP is a loan modification program – this is not
effective if people are unemployed – they need a targeted unemployment
program.”

10

Treasury used the BLS seasonally adjusted monthly unemployment rates (by state) and took the average for each state
from July 2009 through June 2010.
11
The only state that had previously received funds but was not included in Round Three was Arizona because Arizona’s
12-month average unemployment rate was not equal to or greater than the national average.

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

9

In Round Four, Treasury Added No New States, but Allocated an
Additional $3.5 Billion to Previously Funded HFAs
On September 29, 2010, Treasury announced that in Round Four, an additional
$3.5 billion would be provided to all states already approved for HHF, bringing
total TARP funding for the program to $7.6 billion. Treasury officials told
SIGTARP that the decision to provide a fourth round of funding was based on the
belief that a state-driven solution could address the ongoing housing crisis and
mentioned the impending October 3, 2010, expiration of Treasury’s investment
authority under TARP.12
For the first three rounds, SIGTARP found that Treasury consistently applied the
announced criteria to all states. Round Four provided more money to the states
already in HHF. According to Treasury, in the first three rounds it assessed
states’ capacity to implement HHF programs and funded the states according to
what it thought the HFAs could use effectively. However, in Round Four,
Treasury nearly doubled the program’s funding and allocated the funds to the
participating states by population. Treasury officials told SIGTARP that Treasury
called the HFAs and inquired as to their capacity before obligating additional
funds. Despite a SIGTARP request, Treasury provided SIGTARP no
documentation showing evaluation of each state’s ability to effectively absorb
additional funding. Therefore, it is not clear how Treasury assessed the HFAs’
needs and requirements for receiving nearly double the TARP funding. For an
overview of the funding, state selection criteria, states funded, and funding
allocation method, see Appendix D.

Treasury Rejected Programs as Noncompliant with EESA
In announcing HHF on February 19, 2010, the Administration specifically stated
that programs must meet funding requirements under EESA, which included “that
the recipient of funds must be an eligible financial institution and that the funds
must be used to pay for mortgage modifications or for other permitted uses under
EESA.” Treasury determined which of the 19 HFAs were eligible financial
institutions, and required each HFA that was not an eligible financial institution to
establish one to receive the Government funds.13

12

The funds were allocated based on each of the participating state’s population. For detail on funding allocations
among Round Four states, see Appendix E.
13
Treasury may only purchase a “troubled asset” from a “financial institution” as defined in EESA, and Treasury may
use its authority under Section 109(a) to use loan guarantees and credit enhancements to facilitate loan modifications
to prevent avoidable foreclosures. Treasury required each HFA to designate or create an entity (“Eligible Entity”) that
complied with the definition of a “financial institution” under Section 3(5) of EESA, and Treasury entered into
participation agreements – which it determined were “financial instruments” and therefore “troubled assets” under
Section 3(9) of EESA – with the Eligible Entities, requiring the Eligible Entities to implement locally tailored
programs to help prevent foreclosures and stabilize the housing markets in their respective states.

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

10

Treasury also reviewed and approved or rejected state HFAs’ programs, focusing
largely on whether the proposed program complied with EESA. Treasury’s HFAHardest Hit Fund Review Committee (“Review Committee”) was responsible for
evaluating the proposed programs for compliance with EESA and in accordance
with Treasury’s guidelines.14
Treasury determined that programs in the following five categories were
authorized by Section 109(a) of EESA as “credit enhancements” to facilitate loan
modifications for preventing avoidable foreclosures:






unemployment programs;
mortgage modification/principal reduction;
second-lien reduction;
reinstatement or short-term loan; and
relocation, short sale, or deed-in-lieu.

SIGTARP has reviewed Treasury’s contracts with HFAs detailing each of the 49
programs initially approved through the first three HHF rounds. SIGTARP found
that all of the programs fall within one of the five categories set forth above.
Treasury consistently rejected proposed programs for legal aid and foreclosure
counseling. Treasury conducted a legal analysis that determined that proposals
for legal aid services were not specifically authorized by EESA. In addition,
Treasury determined that certain proposed legal aid services and broad-based
foreclosure counseling were not necessary and incidental, as a matter of law, to
the implementation of the HHF because Congress had provided other specific
appropriations that fund similar services provided by the HFAs and because legal
aid services were not “necessary” or “essential” to the implementation of a loan
modification program. Treasury rejected some proposals because the programs
did not establish enough of a link between the assistance offered and the
prevention of avoidable foreclosures and therefore did not comply with EESA.
According to HFAs, Treasury rejected proposed programs for down payment
assistance, mediation, job training, job creation, and a program for the elderly
with flood-damaged homes who qualified for reverse mortgages. However,
beyond stating that the HFA-proposed programs did not establish enough of a link
between the assistance offered and the prevention of avoidable foreclosures,
Treasury has not provided additional explanation or documentation for the
rejection of those particular programs. Treasury provided documentation such as
Review Committee minutes showing decisions on proposed programs, and emails
from a contracted law firm conveying Treasury guidance to the states on some
types of assistance that were not permissible. However, this documentation was
14

The Review Committee included seven voting representatives from Treasury’s Office of Financial Stability (“OFS”)
and Treasury’s Office of Domestic Finance, and four non-voting participants including two attorneys from the Office
of Chief Counsel, a Budget Officer, and a Financial Analyst.

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

11

not sufficient for SIGTARP to analyze the basis for Treasury’s rejection of these
programs or to form an opinion as to whether Treasury consistently applied that
basis in rejecting these programs.

Treasury Considered the Design of the Program To Be Innovative
and Did Not Evaluate Whether State HHF Programs Were
Duplicative of Other Programs
Treasury officials, the GSEs, FHA, and some servicers considered the design of
the HHF program to be innovative. Treasury officials stated that HHF is
innovative in general by providing “locally tailored” solutions. The HHF
Program Director told SIGTARP, “There was no definition of innovation required
by Treasury. Treasury did not ask states to reinvent the wheel; states used their
discretion and developed their own delivery mechanisms that Treasury considers
to be innovative in general. There are only so many ways to implement
foreclosure mitigation programs.” Former HPO Chief Caldwell said, “Innovation
means different things to different people. HHF was innovative in that it’s
different from HAMP. HAMP is a one-size-fits-all program.” She also said,
“There was no litmus test for innovation.” Caldwell also noted that HHF could be
considered innovative in the context of traditional mortgage modifications
because HHF programs were different, and states have the flexibility to choose
the type of program and set the amount of funding and the number of
homeowners they wish to help.
SIGTARP consulted Fannie Mae, Freddie Mac, FHA, three of the largest
servicers, and an academic about whether HHF had innovative aspects. They told
SIGTARP that they generally agreed that HHF programs have innovative aspects
compared to existing Government programs because they provide different types
of assistance at a local level or help borrowers for longer periods of time. Some
mortgage industry stakeholders considered HHF unique in targeting the
unemployed and second liens. Another mortgage industry stakeholder considered
assistance to unemployed homeowners with no income to be innovative.
Mortgage industry stakeholders also said that the HHF programs provide deeper
relief to homeowners than before the housing crisis because previous programs
were generally funded at too low a level to respond effectively to the housing
crisis, were not designed to address negative equity or issues with second liens, or
had eligibility requirements that excluded many current struggling homeowners
such as the unemployed.
Treasury told SIGTARP that it did not perform an analysis to determine whether
HHF programs were duplicative of existing Federal and state programs. Treasury
officials told SIGTARP that they did not require HFAs to design programs that
had never before been implemented. Treasury encouraged states to borrow other

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

12

states’ effective programs,15 and told the states that their HHF proposals could
complement existing foreclosure programs, including HAMP.16

15

For example, Treasury referred HFAs to existing programs that could serve as models for HHF programs. One such
model program was Pennsylvania’s Homeowners’ Emergency Mortgage Assistance Program, which assists
unemployed borrowers. Other existing foreclosure prevention programs used as models include the Delaware
Emergency Mortgage Assistance Program, North Carolina’s Home Protection Pilot Program, and the Ohio Home
Rescue Fund.
16
For example, HHF assistance can be used either to make a borrower eligible to participate in a HAMP program, or to
assist a borrower who has already received a permanent HAMP loan modification. Treasury also issued guidance on
how HHF programs should interact with MHA foreclosure prevention programs.

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

13

The Hardest Hit Fund Has Experienced
Significant Delay in Providing Help to
Homeowners; Assistance Must Dramatically
Increase To Meet the Number of Homeowners
Whom HFAs Intend To Help
This section describes how Treasury’s planning and oversight created
implementation issues that delayed participation by Fannie Mae, Freddie Mac,
and the largest servicers. The delay in participation by these major stakeholders
had a ripple effect on preventing the state HFAs from getting assistance to
homeowners.
State HFAs experienced delays in rolling out their programs and getting
assistance to homeowners. Treasury reported that all 19 HFAs in the HHF
program had begun offering assistance statewide by July 2011. According to the
most recently available performance results data as of December 31, 2011, the
HFAs had offered 55 HHF programs.17
As of February 2012, two years after the launch of HHF, the HFAs had drawn
down $828.6 million. The majority of these funds had been identified for
administrative expenses and cash on hand.18 As of December 31, 2011, HFAs
had spent $217.4 million (or 3% of $7.6 billion) to assist 30,640 homeowners,
only 7% of the 458,632 to 486,536 homeowners whom HFAs plan to assist by
December 31, 2017, when the program’s funding expires.19 See Table 1 for
estimates of the number of homeowners to be assisted, and actual numbers for the
applications approved, homeowners served, and the amount of funds spent on
programs through December 31, 2011.

17

HFAs had 55 programs as of December 31, 2011. Since then, HFAs added or eliminated programs with a net result of
54 programs as of January 25, 2012. However, the most recent available quarterly performance results data analyzed
for this report are from December 31, 2011. As a result, for many purposes in this report, SIGTARP uses data as of
December 31, 2011.
18
Treasury monthly reports refer to funds paid to HFAs for HHF as “drawdowns,” or disbursements. “Cash on hand”
refers to funds that the states have received from Treasury but not spent. According to Treasury, 16 of the 19 HFAs
hold the funds in interest-bearing accounts. Any interest earned can be used only for HHF. For the amount drawn
down by each HFA, see Appendix G.
19
SIGTARP aggregated the HFAs’ estimated number of homeowners to be assisted through December 2017 for all HHF
programs to arrive at a single range of numbers the program plans to assist overall (see Table 1 note). The range is
from 458,632 to 486,536 homeowners.

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

14

TABLE 1

ESTIMATED AND ACTUAL HHF USAGE
Estimated
Number of Homeowners
a
to Assist Through 2017

Date
As of September 30, 2010

244,703-262,170

Applications
Approved
b
(cumulative)
262

Homeowners
Assisted
(cumulative)

Assistance Spent
on Programs
(cumulative)

c

$1,060,390

c

n/a

$3,819,129

n/a

As of December 31, 2010

434,472-475,054

757

As of March 31, 2011

507,619-549,094

2,598

2,328

$10,949,749

As of June 30, 2011

501,506-538,206

8,422

7,389

$40,726,410

As of September 30, 2011

480,929-510,797

20,695

19,025

$112,494,322

As of December 31, 2011

458,632-486,536

33,542

30,640

$217,427,372

Note: Treasury allocated Round Four funds by September 30, 2010, but the HFAs did not reflect this in estimates of the numbers they would serve until
December 2010. As a result, the estimated number of participating households increased substantially from September 30, 2010, to December 31, 2010.
a

This column shows the totals of the individual program estimates. According to Treasury, these totals do not necessarily translate into the number of
unique homeowners whom the states expect to assist because some homeowners may participate in more than one HHF program.
b

In some states, homeowners may apply to more than one program, so the number of applications approved may be higher than the number of borrowers
assisted.
c

HFA quarterly reports did not include data for Homeowners Assisted until the March 31, 2011, report.
Sources: HFA Participation Agreements, amendments through 12/31/2011, and Quarterly Performance Data reports, third and fourth quarters 2010, first,
second, third, and fourth quarters 2011, reporting states. Some figures have changed from those previously published in SIGTARP Quarterly Reports as
some HFAs revised previously reported numbers.

The initial months of the HHF program involved a ramp-up period – HFAs
developed proposals for programs, Treasury reviewed and approved proposed
programs, and HFAs established infrastructure for administering their programs.
The rollout of HHF was also staggered – Treasury approved Round One HFAs’
programs in June 2010, Round Two HFAs’ programs in August 2010, and
Round Three HFAs’ programs in September 2010. As is evidenced in Table 1,
the estimated number of homeowners to be assisted by HHF has been steadily
decreasing over the last year. There will have to be a dramatic increase in the
number of homeowners served to reach the most recent minimum estimate of
459,000 homeowners assisted.20
Three-fourths of the HHF assistance provided to homeowners so far was for
unemployment assistance. The remaining assistance provided to homeowners can
be broken down to 20% for reinstatement through payment of past due amounts,
5% for principal reduction, 1% for second-lien reduction, and 0.1% for transition
assistance (see Figure 1). This assistance ranged from approximately $3,000 to
$50,000 per homeowner.21

20
21

For the programmatic expenses and homeowners assisted by HFAs through December 31, 2011, see Appendix F.
Treasury told SIGTARP that for two HHF loan purchase programs in Illinois and Oregon, the per-household
assistance could be calculated when the programs are completed because all of the information would not be available
until assistance is concluded. SIGTARP eliminated these two programs from the per-household assistance
calculation.

April 12, 2012

F
FACTORS AFFE
ECTING IMPLEM
MENTATION OF THE HARDEST HIT FUND PRO
T
OGRAM

15

F
FIGURE 1

A
ASSISTANCE PROVIDED UNDER HHF PROGRAM
E
D
MS
B TYPE OF ASSISTANC THROUGH DECEMBE 31, 2011
BY
CE
H
ER

PRI
INCIPAL
RED
DUCTION
$10
0,397,621
5%

UNE
EMPLOYMENT
AS
SSISTANCE
$1
162,146,435
75%

2
2ND-LIEN REDU
UCTION
$1,882,683
3
1%
REINSTATE
EMENT
$42,744,862
20%
TRANSITION
N
ASSISTANCE
$255,771
0.1%

Total HH Program Exp
HF
penses = $217,4
427,372

S
Source: HFA quarte performance re
erly
eports through Dece
ember 31, 2011. Totals do not add to 100% due to roun
T
o
nding.

The Government Performance and Result Act of 199 guidance related to
G
P
e
ts
93
progra planning in Federal agencies offe best prac
am
g
a
fers
ctices for Go
overnment
progra
ams. These include: (1) involving s
)
stakeholders early on, w
s
which can
determ whethe a Federal program suc
mine
er
p
cceeds or fail and (2) as
ls,
ssessing the
extern environm because forces outsi an organ
nal
ment
e
ide
nization’s co
ontrol can
power
rfully affect chances for success. Th Congressi
he
ional Oversi
ight Panel
(“COP has also opined on best practices in the area of Treasury housing
P”)
b
s
y
progra by emph
ams
hasizing the importance of determin
ning whether Federal
r
forecl
losure preven
ntion progra can be ra
ams
amped up qu
uickly to han large loan
ndle
volum and whe
mes,
ether the program will ha widespre participa
ave
ead
ation by lend
ders
and se
ervicers.
Using these best practices, Treasury could have impro
g
p
d
oved its plan
nning and
execu
ution for HHF and increa
F
ased particip ation in HHF by:
F




br
ringing all ke stakehold such as H
ey
ders
HFAs, servicers, and GS together
SEs
r
sig
gnificantly earlier than seven month after progr launch t ensure tha
e
s
hs
ram
to
at
sta
akeholder ne
eeds would be addressed
b
d;
ga
aining broad industry acc
ceptance for the state pro
r
ograms it ap
pproved, such as
h
pr
rincipal redu
uction or seco
ond-lien redu
uction;

Apr 12, 2012
ril

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM






16

taking a stronger role in securing early participation of the largest servicers –
Round One and Two states told SIGTARP that without large servicers on
board, they would not be able to help a significant portion of homeowners
whom they originally estimated;
anticipating common implementation issues early on and resolving them in a
timely manner; and
supplying critical guidance, information, and support to GSEs and other
stakeholders earlier than they did.

The former Assistant Secretary for Financial Stability, Herbert Allison, told
SIGTARP that at the time Treasury announced the first round, Treasury did not
expect to have a second or third round for the HHF program. However, in order
to ensure that this initial $1.5 billion would be distributed efficiently and
effectively to homeowners, Treasury should have brought all key stakeholders
together early on to mitigate any barriers to participation. Even if the program
had remained at the $1.5 billion or $2.1 billion funding level, early collaborative
involvement of key stakeholders could have helped provide this assistance to
homeowners more quickly than the program has done.
Treasury did not use its influence with key stakeholders for effective
implementation of the program. Treasury involved some key stakeholders
individually in planning HHF late in 2009 and contacted the GSEs and FHFA on
the day before the program was announced. A working group of FHFA, Fannie
Mae, and Freddie Mac officials discussed HHF in the early months. The working
group met several times in April, May, and June of 2010. A Treasury official said
Treasury had monthly one-on-one calls with HFAs that began in the summer of
2010; one-time visits to each state when its HHF programs opened statewide;
calls with states explaining interaction between HAMP and HHF, and other
issues; quarterly conference calls with HFAs; biweekly calls with more than 100
servicers and states; and biweekly calls with large servicers.
Despite Treasury’s contacts with these stakeholders, Treasury did not use its
influence to enlist servicers’ support for and participation in state HHF programs,
instead largely leaving that to the states. By July 2010, only one HFA (Michigan)
had launched its pilot program and no large servicers were participating in HHF.
Servicers cited the need for GSE guidance to begin participating in HHF. One
GSE stated it had little direct contact with Treasury. This may have been a result
of FHFA’s guidance. In June 2010, FHFA issued an email to Treasury, Fannie
Mae, and Freddie Mac, stating:
“FHFA’s OGC [Office of General Counsel] has determined that the GSEs
should not work directly with Treasury on the design of HHF programs. If
the GSEs work with Treasury directly on program terms, the GSEs could
be perceived as having undue influence in the design of the HFA

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

17

programs. Given Treasury’s substantial investment in the GSEs, we don’t
think that perception can be completely eliminated. However, we think it
can be minimized by having the GSEs work directly with the affected
HFAs on any program issues, rather than with Treasury staff.”
An FHFA official later clarified that GSEs could work in general with Treasury
but could not ask Treasury to review or approve proposed “partnership proposals”
to HFAs.
Key stakeholders stated that Treasury’s decision to make states responsible for
negotiating with servicers without Treasury first using its influence to resolve
common issues may have impeded progress in the early months of HHF. Nine of
the 10 HFAs funded in Round One and Round Two launched their initial HHF
programs without large servicer participation. One HFA told SIGTARP that
getting national banks to participate would have “required lots of coaxing and
planning on the part of Treasury” and it would have been helpful to bring
potential participants together before the program was announced. One large
servicer told SIGTARP, “Anytime all the parties can be involved in a program,
the more success you will have. I think that if Treasury, the states, and the
servicers were involved earlier on, that the program would be more successful and
further along.”
FHFA informed Treasury as early as April 2010 that the GSEs needed an official
determination from Treasury that they were allowed to accept TARP funds, and
Treasury provided that in August 2010. Despite these communication efforts,
GSEs’ support for HHF was not finalized until after Treasury gathered the FHFA,
HFAs, large servicers, and GSEs for a collaborative effort in September 2010.
That meeting led to GSE guidance, which in turn led to large servicer
participation in HHF. If Treasury had taken earlier efforts to collaborate with
these key stakeholders, all may have been able to better anticipate barriers to
participation in the program.
Several issues delayed HHF’s implementation. What follows is a discussion of
the most significant issues.

Treasury’s One to Two Days of Notice to States Selected in the First
Two Rounds Caught the States Off Guard
Treasury gave the five states selected for Round One a single day’s notice before
the announcement of the program on February 19, 2010. Until that time, four of
the five states had no knowledge that they were under consideration to receive
TARP funds or that the HHF program was being developed.22 On
22

One state HFA’s representative was involved in discussions with Treasury on the development of HHF in the two
weeks before the program announcement.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

18

February 18, 2010, Treasury held a conference call with the five states in which
Treasury notified them about the program, their selection to receive TARP funds,
and a “walk-through” of the application process. In Round Two, three of the five
states told SIGTARP that Treasury provided one to two days’ advance notice that
they were selected. Representatives from two state HFAs in Round Two told
SIGTARP they did not know they were selected for the program until
March 29, 2010, the day of Treasury’s announcement, when they received phone
calls from the media. Treasury told SIGTARP that it did not provide HFAs in the
first two rounds more than one day’s notice because “giving notice too early
could lead to the premature release of information that is incomplete or
inaccurate.”
Treasury’s decision to give one to two business days’ notice to HFAs that they
were selected for various rounds of HHF funding caught several HFAs off guard
and did not allow them enough time to prepare to respond to the public’s inquiries
about the program. One HFA official told SIGTARP that 10 minutes after the
announcement, the HFA began receiving phone calls from the public about the
program, and the HFA received 200 phone calls that day from people asking
when the money would be available.
HFAs had a matter of weeks to develop their programs after their selection was
announced. On March 5, 2010, two weeks after announcing the Round One HHF
program, Treasury told the states that they were required to submit proposals for
their HHF programs by April 16, 2010,23 which had to comply with new Treasury
guidelines.24 The HFAs gathered public input in developing proposed programs.
In addition to developing proposed programs, the HFAs had to change their
processes and hire and train staff to implement the programs. One HFA official
told SIGTARP that the HFA “was not prepared to deal with the tsunami of the
HHF. … We had to build business processes.” A second HFA said that it had to
“scramble and get a network in place.” One HFA had to add more staff assigned
to HHF, going from seven employees to 42 employees, a sixfold increase. If
Treasury had informed the HFAs before the announcement, the HFAs may have
been able to identify their ramp-up requirements and been better prepared to
handle inquiries from the public.

23

On April 12, 2010, Treasury told the Round Two states that they were required to submit proposals for HHF programs
by June 1, 2010.
24
The guidance stated that the states’ proposals could include innovative housing initiatives tailored to their local
conditions to help prevent foreclosures and stabilize housing markets, including individual programs targeting
unemployed borrowers, underwater borrowers, and second-lien relief. Treasury’s guidance limited any assistance to
borrowers with loans that had an unpaid principal balance of $729,750 or less. This amount was the GSE conforming
loan limit in effect from the start of HHF through October 1, 2011. The guidelines also emphasized that the programs
must meet EESA requirements for funding, purpose, and accountability. Treasury also provided a list of foreclosure
prevention tools or foreclosure alternatives that would meet EESA requirements.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

19

The Primary Challenge for HFAs Was Lack of Participation
by Large Servicers
Several HFAs told SIGTARP that their primary challenge with the
implementation of HHF was the lack of participation by large servicers. In regard
to the lack of servicer participation, one HFA told SIGTARP that on a scale of
one to 10, “this was a 10.” Another HFA told SIGTARP, “Our biggest complaint
is we were provided these funds, and we have such a need here, but we weren’t
able to handle the mass numbers because of no participation from the large
lenders.”
SIGTARP found that Treasury’s delay in securing support from large servicers
and the GSEs in Round One, and even in Round Two, was a planning and
execution error. There was a very low volume of homeowners assisted until after
the GSEs came on board, which in turn led to large servicer participation. A
Treasury official told SIGTARP that the program was purposefully designed to
have the HFAs negotiate with the servicers, but several HFAs reported being
rebuffed by large servicers when seeking their participation for the Treasuryapproved programs. One HFA told SIGTARP that large lenders said that with the
number of homeowners who would receive assistance and the lenders’ capacity,
implementing the HHF program without a consistent process from the states
would have been difficult for them. Another HFA told SIGTARP that servicers
responded by saying that all of the HHF states with different programs would be
too many different programs to handle. In designing the program this way,
according to two HFAs, Treasury did not address the lack of bargaining power
that smaller state HFAs had to recruit large servicers. A Florida HFA official
explained to SIGTARP, “The one billion dollars has been a nice carrot to use for
servicers in Florida, but there is no stick with the carrot to force servicers to
participate.” Another HFA told SIGTARP that it would have been helpful if
Treasury had been more aggressive in getting large lenders to participate.
Treasury was aware of the HFAs’ lack of progress in recruiting large servicers.
One HFA official said that at the time Round One states signed their HHF
contracts, one question was unanswered – would large servicers participate in
HHF? He said that Treasury did not have an answer but Treasury realized the
large banks “were late to the table.”
Prior to receiving crucial guidance from the GSEs in October 2010, none of the
four largest servicers had agreed to participate with any of the 19 HFAs in HHF.
Several HFAs launched pilot programs with local community banks, and credit
unions signed up to participate – though these institutions held a relatively small
number of loans. Several HFAs praised Treasury for encouraging HFAs to pilot
their programs before a full rollout.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

20

Nine of the 10 HFAs funded in Round One and Round Two launched their initial
HHF programs without large servicer participation, and one delayed its initial
launch because large servicers were not participating. For example:











Michigan’s HFA signed up 136 local banks and launched its pilot program in
July 2010 without major servicers. Michigan rolled out three HHF programs
statewide in October 2010 without any of the four largest servicers
participating.
Florida’s HFA said it delayed its pilot launch from August 2010 to
October 2010 because large servicers were not participating. Florida launched
with one large servicer.
Arizona’s HFA had planned to launch its pilot programs in July 2010, but
instead launched in September 2010 with mostly community banks
participating. Large servicers and the GSEs were not participating at that
time; they were reluctant to join.
Nevada’s HFA took nearly a year to come to an agreement with Bank of
America Corporation (“Bank of America”) for the bank’s participation in
Nevada’s principal reduction program. Nevada stated that it had started
working with Bank of America in April 2010. Nevada’s HFA and Bank of
America reached agreement in January 2011, and Nevada’s HFA launched its
pilot program in March 2011, one year after Nevada was selected for the
program.
Ohio’s HFA launched all four of its programs in September 2010 without
major servicers participating.
HFAs from California, Rhode Island, North Carolina, and South Carolina also
cited issues with the lack of large servicer participation.

For a timeline of HFAs’ pilot and statewide program launches between July 2010
and July 2011, with the date the first large servicer signed up to participate with
each HHF program, see Appendix H.
HFAs launched their program without large servicer participation, and as a result,
they could not reach all intended applicants. The HHF Program Director said that
the Office of Financial Stability (“OFS”) thought that the first two HHF rounds
would work with either community banks and credit unions alone, or one large
servicer in some states, and that they did not need to have all the large servicers
and the GSEs participating until the third round expanded the program to 19 states
and $4.1 billion. However, as stated above, the HFAs in the first two rounds cited
issues with the lack of large servicer participation. The largest mortgage servicers
account for a substantial percentage of loans and dollar volumes serviced, making
their participation key if HHF programs are to reach as many homeowners as was
intended. The four largest servicers – Bank of America, Wells Fargo and
April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

21

Company (“Wells Fargo”), JPMorgan Chase & Co. (“JPMorgan”), and
CitiMortgage, Inc. (“CitiMortgage”) – together account for 53.9% of the top 50
firms’ dollars serviced.25 Several HFAs said participation by the largest servicers
would be necessary to assist a significant share of the struggling homeowners in
their states.
One HFA told SIGTARP that applicants were frustrated and wanted to know why
ramping up the programs took so long, and the reason was that the national banks
were not ready to jump in. Florida’s HFA explained, “Without big servicers, it
would take much, much longer to get the funds out, with just community banks
and credit unions. It would be a trickle of eligible applicants. Without the big
servicers, we would only be able to help about 50%” of the applicants the HFA
had originally estimated. Arizona’s HFA told SIGTARP that it could serve only
20% of the original estimate of applicants without the big servicers. North
Carolina’s HFA said if the big servicers are not on board, the HFA could help
only 25% of its estimate. Michigan’s HFA said that because the large servicers
were not involved, it was able to assist only a small percentage of the applicants
in its state. One HFA told SIGTARP that “without the servicers’ participation, it
would have been disastrous.”

Administrative Burden, Lack of Program Uniformity, and Lack of
GSE Guidance Made Servicers Hesitant To Participate in HHF
Treasury’s decision to decentralize program development resulted in more than 50
non-uniform programs, which created implementation issues for servicers. Some
of the large servicers said that without uniformity it was difficult to operate in the
more than 50 unique HHF programs offered by 19 different HFAs. One servicer
said its experience with HAMP, a single national program with one set of rules,
was less complex than HHF. Servicers said the large number of HHF programs
and their complexity posed an operational challenge for servicers to develop and
implement HHF infrastructure and properly train staff. Large servicers said HHF
would greatly tax their resources, given the number of programs and their lack of
uniformity. Servicers voiced concern over their capacity to implement required
systems and changes and asked for standardized information and a process for
each program. One large servicer explained that states were creating and rolling
out different programs and there was no standardization of programs. The
servicer explained that its staff had to learn each state’s different eligibility and
coding requirements and that “the volume was unprecedented.”
Treasury contacted large servicers after the program’s announcement, but until
November 2010, none of the four largest servicers had signed on to participate.
25

According to analysis by Inside Mortgage Finance, the servicer arms of Bank of America, JPMorgan, CitiMortgage,
and Wells Fargo are the largest servicers by total dollar volume serviced nationally for 1-4 family mortgages in 2011.
Market share data were compiled by Inside Mortgage Finance, “Top Mortgage Servicers in 2011.”

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

22

Treasury emailed the largest servicers in April 2010 suggesting a working group
on the HHF program that included representatives from the largest servicers and
FHFA. The HHF working group met in May 2010. Bank of America also liaised
with Treasury and FHFA on the HHF program. One servicer explained that the
states designed their own programs “in a vacuum,” without knowing whether the
servicers would be able to execute the programs.
Servicers also cited the need for GSE guidance to begin participating in HHF
programs so they could ensure that they obeyed investor rules and acted correctly
in processing loans and applying funds received from state HFAs. HFAs
confirmed that large servicers identified the lack of GSE guidance as an obstacle
to their participation in HHF programs. One HFA told SIGTARP that there was
“no hint” of the big servicers’ participation until Fannie Mae and Freddie Mac put
out guidance.
Treasury told SIGTARP that after HHF expanded from $2.1 billion for 10 HFAs
to $4.1 billion for 19 HFAs in August of 2010, “it became clear that servicer and
GSE support would be critical to the full utilization of program funds.” However,
HFAs in the first two rounds told SIGTARP that because the large servicers were
not involved, they were able to assist only a small percentage of the applicants in
their states. The HHF Program Director told SIGTARP that OFS wanted states to
have an opportunity to innovate and develop their programs before involving
servicers, which might have pushed for too much uniformity early on. In fact,
servicers said they demanded and received uniformity and standardization
because the variety of programs was unworkable. SIGTARP found that
Treasury’s early experience in HAMP should have provided it a better
understanding of servicers’ needs and the effect that servicers’ participation
would have on a program’s success. SIGTARP found that, given Treasury
experience with HAMP and the sheer volume of mortgages held or guaranteed by
the GSEs, it should have been clear before HHF was announced that large
servicers and GSE support would be critical.
The GSEs exert considerable influence over the number of homeowners that the
HHF programs can reach because the GSEs own or guarantee 56% of the
53 million outstanding first-lien mortgages in the United States, according to a
June 2011 Freddie Mac analysis, the latest available. Moreover, the GSEs own or
guarantee 28% (18% Fannie Mae, plus 10% Freddie Mac) of the 4 million
seriously delinquent mortgages. Because Fannie Mae and Freddie Mac directly
control policy for more than half of the residential mortgage market, their support
for the HHF program is critical for the state programs to have a widespread effect.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

23

Treasury Did Not Gain GSE Support for HHF Before Approving
State Programs
Treasury opened discussions with the GSEs early on, but Treasury did not secure
support for some HHF categories of programs that it had approved, delayed key
approvals for GSEs to accept TARP funds, and did not use its influence to obtain
GSE guidance critical for servicer participation until eight months after the
program launch.
Treasury met with the GSEs and FHFA in planning the rollout of HHF, but
Treasury did not determine what categories of programs the GSEs would support
before the state HFAs designed their programs. The GSEs and their
regulator/conservator FHFA told SIGTARP that Treasury contacted the GSEs in
early 2010 to discuss HHF and how to get the GSEs involved with HHF
programs. At that time, FHFA formed a working team with Fannie Mae and
Freddie Mac to discuss HHF participation and the guidance to be issued to
servicers. On April 1, 2010, two months after Round One of the HHF program
was announced and one month after Round Two was announced, FHFA directed
the GSEs “to discuss under FHFA auspices existing and possible new practices to
mitigate losses,” including “partnering with HFAs participating in the HFA
Hardest Hit Fund.”
A senior Treasury official told SIGTARP that Treasury’s role was to work with
the GSEs and gain their support for the types of assistance under HHF. However,
in the first six months of the program, Treasury approved HFA program proposals
without getting the buy-in of the GSEs. A Treasury official told SIGTARP that
HHF programs are voluntary and that Treasury cannot compel GSEs to
participate. The effect was very real on state HFAs. One HFA told SIGTARP
that it did not limit applications to its HHF program, but that it happened on its
own, explaining that when it rolled out its program, Fannie Mae and Freddie Mac
were not on board.
In addition, Treasury did not provide the GSEs with documentation needed to
issue HHF guidance to servicers until August 2010, six months after the program
was announced. Treasury became aware of the GSEs’ need for documented
authority for the GSEs to accept borrower payments from TARP funds in
April 2010. Treasury did not resolve the issue early on and therefore missed an
opportunity to resolve it before program rollout.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

24

Treasury Convened a Servicer Summit with Key Stakeholders
Seven Months After Program Launch
Treasury organized a Servicer Summit in Washington, D.C., on
September 21, 2010, seven months after the announcement of the HHF program,
inviting major participants and stakeholders. At the time of the summit,
Round Three had already been announced, the announcement of Round Four was
seven days away, none of the largest servicers had signed on to any of the HHF
programs, and the GSEs had not issued any HHF program guidance. The
Servicer Summit was a turning point for HHF as the state HFA programs prior to
that were hobbled by lack of servicer participation and GSE support. One HFA
called the Servicer Summit “the first big step,” explaining that FHFA, the GSEs,
the big servicers, and the states looked to Treasury to instigate these
improvements. One large servicer told SIGTARP that prior to the Servicer
Summit, the interaction was fairly minimal, but after the summit, the large
servicers began to meet as a group on state-level issues.
At the Servicer Summit, servicers discussed a standard agreement between HFAs
and servicers and guidance from investors including the GSEs on how to treat
their loans under the HHF program. Treasury also communicated with the
guarantors ‒ such as FHA, the U.S. Department of Veterans Affairs (“VA”), and
the U.S. Department of Agriculture-Rural Development ‒ to obtain their
participation in HHF. The GSEs and FHFA prepared for the summit by outlining
the general terms under which the GSEs would participate in the HHF
unemployment program, providing what they called a broad set of expectations
for their participation. Some issues the servicers raised were resolved after the
summit, such as developing an HFA “common data file” format, which would
give the servicers standardized information from the HFAs, and obtaining
guidance on how to report mortgage interest payments to the IRS when states
cover any portion of mortgage payments.
The outcome of the Servicer Summit was the resolution of several issues that had
prevented GSEs and many servicers from participating in HHF. One large
servicer said that participants at the summit worked on standardization of
programs for HHF. The servicers agreed on a way to communicate with the
HFAs and on a participation agreement between servicers and HFAs. Treasury
finalized term sheets as a part of the participation agreements between Treasury
and each HFA that describe each HHF program. The GSEs and FHFA met
regularly following the summit to develop written guidance for servicers on
participating in HHF programs.26

26

Treasury held a second summit on November 15, 2011, for states, servicers, and GSEs, and other stakeholders to
discuss the status of the HHF program, issues that should be addressed, and opportunities to expand program
participation.

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

25

After the process and uniformity issues were addressed in the September 2010
Servicer Summit, Fannie Mae and Freddie Mac issued guidance to servicers on
October 29, 2010, directing them to accept funds from HFAs for mortgage loans
owned or guaranteed by the GSEs for only the HHF unemployment and
reinstatement programs.27 Neither guidance document provided an explanation of
why the GSEs supported the HHF unemployment and reinstatement programs,
but not other HHF programs; however, it may have been because the GSEs do not
have to fund any costs associated with these programs. For unemployment and
reinstatement programs, Treasury, rather than the homeowner, pays all or part of
the monthly mortgage payment or reinstatement payment without changing the
terms of the mortgage. The servicers, investors, and GSEs make no financial
sacrifices in the unemployment and reinstatement programs because the
mortgages are essentially paid by the Government in whole or in part.

Once GSE Guidance Was Issued, Large Servicer Participation in
Unemployment and Reinstatement Programs Greatly Increased
After the GSEs issued guidance, large servicer participation began and swiftly
rose, but only in the two types of HHF programs approved by the GSEs –
unemployment and reinstatement. One HFA told SIGTARP that Fannie Mae’s
and Freddie Mac’s direction in October 2010 “opened up HHF for the larger
lenders.” For two types of HHF programs approved by Treasury – unemployment
and reinstatement programs – the largest servicers are participating actively in the
19 states, and the GSEs, the Government insurer (FHA), and guarantors
(U.S. Department of Agriculture and VA) have issued servicer guidance or
encouraged servicer participation. Large servicers also indicated that other
investors and private mortgage insurers were generally willing to participate in
HHF unemployment and reinstatement programs.
According to the largest servicers, as of August 1, 2011, all 20 of the HHF
unemployment programs had at least three of the largest servicers participating,
and all seven HHF reinstatement programs had at least two participating. As of
December 31, 2011, unemployment and reinstatement programs accounted for 27
of the 55 HHF programs in place and 69% of the total $7.6 billion in HHF
program funding.

27

Freddie Mac’s guidance was silent on the three other types of HHF programs approved by Treasury ‒ principal
reduction, second lien, and transition assistance. Fannie Mae’s guidance said it would not support principal reduction
and was silent on the other two.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

26

GSEs and Servicers Rejected Some HHF
Programs, Leading States To Focus on Other
Programs
This section discusses Treasury’s inability to obtain GSE and servicer support for
all of the HHF programs offered. This affected participation levels in the
programs.
The GSEs rejected principal reduction programs, citing primarily moral hazard28
and execution issues. “Principal reduction could increase the incentive for
homeowners to become delinquent on their mortgage (i.e., increased ‘moral
hazard’ leading to more ‘strategic defaults’),” according to one GSE’s analysis of
HHF principal reduction supplied to FHFA. Freddie Mac officials told SIGTARP
that the moral hazard impact could affect the whole market, ultimately ending in
losses for the GSEs if homeowners able to pay their loan stopped paying in order
to get their principal reduced.
As the GSEs’ conservator, FHFA refused to have the GSEs participate in HHF
principal reduction programs. FHFA Executive Advisor David Pearl told
SIGTARP: “We have regular conversations with Fannie Mae and Freddie Mac as
their regulator and conservator. With any new policy action, FHFA has to give
them the green light.” FHFA did not “give [GSEs] the green light” and the GSEs
therefore have not participated in HHF principal reduction programs.29
Despite the GSEs’ stance on principal reduction, Treasury encouraged HFAs to
pursue principal reduction programs with individual lenders. “Principal reduction
is difficult. We have spent a lot of time with Fannie, Freddie, and FHFA, …”
former HPO Chief Caldwell told SIGTARP. “The GSEs were crystal clear in
their objections to principal reduction, which was not a secret to the
HFAs. That’s why we encouraged the HFAs to work on principal reduction
programs within servicers’ non-GSE book,” she said. “The overall message from
Treasury on principal reduction has been consistent in its guidance on tools for
foreclosure prevention ‒ it makes sense for certain HFAs. We have some initial
servicer support and can encourage more with or without the GSEs.” Officials of
three HFAs ‒ Arizona, California, and Nevada ‒ told SIGTARP that they worked
28

Moral hazard occurs when a party is insulated against a risk (such as in the context of a Government assistance
program) and may behave differently than if it bore the full risk. The Government Accountability Office (“GAO”)
defines moral hazard related to principal reduction as the risk that borrowers would default on their mortgages to
receive principal reduction when they otherwise would not have.
29
Fannie Mae on October 26, 2011, and Freddie Mac on December 13, 2011, issued guidance to their servicers that
require servicers to accept funds from HFAs that are assisting borrowers in qualifying for mortgage modifications as
long as the GSEs and the servicer are not required to match the HFA assistance and certain other criteria are met. This
guidance extends Fannie Mae’s and Freddie Mac’s October 2010 guidance beyond unemployment and reinstatement
programs to include some modification assistance programs that Treasury classifies as principal reduction programs.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

27

together to focus on principal reduction and other issues they shared.
Subsequently Bank of America became the first large servicer to participate in
HHF first-lien principal reduction. It remains the only one as of the drafting of
this report.
FHFA, which determines whether Freddie Mac and Fannie Mae can participate in
HHF, told SIGTARP in February 2011 that GSE analysis showed that the target
population for HHF principal reduction was so small that operational costs would
offset any gains. The GSE analysis also cited concerns about the diverting of
resources from other projects. An FHFA official told SIGTARP it was a “systems
nightmare” for servicers to change their accounting and information systems to
accommodate HHF principal reduction terms. Guidance from Fannie Mae and
Freddie Mac was silent on second-lien and transition assistance programs.
Without GSE buy-in, large servicers generally would not agree to participate in
state HFA programs on principal reduction and transition assistance. Although
some lenders have signed on to HHF second-lien programs, participation has been
very low. One large servicer told SIGTARP that 80% of its portfolio is with
Fannie and Freddie, and said, “…We had to hold up on certain programs, waiting
for Fannie and Freddie.” Another large servicer told SIGTARP that “principal
reduction programs could have a big impact” on home foreclosures, but that 60%
to 80% of the loans the company services are GSE loans, and because the GSEs
will not participate in principal reduction, the servicer cannot process GSE loans
in HHF principal reduction programs.30
The GSEs, with their large market share, directed servicers to participate in the
unemployment and reinstatement programs, and these programs account for nearly all
(98%) of the HHF assistance provided to date. As of December 31, 2011, the latest data
available, according to Treasury only approximately 436 homeowners had received
principal reductions under HHF and only approximately 72 homeowners had received
transition assistance. According to Treasury, there may be a delay between when HFAs
approve homeowners’ applications for HHF assistance and when homeowners actually
receive funding. Therefore, the number of homeowners receiving assistance is
approximate due to this lag time between approval and funding. (See Figure 2 on the
following page and Table 2 on page 31.)

30

Bank of America was the first and only large servicer to sign on to participate in HHF principal reduction programs,
beginning with Nevada in January 2011, and later with Arizona, California, and Rhode Island, only for loans in its
portfolio or third-party investor loans with appropriate authority delegations.

April 12, 2012

F
FACTORS AFFE
ECTING IMPLEM
MENTATION OF THE HARDEST HIT FUND PRO
T
OGRAM

28

F
FIGURE 2

N
NEARLY ALL OF HHF-AP
L
PPROVED AP
PPLICATION ARE FOR UNEMPLOY
NS
YMENT
O REINSTA
OR
ATEMENT PR
ROGRAMS, AS OF DECEM
A
MBER 31, 20
011
1%
%

1%
%
20%

0.2%
78%

PRINCIPAL R
REDUCTION - 16 programs
2ND-LIEN RE
EDUCTION - 4 p
programs
REINSTATEM
MENT - 7 progra
ams
TRANSITION ASSISTANCE - 8 programs
N
UNEMPLOYM
MENT ASSISTA
ANCE - 20
programs

To HHF Applica
otal
ations Approve = 33,542
ed

S
Source: HFA quarte performance re
erly
eports through Dece
ember 31, 2011, an OFS program cllassifications. Tota may not add to 100% due to round
nd
als
ding.

Given the lack of significant participation by the GSE and servic in princi
n
p
n
Es
cers
ipal
reduct
tion and tran
nsition assist
tance progra
ams, the HFA with Trea
As,
asury’s appr
roval,
focuse their alloc
ed
cations on un
nemploymen and reinst
nt
tatement pro
ograms. In th
he
third round, Treas
r
sury directed the 18 state receiving funding to d
d
es
develop only
y
unemp
ployment an reinstatem program in part to facilitate se
nd
ment
ms,
o
ervicer
participation in HHF.
T
proval, an HFA may rea
H
allocate fund among its programs. A of
ds
As
With Treasury app
Decem
mber 31, 201 HFAs all
11,
located 58% of the $7.6 billion in to HHF fun to
%
otal
nds
unemp
ployment assistance programs, 19% to principal reduction p
l
programs, 11 to
1%
reinsta
atement prog
grams, and 1% each to s
1
second-lien r
reduction an transition
nd
assista
ance. The HFAs allocat 11% of to HHF fun to admin
H
ted
otal
nds
nistrative
expen
nses, and adm
ministrative expenses am
e
mong the stat ranged fr
tes
rom 7% to
18% of allocated funds as of December 3 1, 2011. Th funding fo the 55 HH
o
f
D
he
or
HF
progra falls in the five prog
ams
t
gram categor shown i Figure 3 o the follow
ries
in
on
wing
page.

Apr 12, 2012
ril

F
FACTORS AFFE
ECTING IMPLEM
MENTATION OF THE HARDEST HIT FUND PRO
T
OGRAM

29

F
FIGURE 3

F
FUNDING FO HHF PROGRAMS BY TYPE OF AS
OR
T
SSISTANCE T
THROUGH D
DECEMBER 3 2011
31,
PR
RINCIPAL
RE
EDUCTION
$1,4
420,210,180
19%
2ND-LIE REDUCTION
EN
N
$8
83,298,292
1%
UNEMPLOYME
ENT
ASSISTANCE
E
$4,382,850,56
67
58%

R
REINSTATEMEN
NT
$817,409,716
11%
TR
RANSITION
AS
SSISTANCE
$4
45,400,464
0.6%
ADMIN
NISTRATIVE
EXPENSES
50,830,780
$85
11%

Tota HHF Funding = $7,600,000,00
al
g
00
S
Source: HFA participation agreements through Decembe 31, 2011. Totals may not add to 10
s
er
s
00% due to roundin
ng.

3
HF
hed
640
f
As of December 31, 2011, HH has reach only 30,6 (7%) of the HFAs’
estima range of the number of homeow
ated
r
wners to be a
assisted throu 2017
ugh
(458,6
632-486,536 To reach the estimate number o homeowne there mu be
6).
ed
of
ers,
ust
a dram
matic increas over the number of ho
se
n
omeowners h
helped durin the progra
ng
am’s
first tw years.
wo
y
e
it
gram, Treasu has provi
ury
ided nomina
al
Two years into the Hardest Hi Fund prog
31
assista
ance to homeowners:






$1 million (0
10
0.7%) of the $1.4 billion allocated fo principal r
or
reduction;
$4 million (5
43
5.2%) of the $817 million for reinsta
n
atement;
$2 million (2.3 of the $83 million f second lien;
2
3%)
$
for
$2
256,000 (0.6%) of the $4
45.4 million for transitio assistance and
on
e;
$1 million (3.7%) of the $4.4 billion for unemp
162
(
e
n
ployment ass
sistance.

ury
hat
me
sury and the HFAs to sta up a new
and
w
Treasu stated th it took tim for Treas
progra and this took the bet part of a year to do. Treasury co
am,
tter
ould have
mitiga the risks involved in increasing the infrastru
ated
s
n
ucture for the HHF program
3
31

Amounts as of December 31, 2011.
3

Apr 12, 2012
ril

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

30

at 19 state HFAs by ensuring that the key stakeholders in the mortgage industry
were on board and actively participating early on. However, the HFAs should be
out of their ramp-up period and into full execution of the programs. Because
HHF’s assistance to homeowners has been nominal, the HFAs will have to
dramatically increase assistance to meet their own estimates for the number of
homeowners they intend to help by the end of 2017, when the program ends. In
the next section, SIGTARP discusses how Treasury needs to set appropriate
numeric goals and metrics to ensure that the expected number of homeowners
assisted is met.
However, as was clear in the beginning of HHF, the HFAs need Treasury’s help
and support to increase the number of homeowners helped. Treasury approved
HHF programs knowing that the GSEs did not support principal reduction
assistance. In October 2010, the GSE guidance issued for HHF was silent on
supporting transition assistance programs.32 These programs continue in HHF ‒
with limited participation. Treasury also has these very same types of assistance
in other TARP-funded housing support programs, including HAMP. Participation
in HHF principal reduction programs has been limited, even though investor
incentives were generally double that initially offered in HAMP, and GSEs have
opted not to reduce principal on any cost-sharing basis for HHF programs.
Because HAMP was having similar issues, Treasury recently took steps to further
increase the number of homeowners assisted in HAMP by tripling the incentives
paid to investors for HAMP principal reduction and making those incentives
available to GSEs without making a corresponding change in HHF.
After nearly two years,33 HFAs have assisted 7% of the homeowners they
expected to assist over the life of the program. HFAs have spent only
approximately $217 million (3% of the funds allocated for the program) for
assistance to homeowners. (See Table 2 on the following page.) To expedite
assistance to homeowners, Treasury should develop an action plan that includes
steps that Treasury intends to take to increase dramatically the numbers of
homeowners assisted in all the programs, including the two known areas Treasury
supports but are lacking broad industry support ‒ principal reduction and secondlien reduction. Further, if in a reasonable time Treasury cannot achieve the
desired level of homeowners assisted in any one type of assistance ‒ for example,
principal reduction, second-lien reduction, or transition assistance ‒ Treasury
should put the funds to better use toward programs that are reaching homeowners.

32

On March 6, 2012, Fannie Mae issued servicer guidance directing servicers to facilitate HHF transition assistance
provided to borrowers for loans it owns and for certain securitized loans.
33
As of December 31, 2011.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

31

TABLE 2

PERCENT OF HHF USAGE AND TIME ELAPSED
Applications
Approved by
Dec. 31, 2011

Spent by
Dec. 31, 2011

Allocated as of
Dec. 31, 2011

Percent

436

$10,397,621

$1,420,210,180

0.7%

Unemployment
Assistance

26,100

$162,146,435

$4,382,850,567

3.7%

Reinstatement

6,764

$42,744,862

$817,409,716

5.2%

170

$1,882,683

$83,298,292

2.3%

72

$255,771

$45,400,464

0.6%

–

$850,830,780

–

$217,427,372

$7,600,000,000

3.2%

HHF Program
Categories
Principal
Reduction

Second-Lien
Reduction
Transition
Assistance
Administrative
Expenses*
Total

–
33,542

Homeowners
Assisted as of
Dec. 31, 2011
Homeowners

30,640
Months Elapsed:
February 2010 to
December 2011

Months

23

Average of Aggregate
Number of
Homeowners HFAs
Plan To Assist
Through 2017
475,000**

6.5%

Total months in
program:
February 2010 to
December 2017
95

24%

Note: *This percentage is the total spent on programs as a percent of the total amount allocated to programs ($7.6 billion less
administrative expenses).
** This number is an average of the high and low estimated number of homeowners HFAs plan to assist, rounded up to the
nearest 5,000.
Source: SIGTARP analysis of HFA quarterly performance reports and latest state participation amendments as of December 31, 2011.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

32

Treasury’s Goals and Metrics Fall Short and
Make Effective Evaluation Difficult
This section discusses the goals and metrics for HHF. Treasury set a goal to
prevent avoidable foreclosures but did not define measurable targets for this.
Treasury required HFAs to set goals for each of their programs, but most HFAs
set nonnumeric goals.
Treasury’s goals and metrics for the HHF program fall short of those used in best
practices and make effective program evaluation difficult. Best practices for
results-oriented organizations are to define goals and desired outcomes, set
overall and incremental measurable targets to gauge progress, and use
performance information as a basis for decision making. Treasury’s stated goal
for the overall HHF program is to prevent avoidable foreclosures and thereby
preserve homeownership, but Treasury did not set a measurable overall target or
require states to produce measurable goals. Treasury does require states to
estimate the number of households that will participate in the states’ HHF
programs, but this number has limited usefulness because states can and have
changed estimates, creating a shifting baseline. In fact, the aggregate of these
estimated ranges has steadily decreased in the last year, from 507,619–549,094 as
of March 31, 2011, to 458,632–486,536 as of December 31, 2011.
In addition, Treasury does not publicly report HHF performance information.
Treasury’s website provides links to performance data on HFAs’ websites, but
Treasury does not publish aggregate HFA data or connect the data to goals for
HHF. Tracking performance of all HHF programs would require a taxpayer to
gather pieces of information from 19 separate HFA websites, but it is not clear
how the data can be used to assess the program. Treasury totals the number of
homeowners assisted and dollars expended by all states on HHF programs, but
does not make these aggregate statistics public. As a result, it is difficult for
Congress and the public to assess HHF program performance. Therefore,
SIGTARP publishes in its Quarterly Report to Congress the total of the HFAs’
estimated numbers of homeowners to be served, the actual number of
homeowners assisted, and the dollars expended by all states on HHF. Treasury, in
its oversight role for $7.6 billion in TARP funds, should publish the HFAs’
performance data collectively, in one place, in a format that facilitates
comparisons across HFAs, programs, and time.

Treasury and Most HFAs Did Not Set Numeric Goals
In Government and business, goals and metrics are vital tools to clearly measure
implementation and progress of programs. However, Treasury did not establish
overall goals for HHF that are clear, reliable, objective, measurable, and linked to
higher-level goals. Instead, it deferred to the individual HFAs to establish goals

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

33

for their individual programs and did not require these goals to be measurable. In
addition, Treasury did not require HFAs to establish at least one goal that is
consistent across the HFAs, resulting in a single goal for the program. This would
allow an assessment of HHF in its entirety. Treasury told SIGTARP that
Treasury’s goal – instead of setting measurable targets against which to assess
performance data – is to continually improve the performance of the program over
time, taking into account the context in which the program operates, such as
changing market conditions and differing local conditions. Treasury refers to this
as its “continuous improvement” model. Treasury says that it uses a “feedback
loop” to help HFAs improve the performance of HHF programs. Treasury told
SIGTARP that HFAs have made more than 80 changes to HHF programs based
on discussions with Treasury.
The former Assistant Secretary for Financial Stability, Herbert Allison, told
SIGTARP that Treasury did not want to impose measurable goals on the HFAs
but wanted each state to develop its own. Another Treasury official told
SIGTARP that the states, not Treasury, should report data that show progress,
saying, “This is not our program. These are their programs.” However, the
source of the funds for all HHF programs is the Federal Government, with
Treasury as the steward over TARP funds. Congress and the public rightfully
expect Treasury to administer the program and ensure that TARP funds are
appropriately spent and are achieving the desired goals.
Treasury initially considered requiring HFAs to establish targets and metrics for
HHF programs in their agreements with Treasury, but later eliminated this
requirement. In April 2010 and May 2010, draft versions of the agreement
included a requirement for HFAs to specify “performance metrics” and later
“program success metrics.” As an example, Oregon initially listed goals in its
agreement for 90% of program participants to remain in their homes after one
year. One OFS official supported requiring goals to benchmark success. On the
other hand, another OFS official preferred not to require measurable targets for
new programs, and suggested that stating a target would probably set a program
up for failure. Treasury also initially considered and then rejected using
performance metrics to determine whether HFAs could continue to draw down
HHF funds.
Based on SIGTARP’s review of the 19 agreements, most program goals are high
level and describe what the HFAs want their programs to achieve in broad terms,
with no numeric measurable targets. For example, Florida’s Unemployment
Mortgage Assistance Program goal is: “preserving homeownership” and
“protecting home values.” South Carolina’s HAMP Assistance Program goal is:
“To provide limited funding to help homeowners become eligible for HAMP.”
However, five of the 19 states did set numeric program goals. Three of those five
states (Georgia, Nevada, and North Carolina) used their estimates for the number
of households to be served as program goals. Arizona set a goal for one of its

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

34

programs to achieve a 90% success rate in modifying loans. California set a
numeric goal for one of its programs to have 21% of principal write-downs
contributed by a city grant. In addition, the measurable goals the states establish
are a moving target ‒ HFAs can change their program goals with Treasury
approval in amendments to the original formal agreement. For example, Nevada
had a goal for its Principal Reduction Program to serve at least 3,000 homeowners
in April 2011. In the sixth amendment to its agreement with Treasury in
October 2011, the HFA dropped that numeric goal and reduced the estimated
number of households to be served by the program from 3,016 to 1,008, while
increasing the maximum per-household assistance. Appendix K lists the HFAs’
program goals for the 55 HHF programs, as of December 31, 2011.

HFAs Publish Quarterly Numeric Data on Their Own Websites, but
Without Stated Numeric Goals, It Is Difficult To Assess Performance
Treasury’s agreements with HFAs require each HFA to report the same
performance data elements to Treasury in a standardized format and to post the
information on their own websites, but Treasury does not publish the data either
by individual HFA or in the aggregate. The quarterly performance reports34
contain more than 25 data points about each program and more than 15 data
points about an HFA’s programs in the aggregate. For example, the quarterly
performance reports include data such as the number of applications approved and
denied, the number of homeowners assisted, the range of borrower incomes, the
number of homeowners in each county, the number of homeowners by race and
ethnicity, and the number of homeowners who remain in their homes after six
months and 12 months.
These data points can be compared from quarter to quarter. Although these
measures are helpful for determining whether activity is occurring in each
program, Treasury has not established desired outcomes to assess whether these
activities are meeting intended targets and whether they can add up to an overall,
measurable performance goal. For example, if an HFA reports that 25% of
homeowners in an HHF program remained in their homes six months after
receiving HHF assistance, this performance could be compared to the
performance of other states or programs, but Treasury and HFAs have not
established a target to show what performance they intended.
Treasury’s HHF Program Director described a three-step process for evaluating
HHF programs. He told SIGTARP that to evaluate HHF, one would:

34

See Appendix J for a template/data dictionary of the quarterly performance report that Treasury provided to HFAs
describing each data element.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM





35

look at the HFA’s goals for its HHF programs for what HFA officials
intended to do (HHF program goals are in agreements posted on Treasury’s
website);
look at the HFA’s quarterly performance reports for what it did (HFA
quarterly performance reports are posted on each of the 19 HFA websites);
and
contact the HFA and other stakeholders for context and explanation of how
the program is working.

Estimates of the Number of Participating Households That Change
Each Quarter Have Limited Value for Assessing Performance
Treasury requires HFAs to establish in their agreements with Treasury estimates
of the number of households that each of their HHF programs will assist through
2017, but Treasury allows HFAs to revise their estimates anytime by amending
the agreements. The HFAs’ estimates of the numbers of households to be assisted
have changed over the life of the HHF program (decreasing since
March 31, 2011) and do not provide a consistently measurable target. Evaluating
performance against a shifting baseline presents a challenge to assessing program
outcomes. If the estimate of the number of households to be assisted changes,
consistent performance measurement over the life of the program is not possible,
progress is no longer measured based on a goal established at the outset, and
opportunities for accountability to the public are diminished. HFAs can change
their estimates when they shift funds between programs, change the amount of
per-household assistance in a program, or change the amount allocated to
administrative expenses. Each type of adjustment can change the number of
households that can be helped. As a result, these estimates are of limited value
for performance measurement.

Best Practices Call for Setting Goals and Measuring Program
Performance
According to an official in the Treasury Office of Strategic Planning and
Performance Management, to follow good management practice that in turn
would reflect HHF progress toward meeting its goal, Treasury should establish a
mix of performance measures for activities the organization can hold itself
accountable to and indicators that show the intended effect or outcomes of the
program or activity. When asked by SIGTARP whether Treasury’s approach of
setting one broad operational goal without setting performance measures or
indicators allows for measurement of the HHF program, the official said it means
that one cannot evaluate, but can only infer the program’s performance and

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

36

results. The official told SIGTARP that Treasury could report HHF performance
in the monthly Housing Scorecard published by HUD and Treasury.35
Treasury has not defined desired quantifiable outcomes for HHF. Treasury has
resisted measuring performance to gauge progress at the Federal level, saying
HHF programs are the states’ programs. Treasury required HFAs to estimate the
number of households to be served, but these estimates change. Treasury has
performance data from individual HFAs, but it does not have measurable
performance information that ties to program-wide goals with which to make
appropriate decisions.
Rather than follow best practices by establishing performance metrics by which
Treasury can be held accountable, Treasury officials expressed several concerns
with using numeric targets:




numeric targets for a new program in an ever-changing housing market will
have little or no value, especially across states with different economic
conditions;
numeric goals may lead to a “ceiling effect” (if the goals are too low); and
numeric goals may create incentives for unwanted actions such as HFAs
pursuing a type of foreclosure assistance to meet a goal rather than
implementing the right type of assistance for each borrower’s situation.

At the start of HHF, Treasury should have set one or more measurable
performance goals for the HHF program overall, including, at a minimum, the
number of homeowners Treasury hopes to help under HHF, a number that should
not change each quarter. However, it is not too late for Treasury to set these
goals. For each goal, Treasury should have established metrics to measure the
performance of the program against the goal. Additionally, Treasury should have
established milestones and a periodic schedule to assess the progress the HHF
program is making toward the intended outcome. Finally, Treasury should use
this performance information as a basis for working with the state HFAs to make
program adjustments as needed to ensure the success of the program at meeting
its goals.
Setting measurable performance goals is not difficult. For example, Treasury
could at a minimum adopt the HFAs’ collective estimates of homeowners to be
assisted through 2017. Treasury should set interim goals to target the intended

35

The Housing Scorecard reports on the status of the nation’s housing market, providing key housing market indicators
and highlighting Government programs, including HAMP. The scorecard lists HHF as part of the Administration’s
housing plan, but does not report HHF performance metrics, as it does for HAMP. Treasury also produces a
Monthly 105(a) Report for TARP that includes the amount of HHF funds drawn and a narrative update on the HHF
program, such as which HFAs have made recent changes to their programs. However, the report does not assess HHF
performance based on predetermined measures.

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progress of the program. For example, Treasury could set interim goals, such as a
number of homeowners that the program should reach each year.
In addition, Treasury should have ensured that states set measurable goals and
related metrics to assess performance for each HFA. Treasury should also require
states to provide the specific performance data it needs to roll up to any overall
and interim goals, and if necessary, the methodology and calculations states
should perform to arrive at these data.

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Conclusions
The Hardest Hit Fund was announced in February 2010 when the housing market
was still under significant stress, despite Government efforts to address recordhigh foreclosures with programs such as TARP’s HAMP. A senior Treasury
official told SIGTARP that the idea of the Hardest Hit Fund came from an
examination of options to tackle home foreclosure economic challenges such as
negative equity and unemployment not being addressed by HAMP. The Treasury
official told SIGTARP that at the end of 2009 (when HHF was being developed),
unemployment was hovering around 9%, and one in four homes was underwater.
Under HHF, TARP dollars fund “innovative measures” developed by state
housing finance agencies (“HFAs”) and approved by Treasury to help families in
states that had been hardest hit by the economic crisis and the collapse of the
housing bubble. HHF expanded from its original announcement of $1.5 billion in
TARP funds for five states with 20% home price declines in four iterative rounds
of funding. Each round had specific criteria, resulting in Treasury obligating a
total of $7.6 billion in TARP funds to 18 states and Washington, D.C. The 19
HFAs could propose multiple programs within categories of assistance for
Treasury approval. As of December 31, 2011, Treasury had approved 55 HHF
programs, which have through 2017 to use TARP funds.
After two years, the Hardest Hit Fund has experienced significant delay in
providing help to homeowners due to several factors, including a lack of
comprehensive planning by Treasury and a delay and limitation in participation in
the program by large servicers and the GSEs (Fannie Mae and Freddie Mac). As
of December 31, 2011, the latest data available, HHF has spent only
$217.4 million to provide assistance to 30,640 homeowners – approximately
3% of the TARP funds allocated to HHF and approximately 7% of the minimum
number of homeowners whom the state HFAs estimate helping over the life of the
program. Nearly all (98%) of the help provided to homeowners under HHF has
been related to unemployment assistance or reinstatement through payment of
past due amounts, the only types of assistance for which the GSEs directed
servicers to participate. The great bulk (78%) of the HHF help to homeowners
has been for unemployment assistance. Unless there is a drastic change in the
assistance the GSEs and their conservator, FHFA, will support, the Hardest Hit
Fund may be much narrower in scope and scale than what was originally expected
due to the lack of servicer and GSE support for certain programs. Without
significant change, while the Hardest Hit Fund may be able to reach unemployed
homeowners as was originally intended, it is likely to be limited in addressing
negative equity for homeowners who are underwater.
SIGTARP found that Treasury consistently applied its criteria to choose states to
participate in the first three rounds of funding for HHF. However, in the second
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round, it was unclear why Treasury determined that states with high percentages
of their population in counties with an unemployment rate greater than 12% were
economically distressed, but that states with 11% unemployment were not. The
cutoff for Treasury’s selection of states in Round Two was not transparent
because one percentage point divided Ohio (with 22% of its population living in
counties with an unemployment rate higher than 12%), which was selected, and
Tennessee (with 21%), which was not selected until five months later, when
Treasury made another round of funding to all states, including Tennessee, with
above-average unemployment. For the fourth round, no new states were selected.
Rather, Treasury nearly doubled the funds available for HHF four days before the
expiration of Treasury’s TARP investment authority. Treasury determined that
the five categories of assistance it approved were compliant with TARP’s
requirement that programs prevent avoidable foreclosures and rejected other
proposed programs for not having a sufficient link to this requirement. The five
categories Treasury approved are: (1) principal reduction; (2) second lien;
(3) reinstatement through payment of past due amounts; (4) unemployment; and
(5) transition assistance.
SIGTARP was unable to analyze whether Treasury consistently applied its criteria
for rejecting individual state programs because Treasury has not provided
additional explanation of the rejection except for its rationale for rejecting legal
and housing counseling programs as not being specifically authorized by EESA or
necessary for the implementation of HHF. Treasury did not define “innovative”
or perform an analysis of whether proposed programs were innovative or
duplicative of other programs, instead considering the design of the program to be
innovative because it provides locally tailored solutions. The GSEs, FHA, three
of the largest servicers, and an academic told SIGTARP that they generally
agreed that HHF has innovative aspects because it provides different types of
assistance at a local level, helps homeowners for longer periods of time, or
provides greater funding to respond to the housing crisis.
Treasury has not set measurable goals and metrics that would allow Treasury, the
public, and Congress to measure the progress and success of HHF. Treasury set a
single goal for HHF: to prevent avoidable foreclosures and help preserve
homeownership. Treasury instead deferred to individual states to set goals but did
not require states to set measurable goals. Most states’ goals are high-level
expectations with no measurable targets, such as Florida’s “preserving
homeownership” and “protecting home values.” Treasury does require states to
estimate the number of households to be assisted by their HHF programs, but this
number has limited usefulness because states can, and have, changed estimates,
creating a shifting baseline that makes it difficult to measure performance against
expectations. The states’ estimated number of homeowners to be assisted by
HHF has steadily decreased over the last year. As of December 31, 2011, the 19
HFAs collectively estimate helping between 458,632 and 486,536 homeowners
over the lifetime of HHF, which will end in 2017. Treasury has not adopted this

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estimate or even reported it. Consistent with best practices, Treasury should have
set meaningful and measurable goals at the start of the program. However, it is
not too late for Treasury to set measurable goals, including at a minimum,
adopting the HFAs’ collective estimate or developing its own goal of how many
homeowners Treasury expects HHF to help.
The 19 individual HFAs have provided a significant amount of transparency on
their 55 HHF programs on their websites as required by Treasury; however,
Treasury can do more to improve transparency. Tracking performance of all HHF
programs would require a taxpayer to gather information from 19 separate HFA
websites. Treasury aggregates the number of homeowners assisted and dollars
expended by all states on HHF programs, but SIGTARP, not Treasury, publishes
this information. Treasury should publish this information, along with other
useful information on HHF’s performance, on its website and in the monthly
Housing Scorecard that reports on the Administration’s efforts in housing
programs, such as HAMP. A Treasury official told SIGTARP that it is
appropriate to leave reporting of the data to the states: “This is not our program.
These are their programs.” However, HHF is a TARP program, the source of the
funds is TARP, and Treasury is the steward over TARP. Congress and the public
rightfully expect Treasury to administer the program and ensure that TARP funds
are appropriately spent and are achieving the desired goals.
SIGTARP found that several factors contributed to the Hardest Hit Fund’s
significant delay in getting assistance to homeowners, some of which have been
successfully resolved, and some of which are likely to continue to affect the
program:


HHF lacked comprehensive planning by Treasury, which rushed out the
program without appropriate collaboration of key stakeholders, including state
HFAs, large mortgage servicers, and the GSEs (Fannie Mae and Freddie
Mac). In the creation of HHF, Treasury solicited input from mortgage
industry participants, but in planning the program, it did not gather all key
stakeholders together to anticipate and assess needs, participation, and barriers
for effective implementation of the program. HHF suffered from a rushed
rollout of state HHF programs without a comprehensive implementation plan
by Treasury that would ensure success. Treasury delegated program
development to state HFAs, but generally gave one to two days’ notice to state
housing officials before announcing that they would receive TARP funds and
would have approximately six to eight weeks to develop programs. Despite
the fact that the states could not reach a significant amount of homeowners
unless large servicers agreed to participate, Treasury did not contact some of
the largest servicers to gain their support until April 2010, and did not resolve
large servicers’ issues sufficiently for them to participate with states until
November 2010, after a Treasury-convened Servicer Summit. Treasury
opened discussions with the GSEs early on, but did not do enough initially to

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secure support for some HHF programs. SIGTARP found in its
March 25, 2010, audit of HAMP that “taking more time at the outset to
adequately plan” may have resulted in assisting more homeowners more
quickly. Similarly, had Treasury taken more time to adequately plan HHF, it
may have helped the state HFAs gain support for their programs from large
servicers and GSEs, and resulted in more homeowners receiving help during
the first two years of the program. One large servicer said it best: “Anytime
all the parties can be involved in a program, the more success you will have. I
think that if Treasury, the states, and the servicers were involved earlier on,
that the program would be more successful and further along.”


Treasury’s decision to give one to two days’ notice to states and six to eight
weeks to develop programs caught several states off guard. One HFA official
told SIGTARP that 10 minutes after the program was announced, the HFA
began receiving phone calls from the public asking when the money would be
available. The office received 200 calls in the first 24 hours. HFAs had six to
eight weeks to develop their programs. Treasury provided informal guidance
throughout these weeks and the HFAs gathered public input. The HFAs also
had to build or change their processes and hire and train staff. One HFA had
seven employees dedicated to HHF and had to increase its staff for HHF by
500%. Another state HFA said that it had to scramble and get a network into
place. One HFA official explained to SIGTARP that the HFA “was not
prepared to deal with the tsunami of the HHF.”



Several states delayed HHF programs because the large mortgage servicers
were not participating. One great shortcoming in HHF’s implementation was
Treasury’s lack of timely action to enlist large servicer support for and
participation in state HHF programs. Treasury officials told SIGTARP that it
was up to the HFAs to negotiate with the servicers. HFAs reported to
SIGTARP that they were rebuffed by the large servicers. Several HFAs told
SIGTARP that their primary challenge with the implementation of HHF was
the lack of participation by the large servicers, with one HFA official
explaining that on a scale of one to 10, “this was a 10.” Without the
participation of the large servicers, the HFAs’ programs could not reach a
large portion of struggling homeowners. One HFA explained, “Without big
servicers, it would take much, much longer to get the funds out, with just
community banks and credit unions. It would be a trickle of eligible
applicants.” Some HFAs told SIGTARP that without the largest servicers,
they would have been able to help only 20% to 50% of applicants. Another
HFA told SIGTARP, “Our biggest complaint is we were provided these funds,
and we have such a need here, but we weren’t able to handle the mass
numbers because of no participation from the large lenders.” One HFA told
SIGTARP that “without the servicers’ participation, it would have been
disastrous.”

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

Large servicers did not participate for the first nine months of the program
citing administrative burden of more than 50 different programs, lack of
program uniformity, and lack of GSE guidance. One large servicer said that
its experience with HAMP, a national program, was less complex than HHF.
Servicers told SIGTARP that the large number of HHF programs and their
complexity posed an operational challenge for servicers to develop and
implement HHF infrastructure and properly train staff. One servicer
explained to SIGTARP that with each state’s differing eligibility and coding
requirements, “the volume was unprecedented.” In addition, servicers cited
the need for GSE guidance before they could begin participating in HHF
programs so they could ensure that they acted correctly in obeying investor
rules, processing loans, and applying funds received from the states. One
servicer explained that the states designed their HHF programs “in a vacuum,”
without knowing whether the servicers would be able to execute the programs.



Treasury did not initially use its influence on the largest servicers to gain their
support. By leaving the responsibility of recruiting large servicers to the
states and not taking more aggressive efforts to gain servicer support for the
state programs, Treasury failed to recognize the lack of bargaining power that
states had for recruiting servicers. Florida’s HFA official explained to
SIGTARP, “The one billion dollars has been a nice carrot to use for servicers
in Florida, but there is no stick with the carrot to force servicers to
participate.” One HFA told SIGTARP that it would have been helpful if
Treasury had been more aggressive in getting large lenders to participate.
Treasury officials chose to decentralize program development with the HFAs,
but their lack of comprehensive planning, such as involving servicers early on,
resulted in Treasury not anticipating and initially not addressing the
implementation issues that approximately 50 non-uniform programs created
for servicers. SIGTARP found that Treasury’s experience with HAMP should
have provided a better understanding of servicers’ needs and the effect that
servicers’ participation would have on a program’s success. Several state
HFAs delayed programs until the large servicers came on board, which did
not happen until the GSEs issued guidance on October 29, 2010. One large
servicer told SIGTARP that 80% of its portfolio is with the GSEs, explaining,
“… We had to hold up on certain programs, waiting for Fannie and Freddie.”



Treasury did not gain GSE support for HHF programs until eight months after
the announcement of the program. Treasury, responsible for HHF oversight
and accountable for HHF results, should have been the driving force to ensure
that the GSEs and large servicers supported the HFAs’ programs. Although
Treasury sought GSE guidance in creating the program, it did not use its
influence to gain GSE support for state HHF programs for the first eight
months of the program. One Treasury official told SIGTARP that after HHF
expanded from $2.1 billion for 10 HFAs to $4.1 billion for 19 HFAs in
August 2010, “it became clear that servicer and GSE support would be critical

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to the full utilization of program funds.” However, HFAs in the first two
rounds told SIGTARP that because the large servicers were not involved, they
were able to assist only a small percentage of applicants. SIGTARP found
that, based on Treasury’s experience with HAMP and the sheer volume of
mortgages held or guaranteed by the GSEs, it should have been clear before
the announcement of HHF that large servicers and GSE support would be
critical.36 In addition, Treasury was aware before August that no large
servicers had signed on.
The largest servicers did not participate in HHF and the GSEs did not issue
guidance to servicers on HHF until Treasury formally interceded by holding a
Servicer Summit in September 2010, when it brought all of the key stakeholders
together. This summit was a turning point, and out of it came the resolution of
several issues such as process standardization and GSE guidance that had
prevented GSEs and large servicers from participating in HHF.
The GSEs’ guidance issued on October 29, 2010, to servicers stated that the GSEs
supported mortgage assistance programs for unemployed or underemployed
homeowners and programs to reinstate past due amounts on mortgages. These
two programs require no financial sacrifice from the servicers or investors. GSEs
examined principal reduction in connection with HHF and concluded that
principal reduction could increase moral hazard by incentivizing homeowners to
become delinquent on their mortgages. Without GSE buy-in, large servicers
generally would not agree to participate in HHF principal reduction, and transition
assistance programs for those loans with the GSEs. Although some servicers
have signed on to HHF second-lien programs, participation has been very low.
One large servicer told SIGTARP that 80% of its portfolio is with the GSEs.
Another large servicer told SIGTARP that 60% to 80% of its servicing book is
GSE loans, and because the GSEs are not participating in principal reduction, the
servicer cannot process GSE loans in HHF principal reduction programs.
Treasury approved 16 HHF principal reduction programs, knowing that the GSEs
did not support principal reduction. Treasury encouraged HFAs to work on
principal reduction programs with servicers’ mortgages that were not owned by
the GSEs, but so far the results of those efforts have been minimal. As of
December 31, 2011, the latest data available, approximately 436 homeowners
have received principal reductions under HHF.
HHF eventually may be effective in the areas where there is broad GSE and large
servicer support such as unemployment and reinstatement through payment of
past due amounts. Unless there is a drastic change in the assistance the GSEs and
their conservator, FHFA, will support, HHF may be limited in the types of
homeowners it can reach. While it may be able to reach homeowners who are
36

The GSEs own or guarantee 56% of the 53 million outstanding first-lien mortgages in the United States as of
June 2011, according to Freddie Mac.

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unemployed, underemployed, or have past due amounts that can be reinstated,
without a significant change by the GSEs or servicers, it is likely to be limited in
reaching homeowners who are underwater, have mortgages with second liens, or
need transition assistance, including a short sale or deed-in-lieu of foreclosure.
Because Treasury does not set performance metrics for the various programs
under HHF, it is not clear whether providing approximately 436 homeowners with
principal reduction assistance meets performance expectations for the first two
years of the program. However, at this rate it is unlikely that Treasury will spend
the $1.4 billion allocated to HHF principal reduction without taking other actions.
Treasury should seek to apply lessons learned from HAMP to give state HFAs the
support that they need. For example, Treasury recently announced that it will
triple its incentives for principal reduction in HAMP. Treasury should work with
the state HFAs to determine whether a change is appropriate in any of the 16 state
HHF principal reduction programs.
In order to reach the number of homeowners that the HFAs collectively estimate
helping over the life of HHF, there needs to be a dramatic increase in the number
of homeowners helped. As was clear in the beginning of HHF, states need
Treasury’s help and support to increase the number of homeowners helped.
Treasury should do all that it can to ensure the program’s success. Treasury
should set measurable goals, measure progress against those goals, and develop
an action plan to ensure that the next five years result in the HHF program
fulfilling TARP’s goal to preserve homeownership.

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Recommendations
1. Treasury should set meaningful and measurable performance goals for the
Hardest Hit Fund program including, at a minimum, the number of
homeowners Treasury estimates will be helped by the program, and measure
the program’s progress against those goals.
2. Treasury should instruct state housing finance agencies in the Hardest Hit
Fund to set meaningful and measurable overarching and interim performance
goals with appropriate metrics to measure progress for their individual state
programs.
3. Treasury should set milestones at which the state housing finance agencies in
the Hardest Hit Fund must review the progress of individual state programs
and make program adjustments from this review.
4. Treasury should publish on its website and in the Housing Scorecard on a
quarterly basis the total number of homeowners assisted, funds drawn down
by states, and dollars expended for assistance to homeowners, assistance
committed to homeowners, and cash on hand, aggregated by all state Hardest
Hit Fund programs.
5. Treasury should develop an action plan for the Hardest Hit Fund that includes
steps to increase the numbers of homeowners assisted and to gain industry
support for Treasury-approved HHF programs. Treasury should set interim
metrics for how many homeowners it intends to assist in a Treasury-defined
time period in each particular program (such as principal reduction, secondlien reduction, or reinstatement). If Treasury cannot achieve the desired level
of homeowners assisted in any one program area in the defined time period,
Treasury should put the funds to better use toward programs that are reaching
homeowners.

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Management Comments and SIGTARP’s
Response
Treasury provided an official written response to this report in a letter dated
March 28, 2012, which is reproduced in full in Appendix L. The letter states that
“we appreciate the findings of the report with respect to the three stated objectives
of the audit,” but Treasury did not address in detail the five recommendations in
the report.
Treasury disagreed that the time it took for states to build infrastructure should be
characterized as delay. Treasury said that state programs are gaining traction and
focused on the fact that there was growth last quarter in the number of
homeowners assisted and the amount of dollars going to assist those homeowners.
Treasury stated that it will address each of SIGTARP’s recommendations in detail
at a later date, but “generally believes that measures that would erode the
fundamental character of the HHF program – which empowers the states rather
than dictates a one-size fits all approach – would not be appropriate.” In response
to SIGTARP’s recommendation that Treasury set meaningful and measurable
goals for HHF, Treasury said that it believes establishing static numeric targets is
not well suited to HHF.
SIGTARP requested that within 30 days of the date of this report, Treasury
provide its rationale for nonconcurrence on each of the recommendations.

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Appendix A – Objectives, Scope, and Methodology
SIGTARP performed this audit under authority of Public Law 110-343, as amended, which also
incorporates the duties and responsibilities of inspectors general under the Inspector General Act of
1978, as amended. We initiated this audit as part of our continuing oversight of TARP and to
respond to a request from House Committee on Oversight and Government Reform Chairman
Darrell Issa.37 The audit’s objectives were to:38





assess the extent to which Treasury applied consistent and transparent criteria, including
applicable provisions of the Emergency Economic Stabilization Act of 2008 (“EESA”), in
selecting the states and programs to receive money from HHF;
assess the extent to which Treasury determined that the programs to be funded by HHF are
innovative and not duplicative of existing state and Federal programs; and
identify the goals and metrics that Treasury adopted and reported to the public for the operation
of HHF.

HHF funds foreclosure prevention programs run by state HFAs in states hardest hit by decreases in
home prices and high unemployment rates. The scope of this audit covered the four rounds of
Treasury funding of HHF and HHF program activity through December 31, 2011. Treasury
provided $7.6 billion for HHF in four increments: $1.5 billion made available on June 23, 2010;
$600 million made available on August 3, 2010; $2 billion made available on September 23, 2010;
and $3.5 billion made available on September 29, 2010. We conducted our audit work from
August 2010 through March 2012 in Washington, D.C., and New York, N.Y. (engagement code
022).
SIGTARP interviewed the 10 HFAs that participated in Round One or Round Two of HHF, and
conducted an email survey of the nine HFAs that joined HHF in Round Three. SIGTARP
judgmentally selected to interview the first 10 HFAs because they entered the program earlier and
had more experience to convey, and had a variety of program types. The HFAs that joined in Round
Three had fewer months of experience and at the time of the interviews offered unemployment
programs only. Treasury did not add any HFAs to HHF in Round Four. SIGTARP also surveyed all
19 HFAs about the goals for their programs (one HFA did not respond). In addition, SIGTARP
interviewed and sent a written survey on their participation in the HHF program to officials from the
nation’s four largest mortgage servicers.
To determine whether Treasury applied consistent and transparent criteria, including applicable
provisions of EESA used in selecting states and programs, SIGTARP interviewed officials from
Treasury’s Office of Financial Stability; officials from the 10 state housing finance agencies first
selected for the HHF program out of the 19 HFAs participating; and mortgage industry
stakeholders. We analyzed the criteria and data used by Treasury when making its state selection
37
38

Chairman Issa was the ranking member of the committee when he made the request.
A fourth question, whether Treasury has put sufficient mechanisms in place to prevent waste, fraud, and abuse of the
Hardest Hit Fund, will be addressed in a future audit report.

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decisions and reviewed available documentation, including Treasury’s HHF proposal guidelines,
written methodologies, emails, selection criteria such as unemployment rates and house price
declines, Review Committee meeting minutes, and decision memoranda regarding the HHF
program.
To determine whether Treasury’s HHF programs are innovative and not duplicative of existing state
and Federal programs, we synthesized Treasury guidance and testimonial evidence to determine
what definition or criteria for innovation Treasury established, and what processes Treasury
established and used to determine whether HFA programs for HHF are “innovative” and not
duplicative of existing state and Federal programs. We also synthesized testimonial evidence from
mortgage industry stakeholders and professionals on the extent to which HHF programs are
innovative. For this objective, SIGTARP interviewed officials from Treasury’s Office of Financial
Stability and officials from the 10 state housing finance agencies first selected for the HHF program,
out of the 19 HFAs participating. We also conducted email surveys with the nine additional HFAs
selected for the third round of HHF funding. We also interviewed officials from the four largest
servicers (Bank of America, CitiMortgage, JPMorgan Chase, and Wells Fargo) and the GSEs
(Freddie Mac and Fannie Mae) and their regulator and conservator, FHFA.
To address the goals and metrics of the HHF program, we interviewed Treasury officials including a
former Assistant Secretary for Financial Institutions, current and former OFS officials, and the
Director for Strategic Planning and Performance Management. We conducted a written survey of
the 19 state HFAs participating in HHF. We reviewed Treasury’s proposal guidelines, the proposals
state HFAs submitted to Treasury, the Participation Agreements between Treasury and state HFAs,
and the reports Treasury required state HFAs to publish quarterly about their HHF program activity.
We analyzed the estimates state HFAs made of the number of households their HHF programs
would serve. We reviewed statements made by the Government Accountability Office (“GAO”) and
COP about performance measurement of other TARP-funded housing programs, and reviewed GAO
reports on best practices for performance measurement. We reviewed other documents provided by
Treasury, including emails among Treasury officials related to HHF, as well as documents that
Treasury and HUD made available to the public.
SIGTARP conducted this performance audit in accordance with generally accepted government
auditing standards prescribed by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our findings and conclusions based on our audit
objectives.

Limitations on Data
SIGTARP relied upon Treasury to identify and provide email communication and documents related
to the Hardest Hit Fund. It is possible that the documentation provided did not reflect a
comprehensive response to SIGTARP’s documentation requests, potentially limiting the review.

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Use of Computer-Processed Data
SIGTARP relied upon computer-processed data from each of the 19 HFAs (quarterly performance
reports) and OFS (aggregate quarterly performance reports) to report the number of applications
approved, the number of homeowners assisted, and the amount spent on the program from the
quarter ending September 30, 2010, through the quarter ending December 31, 2011. We did not
validate the accuracy of these data because we did not have access to the underlying HFA or OFS
data. We were able to cross-reference data from the 19 HFA quarterly performance reports to the
OFS aggregate quarterly report to check the internal validity of the figures. Further, we relied upon
monthly statements from OFS on the amount the 19 HFAs drew down, by month and cumulatively,
for HHF program and administrative expenses and cash on hand. We did not validate the accuracy
of these data because we did not have access to the HFA data that appeared in the OFS reports.
Finally, we were able to assess the validity of the 19 HFA quarterly performance reports from
quarter to quarter by checking whether the program expenses and figures of homeowners assisted to
date plus the latest quarter’s data equaled the current cumulative figure.

Internal Controls
To address the reporting objectives in this audit, consideration of internal controls was not necessary.
SIGTARP plans to conduct an assessment of OFS’ internal controls for the HHF program in followon work.

Prior Coverage
SIGTARP, GAO, and COP have provided information about HHF and updates on its status but have
not performed other audits related to HHF with the same or similar audit objectives.

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Appendix B – Acronyms and Abbreviations
Acronym or
Abbreviation
BLS
COP
EESA
Fannie Mae
FHA
FHFA
Freddie Mac
GAO
GSE
HAMP
HFA
HHF
HPO
HUD
MHA
OFS
SIGTARP
TARP
VA

Definition
U.S. Department of Labor – Bureau of Labor Statistics
Congressional Oversight Panel
Emergency Economic Stabilization Act of 2008
Federal National Mortgage Association
Federal Housing Administration
Federal Housing Finance Agency
Federal Home Loan Mortgage Corporation
Government Accountability Office
Government-Sponsored Enterprise
Home Affordable Modification Program
Housing Finance Agency
Housing Finance Agency Innovation Fund for the Hardest Hit Housing
Markets (“Hardest Hit Fund”)
Homeownership Preservation Office
U.S. Department of Housing and Urban Development
Making Home Affordable Program
Office of Financial Stability
Office of the Special Inspector General for the Troubled Asset Relief
Program
Troubled Asset Relief Program
U.S. Department of Veterans Affairs

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51

Appendix C – Timeline of Key HHF Events
February 19:
Announcement of
creation of HHF;
$1.5 billion for Round
One

FEB 2010

MAR

APR

MAY

JUN

October 29: GSE
HHF guidance for
servicers published

August 11:
$2 billion
announced for
Round Three

June 23: Round
One funds
allocated

JUL

AUG

SEP

September
21:
Treasury
holds
Servicer
Summit

March 29:
$600 million
announced for
Round Two
April 16:
Round One
proposals
due

September 1:
Round Three
proposals due

July 12: State
HFA program
launches begin

June 1: Round
August 3:
Two proposals due Round Two
funds
allocated

December 31:
757 borrower
applications approved

OCT

NOV

March 31:
2,328 borrowers
assisted

DEC

MAR

September 29:
$3.5 billion
announced for
Round Four

JAN 2011 FEB

APR

MAY

JUN

June 30:
7,389 borrowers
assisted

September 23:
Round Three funds
allocated

Source: SIGTARP analysis of Treasury data.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

52

Appendix D – HHF State Selection and Funding Allocation
Methodology
A LOOK AT THE FUNDING ALLOCATION METHODOLOGY
HHF
Funding
Round

Funding
($ billions)
Total Funding –
$7.6 billion

State Selection
Criteria Statistic

States Funded
and Criteria Statistic

1.5

Greater than 20%
house price decline
(from peak to 4Q
a
2009)

Nevada
California
Florida
Michigan
Arizona

0.6

Not funded in
Round 1 and
highest percentage
of state’s population
residing in counties
exceeding 12%
unemployment for
2009

Rhode Island
South Carolina
Oregon
North Carolina
Ohio

Round 3
August
2010

2.0

Unemployment rate
at or above national
average for prior 12
months (July 2009June 2010)

District of Columbia,
Tennessee, New Jersey,
Illinois, Kentucky,
Alabama, Georgia,
Mississippi, Indiana, and
all Round 1 and Round 2
states except Arizona

Allocated based on state’s
population

Round 4
September
2010

3.5

All states funded in
Rounds 1, 2, or 3

All states funded in
Rounds 1, 2, or 3

Allocated based on state’s
population

Round 1
February
2010

Round 2
March
2010

-49.9%
-38.9%
-37.4%
-24.1%
-36.8%

Funding Allocation
Method to States

60%
44%
34%
25%
22%





Weighting based on:
House price decline
State’s unemployment rate
State’s number of delinquent
loans
b

Allocated based on state’s
population residing in
Distressed counties, where
Distressed = over 12%
unemployment for 2009

c

a Index utilized was the FHFA seasonally adjusted purchase-only house price index.
b Allocation formula: (State’s population in high-unemployment counties / sum of states’ populations in high-unemployment counties in
states funded in that round).
c Allocation formula: (State’s population / sum of populations in states funded in that round).
Source: Treasury.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

53

Appendix E – HHF Funding Allocations and Amounts
Obligated by State, Total Finalized September 29, 2010
FUNDING ALLOCATIONS AND AMOUNTS OBLIGATED
State

Round One

Round Two

Round Three

Round Four

Alabama

–

–

$60,672,471

$101,848,874

$162,521,345

Arizona

$125,100,000

–

–

$142,666,006

$267,766,006

California

$699,600,000

–

$476,257,070

$799,477,026

$1,975,334,096

Florida

$418,000,000

–

$238,864,755

$400,974,381

$1,057,839,136

Georgia

–

–

$126,650,987

$212,604,832

$339,255,819

Illinois

–

–

$166,352,726

$279,250,831

$445,603,557

Indiana

–

–

$82,762,859

$138,931,280

$221,694,139

Kentucky

–

–

$55,588,050

$93,313,825

$148,901,875

Michigan

$154,500,000

–

$128,461,559

$215,644,179

$498,605,738

–

–

$38,036,950

$63,851,373

$101,888,323

$102,800,000

–

$34,056,581

$57,169,659

$194,026,240

New Jersey

–

–

$112,200,637

$188,347,507

$300,548,144

North Carolina

–

$159,000,000

$120,874,221

$202,907,565

$482,781,786

Ohio

–

$172,000,000

$148,728,864

$249,666,235

$570,395,099

Oregon

–

$88,000,000

$49,294,215

$82,748,571

$220,042,786

Rhode Island

–

$43,000,000

$13,570,770

$22,780,803

$79,351,573

South Carolina

–

$138,000,000

$58,772,347

$98,659,200

$295,431,547

Tennessee

–

–

$81,128,260

$136,187,333

$217,315,593

Washington, D.C.

–

–

$7,726,678

$12,970,520

$20,697,198

$2,000,000,000

$3,500,000,000

$7,600,000,000

Mississippi
Nevada

Total

$1,500,000,000

$600,000,000

Amount Obligated

Note: Treasury announced Round One funding on February 19, 2010, Round Two funding on March 29, 2010, Round Three funding on
August 11, 2010, and Round Four funding on September 29, 2010.
Source: Treasury Transactions Report for period ending 9/30/2010.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

54

Appendix F – HHF Programmatic Expenses and
Homeowners Assisted, by State, as of December 31, 2011
PROGRAMMATIC EXPENSES, HOMEOWNERS ASSISTED
Programmatic
Expenses

Homeowners
Assisted

Alabama

$7,506,166

1,299

Arizona

$1,011,154

325

California

$38,630,554

4,357

Florida

$15,156,356

3,302

Georgia

$1,795,447

524

Illinois

$4,804,262

539

Indiana

$1,510,656

226

Kentucky

$7,003,585

1,045

Michigan

State

$10,485,488

2,897

Mississippi

$1,332,799

193

Nevada

$3,404,243

682

$218,032

54

North Carolina

$31,718,521

3,685

Ohio

$34,169,125

3,924

Oregon

New Jersey

$36,140,389

4,426

Rhode Island

$6,429,243

1,031

South Carolina

$9,146,929

1,207

Tennessee

$5,259,731

752

Washington, D.C.
Total

$1,704,691

172

$217,427,372

30,640

Note: Numbers affected by rounding.
Source: Quarterly performance data reports, fourth quarter 2011.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

55

Appendix G – HHF Funding Allocations and Amount
Drawdown by HFAs, by State, as of February 2012
AMOUNTS OBLIGATED AND DRAWN
Amount
Obligated

Amount
Drawn

Alabama

$162,521,345

$16,000,000

Arizona

$267,766,006

$21,255,000

California

$1,975,334,096

$217,490,000

Florida

$1,057,839,136

$63,350,000

Georgia

$339,255,819

$38,200,000

Illinois

$445,603,557

$46,500,000

Indiana

$221,694,139

$22,000,000

Kentucky

$148,901,875

$24,000,000

Michigan

$498,605,738

$30,166,175

Mississippi

$101,888,323

$5,094,416

Nevada

$194,026,240

$12,302,000

New Jersey

$300,548,144

$7,513,704

North Carolina

$482,781,786

$78,000,000

Ohio

$570,395,099

$96,100,000

Oregon

$220,042,786

$83,501,070

$79,351,573

$13,000,000

South Carolina

$295,431,547

$30,000,000

Tennessee

$217,315,593

$20,315,593

State

Rhode Island

Washington, D.C.
Total

$20,697,198

$3,834,860

$7,600,000,000

$828,622,818

Source: State HFA Invoice, Treasury, February 2012.

April 12, 2012

F
FACTORS AFFE
ECTING IMPLEM
MENTATION OF THE HARDEST HIT FUND PRO
T
OGRAM

56

A
Append H – HFAs’ Timeline of Pilot and St
dix
H
T
t
tatewide Progr
e
ram
L
Launche and Date First Lar Serv
es,
F
rge
vicer Pa
articipat
tes, as o
of
A
August 1, 2011

S
Sources: Surveys of HHF states on pilot and statewide HHF program lau
o
p
e
unch dates, GSE g
guidance on HHF from October 29, 2010, and surveys of four
s
la
argest servicers (CitiMortgage, Bank of America, Wells Fargo, and JPMorg Chase) on whe they signed up w individual HHF programs.
o
F
gan
en
with

Apr 12, 2012
ril

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

57

Appendix I – State Selection Rankings for Rounds One, Two,
and Three
Round One
HOUSING PRICE DECLINE FROM PEAK, MOST FREQUENTLY IN 2007,
TO 4TH QUARTER 2009
Rank

State

Home Price
Decline

Rank

State
District of
Columbia

Home Price
Decline

1

Nevada

-49.9%

27

2

California

-38.9%

28

Missouri

-5.0%

3

Florida

-37.4%

29

Alaska

-4.9%

4

Arizona

-36.8%

30

Tennessee

-4.7%

5

Michigan

-24.1%

31

Wisconsin

-4.5%

6

Maryland

-19.0%

32

New York

-4.3%

7

Rhode Island

-17.2%

33

Pennsylvania

-4.1%

8

Utah

-16.2%

34

Maine

-3.9%

9

Oregon

-15.5%

35

Vermont

-3.9%

10

Hawaii

-14.5%

36

North Carolina

-3.8%

11

Idaho

-13.6%

37

Indiana

-3.2%

12

Washington

-12.9%

38

West Virginia

-3.1%

13

New Hampshire

-12.7%

39

Arkansas

-2.9%

14

Illinois

-12.3%

40

South Carolina

-2.3%

15

New Jersey

-12.3%

41

Colorado

-1.8%

16

Minnesota

-12.1%

42

Louisiana

-1.5%

17

Massachusetts

-11.8%

43

Nebraska

-1.4%

18

Delaware

-11.5%

44

Alabama

-1.2%

19

Georgia

-11.4%

45

Iowa

-0.9%

20

Virginia

-9.7%

46

North Dakota

-0.7%

21

Connecticut

-9.6%

47

Kentucky

-0.1%

22

Ohio

-7.6%

48

Texas

0%

23

New Mexico

-7.2%

49

Kansas

0%

24

Mississippi

-6.4%

50

Oklahoma

0%

25

Wyoming

-6.3%

51

South Dakota

0%

26

Montana

-6.0%

-5.5%

Source: Treasury. The original array provided by Treasury transposed Michigan and Arizona.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

58

ROUND ONE ALLOCATIONS
Housing Price Decline
Ratio
Housing
Relative
Price
to
Decline from
Largest
Peak
Decline

Unemployment
December
Ratio Relative
2009
to Highest
Unemployment Unemployment
Rate
Rate

Sum of
Ratios
(State’s
Weight)

Number of
Delinquent
Loans in
Q4 2009

Weighted
Number of
Delinquent
Loans

Weighted
Share of
Delinquent
Loans in
These
States

Allocation
($millions)

Nevada

-49.9%

1.00

13.0%

0.89

1.9

62,622

118,382

6.9%

$102.8

California

-38.9%

0.78

12.4%

0.85

1.6

494,640

805,978

46.6%

699.6

Florida

-37.4%

0.75

11.8%

0.81

1.6

309,022

481,558

27.9%

418.0

Arizona

-36.8%

0.74

9.1%

0.62

1.4

105,853

144,073

8.3%

125.1

Michigan

-24.1%

0.48

14.6%

1.00

1.5

120,030

178,000

10.3%

Total

154.5
$1,500.0

Source: Treasury.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

59

Round Two
PERCENTAGE OF STATE POPULATION LIVING IN HIGH-UNEMPLOYMENT COUNTIES

Ranking

State

% of State Population
in High-Unemployment
Counties in 2009

Ranking

State

% of State Population
in High-Unemployment
Counties in 2009

1

Michigan

79%

27

North Dakota

2%

2

Rhode Island

60%

28

New Jersey

2%

3

South Carolina

44%

29

New Mexico

1%

4

Oregon

34%

30

Missouri

1%

5

California

26%

31

Maine

1%

6

North Carolina

25%

32

Louisiana

1%

7

Ohio

22%

33

Minnesota

1%

8

Tennessee

21%

34

Texas

1%

9

Kentucky

19%

35

Pennsylvania

0%

10

Mississippi

18%

36

Colorado

0%

11

Alabama

16%

37

Connecticut

0%

12

Indiana

16%

38

Delaware

0%

13

Florida

12%

39

Hawaii

0%

14

Washington

12%

40

Iowa

0%

15

Georgia

10%

41

Kansas

0%

16

Arizona

7%

42

Massachusetts

0%

17

Alaska

7%

43

Maryland

0%

18

Illinois

6%

44

Nebraska

0%

19

West Virginia

4%

45

20

Nevada

4%

46

New York

0%

21

Idaho

3%

47

Oklahoma

0%

22

Wisconsin

3%

48

Utah

0%

23

Montana

3%

49

Vermont

0%

24

South Dakota

3%

50

Wyoming

0%

51

District of
Columbia

0%

25
26

Virginia

2%

Arkansas

New Hampshire

0%

2%

Source: Treasury.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

60

ROUND TWO ALLOCATIONS
State Totals

State

State
Population in
2009

Population in HighUnemployment*
Counties

Unemployment

Allocation of TARP Funds

% of State
Population in
HighUnemployment
Counties

% of Total
Population in
HighUnemployment*
Counties for
Top 5 States

Allocation
Cap

Rhode Island

1,053,209

627,690

60%

7%

$43,000,000

South Carolina

4,561,242

2,022,492

44%

23%

$138,000,000

Oregon

3,825,657

1,281,675

34%

15%

$88,000,000

North Carolina

9,380,884

2,332,246

25%

27%

$159,000,000

Ohio

11,542,645

2,514,678

22%

29%

$172,000,000

Total

$600,000,000

Source: Treasury, March 29, 2010, Hardest Hit Fund Frequently Asked Questions.
* Treasury defined “high unemployment” as exceeding 12%.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

61

Round Three
AVERAGE UNEMPLOYMENT RATE

Rank
1
2
3
4
5

Average
Unemployment
Rate,
July 2009
through
June 2010

Rank

State

Average
Unemployment
Rate,
July 2009
through
June 2010

a

14.1%

27

Delaware

8.7%

a

13.2%

28

New York

8.7%

a

12.3%

29

Wisconsin

8.6%

b

12.3%

30

Alaska

8.3%

b

12.0%

31

New Mexico

8.2%

a

State
Michigan
Nevada

California
Rhode Island
South Carolina

6

Florida

11.6%

32

Texas

8.2%

7

District of
Columbia

11.2%

33

Maine

8.1%

8

Illinois

10.9%

34

Colorado

7.7%

9

b

10.8%

35

Arkansas

7.6%

10

Alabama

10.8%

36

Minnesota

7.5%

11

b

10.8%

37

Maryland

7.4%

b

10.8%

38

Wyoming

7.2%

13

Mississippi

10.7%

39

Louisiana

7.2%

14

Tennessee

10.7%

40

Virginia

7.0%

15

Kentucky

10.6%

41

Utah

6.9%

16

Georgia

10.2%

42

Hawaii

6.8%

17

Indiana

10.0%

43

Montana

6.8%

18

New Jersey

9.8%

44

Oklahoma

6.8%

19

Missouri

9.5%

45

New
Hampshire

6.7%

20

a

9.4%

46

Kansas

6.7%

21

Washington

9.2%

47

Vermont

6.6%

22

Massachusetts

9.2%

48

Iowa

6.6%

23

Idaho

9.0%

49

Nebraska

4.8%

24

West Virginia

8.9%

50

South Dakota

4.7%

25

Connecticut

8.8%

51

North Dakota

4.1%

26

Pennsylvania

8.8%

12

North Carolina

Oregon

Ohio

Arizona

Note: States marked with a superscript “a” received funding in Round One. States marked with a superscript “b”
received funding in Round Two.
Source: Treasury.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

62

ROUND THREE ALLOCATIONS

Rank

State

Average
Unemployment
Rate,
July 2009
through
June 2010

Population

Share of
Population

Allocation

1

Michigan

14.1

9,969,727

6%

$128,461,559

2

Nevada

13.2

2,643,085

2%

$34,056,581

3

California

12.3

36,961,664

24%

$476,257,070

4

Rhode Island

12.3

1,053,209

1%

$13,570,770

5

South Carolina

12.0

4,561,242

3%

$58,772,347

6

Florida

11.6

18,537,969

12%

$238,864,755

7

District of
Columbia

11.2

599,657

0%

$7,726,678

8

Illinois

10.9

12,910,409

8%

$166,352,726

9

North Carolina

10.8

9,380,884

6%

$120,874,221

10

Alabama

10.8

4,708,708

3%

$60,672,471

11

Oregon

10.8

3,825,657

2%

$49,294,215

12

Ohio

10.8

11,542,645

7%

$148,728,864

13

Mississippi

10.7

2,951,996

2%

$38,036,950

14

Tennessee

10.7

6,296,254

4%

$81,128,260

15

Kentucky

10.6

4,314,113

3%

$55,588,050

16

Georgia

10.2

9,829,211

6%

$126,650,987

17

Indiana

10.0

6,423,113

4%

$82,762,859

18

New Jersey

9.8

8,707,739

6%

$112,200,638

100%

$2,000,000,000

Total
Note: Totals affected by rounding.
Source: Treasury.

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

63

Appendix J – HFA Quarterly Performance Report
Template/Data Dictionary
DATA DICTIONARY (FOR QUARTERLY PERFORMANCE REPORT)* MAY 2011 VERSION
HFA Performance Data Reporting – Borrower Characteristics
The Following Data Points Are To Be Reported in Aggregate for All Programs:
Unique Borrower Count
Number of Unique Borrowers Receiving
Assistance

Total number of unique borrowers having received some form of assistance under
any one of the HFA’s programs. The number of borrowers represented in the other
“Borrower Characteristics” fields should foot to this number.

Number of Unique Borrowers Denied
Assistance

Total number of unique borrowers not receiving assistance under any of the
programs and not withdrawn

Number of Unique Borrowers Withdrawn
from Program

Total number of unique borrowers who do not receive assistance under any
program because of voluntary withdrawal after approval or failure to complete
application despite attempts by the HFA

Number of Unique Borrowers in Process

Total number of unique borrowers who have not been decisioned for any program
and are pending review.

Total Number of Unique Applicants

Total number of unique borrowers. This should be the total of the four above
fields.

Borrower Income
All Categories

At the time of assistance, borrower’s annual income ($) rounded to the nearest
thousand.

Borrower Income as Percent of Area Median Income (AMI)
All Categories

At the time of assistance, borrower’s annual income as a percentage of area
median income.

Geographic Breakdown (by County)
All Categories

Number of aggregate borrowers assisted in each county listed.

Home Mortgage Disclosure Act (HMDA)
Borrower
Race
All Categories

All totals for the aggregate number of borrowers assisted.

Ethnicity
All Categories

All totals for the aggregate number of borrowers assisted.

Sex
All Categories

All totals for the aggregate number of borrowers assisted.
Co-Borrower

Race
All Categories

All totals for the aggregate number of borrowers assisted.

Ethnicity
All Categories

All totals for the aggregate number of borrowers assisted.

Sex
All Categories

All totals for the aggregate number of borrowers assisted.

Hardship
All Categories

All totals for the aggregate number of borrowers assisted.

Current Loan to Value Ratio (LTV)
All Categories

Market loan to value ratio calculated using the unpaid principal balance at the time
of assistance divided by the most current valuation at the time of assistance.

Current Combined Loan to Value Ratio (CLTV)

April 12, 2012

FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

64

Market combined loan to value ratio calculated using the unpaid principal balance
for all first and junior liens at the time of assistance divided by the most current
valuation at the time of assistance.

All Categories
Delinquency Status (%)

Delinquency status at the time of assistance.

All Categories
Household Size

Household size at the time of assistance.

All Categories

HFA Performance Data Reporting – Program Performance
Program Intake/Evaluation
Approved
Number of Applications Approved

The total number of applications approved for assistance for the specific program

% of Total Number of Applications

Total number of applications approved for assistance for the specific program
divided by the total number of applications received for the specific program.

Denied
Number of Applications Denied

The total number of applications denied for assistance for the specific program. A
borrower that has provided the necessary information for consideration for program
assistance, but is not approved for this assistance.

% of Total Number of Applications

Total number of applications denied for assistance for the specific program divided
by the total number of applications received for the specific program.

Withdrawn

Number of Applications Withdrawn

The total number of applications withdrawn from the specific program. A withdrawal
is defined as a borrower who was approved but never received funding, or a
borrower who drops out of the process despite attempts by the HFA to complete
application.

% of Total Number of Applications

Total number of applications for assistance withdrawn for the specific program
divided by the total number of applications received for the specific program.

In Process
Number of Applications In Process

The total number of applications for the specific program that have not been
decisioned and are pending review

% of Total Number of Applications

Total number of applications for the specific program that have not been decisioned
and are pending review divided by the total number of applications received for the
specific program.

Total
Total Number of Applications Received
Number of Borrowers Participating in
Other HFA HHF Programs or Program
Components

Total number of applications received for the specific program (approved, denied,
withdrawn and in process).
Number of households participating in other HFA sponsored HHF programs or
other HHF program components.

Program Characteristics
General Characteristics
Median 1st Lien Housing Payment Before
Assistance

Median first lien housing payment paid by homeowner for all approved applicants
prior to receiving assistance. In other words, the median contractual borrower
payment on their first lien before receiving assistance.

Median 1st Lien Housing Payment After
Assistance

Median first lien housing payment paid by homeowner for after receiving
assistance. In other words, the median contractual first lien payment less HFA
contribution.

Median 2nd Lien Housing Payment
Before Assistance

Median second lien housing payment paid by homeowner for all approved
applicants prior to receiving assistance. In other words, the median contractual
borrower payment on their second lien before receiving assistance.

Median 2nd Lien Housing Payment After
Assistance

Median second lien housing payment paid by homeowner for after receiving
assistance. In other words, the median contractual second lien payment less HFA
contribution.

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Median 1st Lien UPB Before Program
Entry

Median principal balance of all applicants approved for assistance prior to receiving
assistance.

Median 1st Lien UPB After Program Entry

Median principal balance of all applicants approved for assistance after receiving
assistance.

Median 2nd Lien UPB Before Program
Entry

Median second lien principal balance of all applicants approved for assistance prior
to receiving assistance.

Median 2nd Lien UPB After Program
Entry

Median second lien principal balance of all applicants approved for assistance after
receiving assistance.

Median Principal Forgiveness

Median amount of principal forgiveness granted ($). This should only include
extinguished fees in the event that those fees have been capitalized. *Includes
second lien extinguishment.

Median Length of Time Borrower
Receives Assistance

Median length of time a borrower receives on-going assistance (e.g.,
unemployment programs). Please report in months (round up to closest integer).
This only need be reported in the cumulative column.

Median Assistance Amount

Median amount of assistance ($).

Assistance Characteristics
Assistance Provided

Total amount of aggregate assistance provided by the HFA (does not include lender
matching assistance).

Total Lender/Servicer Assistance Amount

Total amount of aggregate assistance provided by the lenders / servicers (does not
include HFA assistance). Lender waiving fees and / or forbearance does not count
towards lender / servicer assistance.

Borrowers Receiving Lender/Servicer
Match (%)

Percent of borrowers receiving lender/servicer match out of the total number of
assisted applicants.

Median Lender/Servicer Assistance per
Borrower

Median lender/servicer matching amount (for borrowers receiving matching)

Other Characteristics
Median Length of Time from Initial
Request to Assistance Granted

Median length of time from initial contact with borrower (general eligibility
determination) to granted assistance. Please report in days (round up to closest
integer).

Current
Number

Number of households current at the time assistance is received.

%

Percent of current households divided by the total number of approved applicants.

Delinquent (30+)
Number

Number of households 30+ days delinquent but less than 60 days delinquent at the
time assistance is received.

%

Percent of 30+ days delinquent but less than 60 days delinquent households
divided by the total number of approved applicants.

Delinquent (60+)
Number

Number of households 60+ days delinquent but less than 90 days delinquent at the
time assistance is received.

%

Percent of 60+ days delinquent but less than 90 Days delinquent households
divided by the total number of approved applicants.

Delinquent (90+)
Number

Number of households 90+ Days delinquent at the time assistance is received.

%

Percent of 90+ days delinquent households divided by the total number of approved
applicants.

Program Outcomes
Borrowers No Longer in the HHF
Program (Program Completion/Transition
or Alternative Outcome)

Number of households who are no longer in the HFA program and reach an
alternative outcome or program completion/transition.

Alternative Outcomes
Foreclosure Sale

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Number

Number of households transitioned out of the HHF program into a foreclosure sale
as an alternative outcome of the program.

%

Percent of transitioned households that resulted in foreclosure.

Cancelled
Number

Number of borrowers who were approved and funded, then were disqualified or
voluntarily withdrew from the program without
re-employment or other intended transition.

%

Percent of transitioned households that were cancelled from the program.

Deed in Lieu
Number

Number of households transitioned out of the HHF program into a deed in lieu as
an alternative outcome of the program.

%

Percent of transitioned households that resulted in deed in lieu.

Short Sale
Number

Number of households transitioned out of the HHF program into a short sale as an
alternative outcome of the program.

%

Percent of transitioned households that resulted in short sale.

Program Completion/Transition
Loan Modification Program
Number

Number of households that transitioned into a loan modification program (such as
the Making Home Affordable Program)

%

Percent of transitioned households entering a loan modification program.

Re-employed/Regain Appropriate Employment Level
Number

Number of households transitioned out of the program due to regaining
employment and/or appropriate levels of employment.

%

Percent of transitioned households that resulted in re-employment or regained
employment levels.

Reinstatement/Current/Payoff
Number

Number of households transitioned out of the program due to reinstating/bringing
loan current or paying off their mortgage loan.

%

Percent of transitioned households that resulted in reinstatement/current or payoff.

Short Sale
Number

Number of households transitioned out of the HHF program into a short sale as the
desired outcome of the program.

%

Percent of transitioned households that resulted in short sale.

Deed in Lieu
Number

Number of households transitioned out of the HHF program into a deed in lieu as
the desired outcome of the program.

%

Percent of transitioned households that resulted in a deed in lieu

Other – Borrower Still Owns Home
ouseholds transitioned out of the HHF program not falling into one of the transition
bove, but still maintaining ownership of the home.

Number

Percent of transitioned households in this category.

%
Homeownership Retention

1

Six Months

Number of households assisted by the program in which the borrower retains
ownership 6 months post initial assistance.

%

Percent of households assisted by the program in which the borrower retains
ownership 6 months post initial assistance divided by the total number of
households assisted by the program 6 months prior to reporting period.

Twelve Months

Number of households assisted by the program in which borrower retains
ownership 12 months post initial assistance.

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%

Percent of households assisted by the program in which the borrower retains
ownership 12 months post initial assistance divided by the total number of
households assisted by the program 12 months prior to reporting period.

Unreachable

Number of homes assisted by the program that are unable to be verified by any
means.

%

Percent of homes assisted by the Program that are unable to be verified by any
means.

Note: 1 Borrower still owns home.
* Information should reflect quarterly activity (e.g., borrowers assisted during the reporting quarter)
Source: Treasury.

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Appendix K – HHF Program Goals by State and Program,
as of December 31, 2011
ALABAMA
Hardest Hit for
Alabama’s Unemployed
Homeowners

Provide mortgage payment assistance to unemployed or underemployed
Alabama homeowners with a chance of sustaining homeownership.

ARIZONA

Permanent Modifications
Component

Second Mortgage
Assistance Component

Unemployment/
Underemployment
Mortgage Assistance
Component

Short Sale Assistance
Component

The central goal of the Permanent Modification Component is to help homeowners
avoid foreclosure by permanently modifying a borrower’s primary mortgage to achieve
a monthly payment that does not exceed 31-32% of the borrower’s monthly income,
depending on the agreement with the servicer. Loan modifications may include
principal reduction (the amount of any principal reduction provided by HHF Program
funds must be matched by a borrower’s lender/servicer), interest rate reduction,
and/or term extension. The Permanent Modification Component aspires to achieve a
ninety percent (90%) success rate in modifying loans with the borrowers’
lenders/servicers.
The goals of the Second Mortgage Assistance Component is to help homeowners
avoid foreclosure by eliminating a second mortgage if necessary to modify the terms
of the primary loan, and to reduce the likelihood that a borrower will re-default under
its primary loan as a result of the burden of a second mortgage.
This program will provide assistance for a set period of time and/or maximum dollar
amount so a qualified borrower can search for adequate work or obtain job training
without fear of losing their home. The purpose of the program is to assist borrowers
until they can obtain sufficient income to resume scheduled mortgage payments, or
qualify for a modified mortgage payment.
• Sustain the unemployed/underemployed borrower’s monthly mortgage payment until
they can or the maximum assistance has been provided
• Maintain the borrower’s contribution towards their monthly mortgage payment at
31% of their current gross monthly income for the duration of the assistance
excluding unemployment benefits.
Short sale assistance was designed to help stabilize communities by providing
assistance to consumers in unrecoverable situations to transition from homeownership
to renting as well as enhance the marketability of short sale properties and accelerate
the stabilization of property value.

CALIFORNIA

Unemployment
Mortgage Assistance
Program

Mortgage Reinstatement
Assistance Program

Principal Reduction
Program

The Transition
Assistance Program

UMA’s goal is to help homeowners remain in their homes and prevent avoidable
foreclosures despite loss of income due to unemployment.
The UMA program will minimize past due payments, and provide a homeowner with
additional time to find alternate employment and replace income needed to make their
mortgage payment.
UMA was designed to assist homeowners who are currently eligible to receive
unemployment benefits.
UMA was designed to complement other loss mitigation programs, including
increasing a homeowner’s eligibility for an extended written forbearance plan and/or
loan modification.
The MRAP program will prevent avoidable foreclosures by helping homeowners
reinstate their past due first mortgage loans.
MRAP will also mitigate the need for large reinstatement dollars to be capitalized with
remaining loan balance, and thus, broaden the population of homeowners who
otherwise may not qualify for modification.
The PRP program will, in cooperation with participating lenders, leverage the HHF
dollars by reducing the principal balances of underwater mortgages and provide an
incentive for qualifying homeowners to remain in their homes during this period of
steep declines in value.
A reduction in principal through PRP can achieve desired income ratios and
affordability for a homeowner on the existing mortgage loan or can be used in
conjunction with a loan modification.
CalHFA MAC envisions that these monies would be used to complement other federal
or lender programs designed specifically to stabilize communities by providing
assistance to homeowners who have suffered a financial hardship and as a result are
no longer financially able to afford their mortgage payments.

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69

The goal of this program is to reduce foreclosures by reducing principal balances, on
qualified amortizing subordinate debt, to those market levels needed to prevent
C2MPRP: Community
avoidable foreclosures and promote sustainable homeownership. The C2M PRP thus
nd
2 Mortgage Principal
provides an incentive for qualifying homeowners to remain in their homes during this
Reduction Program
period of steep declines in value, in situations when existing Making Home Affordable
and CalHFA programs are unable to do so.
Leverage existing neighborhood stabilization efforts in the City by targeting at-risk
borrowers in those neighborhoods most impacted by foreclosures and providing
Los Angeles Housing Department
sustainable loan modifications with affordable payments that include permanent
(“LAHD”) Principal Reduction
principal reduction consistent with the guidelines outlined herein. The Program goals
Program
include maximizing leverage (City grant/Amount of Principal Write down) at 21%, with
a Loan to Value/Combined Loan to Value (LTV, CLTV) ranging from 105% to 125%.
The Program will, in cooperation with participating lenders, provide an option for
NeighborWorks® Sacramento
borrowers to remain in their homes after efforts to modify loans have been exhausted.
Short Sale Gateway
The Program goals are to prevent dislocation of households, prevent the creation of
Program
vacant units and return borrowers to successful homeownership.

FLORIDA
Unemployment Mortgage
Assistance Program
Mortgage Loan
Reinstatement Program

• Preserving homeownership.
• Protecting home values.
• Preserving homeownership.
• Protecting home values.

GEORGIA

Mortgage Payment
Assistance (MPA)

The goal is to provide assistance over the next 5 years to 18,300 homeowners to
prevent foreclosures. Mortgage Payment Assistance (MPA) will be provided as
follows:
Short-Term Assistance
Monthly mortgage payments to assist unemployed or substantially under-employed
homeowners while they look for a new job.
Reinstatement Assistance
One-time payment for homeowners who have found a new job and can make ongoing
payments, but need help to bring their mortgage current and avoid foreclosure due to
arrearages accumulated during a period of unemployment or substantial
underemployment.

ILLINOIS
Hardest Hit Fund
Homeowner Emergency
Loan Program (HHF
HELP)
Mortgage Resolution
Fund Program (MRF)

The goal of the Program is to assist homeowners who have experienced an income
reduction due to unemployment or underemployment with Monthly Mortgage Payment
Assistance and Reinstatement Assistance that will allow them to pursue sustainable
income and homeownership without the immediate threat of default or foreclosure.
The MRF Program aims to keep families in their homes or provide families with
support for an orderly property disposition and transition to new housing, which will
help to stabilize neighborhoods and housing markets.

INDIANA
Hardest Hit Fund
Unemployment Bridge
Program

The goal of the UBP is to cover a portion of PITI for eligible unemployed homeowners,
allowing them to:
1) Secure re-employment in their occupation; or
2) Access training made available through the Indiana Department of Workforce
Development that will help them secure employment in a new occupation.

KENTUCKY
Kentucky Unemployment
Bridge Program

To prevent avoidable foreclosure for homeowners who have experienced loss of
income due to unemployment or substantial underemployment by providing funds to
reinstate, pay the household’s mortgage payments during the period of
unemployment/underemployment and for two months after reemployment, if needed,
up to the maximum dollar threshold for assistance of $25,000.

MICHIGAN
Principal Curtailment
Program

The Principal Curtailment will prevent avoidable foreclosures by helping homeowners
who currently cannot refinance or modify their mortgages due to negative equity
positions. Homeowners will benefit from both a restructured loan payment and the
reduction in principal balance, reducing monthly payments and increasing
sustainability.

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Loan Rescue Program

Unemployment Mortgage
Subsidy Program

70

This program will prevent avoidable foreclosures by putting homeowners, who
otherwise are on the brink of foreclosure, but can now afford to sustain
homeownership, back on solid footing without increasing their indebtedness. In so
doing, the program will stem the oversupply of foreclosed homes and short sales that
dominate many markets and help stabilize the broader housing market in Michigan.
Provide mortgage payment assistance to Michigan unemployed residents, helping
them remain successful with homeownership.

MISSISSIPPI
Home Saver Program

The goal of the HSP is to provide borrowers the time necessary to improve their
chances of finding a job that pays them enough to cover their monthly mortgage
payments.

NEVADA
Principal Reduction
Program
Second Mortgage
Reduction Plan
Short-Sale Acceleration
Program

Mortgage Assistance
Program (MAP)

The primary goal is to reduce first mortgage principal balances such that their loan to
value ratios are reduced and correspondingly, the PITI payment reduced to 43% or
less of the homeowner’s gross income.
The expected outcome of this program is to assist up to 2,200 families remove the
impediment of a second lien on their property such that either a short sale, refinancing
or first mortgage modification can be carried out and thus prevent a foreclosure.
It is expected that at an $8,025 level of average funding per family assisted up to
1,371 families facing imminent foreclosure threat, will have the burden of their home
mortgage eliminated and the threats of a default judgment removed.
The MAP program’s goal is to increase the probability that a borrower and/or
recipient’s family has a stronger chance of sustaining homeownership with the
assistance from the HHF program. The enhanced home ownership through reemployment and job maintenance should decrease both the numbers and probability
of foreclosures.

NEW JERSEY

New Jersey Homekeeper
Program (NJHK)

The goal of the NJHK Program is to promote neighborhood stability in New Jersey
communities by providing assistance with mortgage arrears and mortgage payments
to eligible homeowners who, through no fault of their own, are in danger of foreclosure
due to a temporary loss of employment or unexpected substantial underemployment
and are in the process of seeking work or job training that will enable them to resume
making their mortgage payments in full.

NORTH CAROLINA

Mortgage Payment
Program (MPP-1)

Mortgage Payment
Program (MPP-2)

Second Mortgage
Refinance Program
(SMRP)

Permanent Loan
Modification Program
(PLMP)

To assist 5,750 homeowners over the next 3 years. The following types of assistance
will be provided:
Job Search or Short-term Assistance
To help homeowners while they look for a new job.
Job Training or Long-term Assistance
To help homeowners while they complete a job training/education program to help
secure a new job.
Reinstatement Only or One-time Assistance
To help homeowners who have found a new job but need help to bring their mortgage
current.
To assist 14,100 homeowners over the next 5 years. The following types of assistance
will be provided:
Job Search or Short-term Assistance
To help homeowners while they look for a new job.
Job Training or Long-term Assistance
To help homeowners while they complete a job training/education program to help
secure a new job.
Reinstatement Only or One-time Assistance
To help homeowners who have found a new job but need help to bring their mortgage
current due to arrearages accumulated during a period of unemployment.
To assist 2,000 homeowners facing foreclosure in all 100 North Carolina counties.
The goal of this program is to extinguish the existing second mortgage and replace it
with a 0%-interest, non-recourse, deferred-payment subordinate loan. This will reduce
the borrower’s monthly mortgage payment and in some instances may expedite
movement of a qualified applicant into a HAMP first mortgage modification process.
To assist 440 homeowners facing foreclosure.
The goal of the program is to decrease the number of home owners losing their
homes to foreclosure. Secondary goals include stabilization of neighborhoods and
protecting home values of surrounding properties.
This program will provide immediate mortgage payment relief and stable long term
mortgage payments for the life of the loan.

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OHIO
Rescue Payment
Assistance Program
Mortgage Payment
Assistance Program
Modification with
Contribution Assistance
Program
Lien Elimination
Assistance
Transition Assistance
Program

Short Refinance
Program

The goal of this program is to prevent avoidable foreclosure for homeowners who
have experienced a temporary hardship by reinstating their past due first mortgage
loans.
The goal of MPA is to help unemployed and/or underemployed homeowners remain in
their homes and make on-time, monthly payments on their mortgages so that they
may avoid delinquency and foreclosure while seeking regular employment or applying
for a mortgage modification.
The goal of this program is to help stabilize the Ohio housing market by helping
homeowners achieve affordable modifications.
The goals of LEA are to:
• Help homeowners to achieve an affordable monthly payment; and
• Reduce the probability of re-default after the lien elimination.
The goal of TA is to allow homeowners to achieve a graceful exit from their current
situation and avoid foreclosure.
The goals of the Program are to:
• Help homeowners obtain mortgage loan refinances to lower their monthly loan
payment;
• Provide assistance to homeowners who may not be eligible for a traditional
modification but cannot refinance due to a decline in their home’s value; and
• Reduce the number of homeowners with negative equity.

OREGON
Loan Modification
Assistance Program
Mortgage Payment
Assistance Program

Loan Preservation
Assistance Program
Transition Assistance
Program
Loan Refinancing
Assistance Pilot Project

To provide a quick infusion of funds that will allow for a successful loan modification.
Without these additional funds, homeowners would be ineligible for modification.
The assistance provided by the Mortgage Payment Assistance Program will allow
qualified borrowers to search for work or obtain job training without fear of losing their
home. The purpose of this program is to assist borrowers until they can obtain
sufficient income to resume scheduled mortgage payments or qualify for a modified
mortgage payment.
To provide homeowners experiencing unemployment or financial distress the
opportunity to pay arrearages and bring delinquent loans current. The program will
preserve and/or maintain an existing loan and reduce risk of imminent foreclosure.
To provide funds to financially distressed borrowers so they may be able to find
affordable housing while avoiding foreclosure. Additionally, funds will serve as an
incentive to maintain the home’s condition prior to turning it over to a lender/servicer.
The Loan Refinancing Assistance Pilot Project’s goals are to assist homeowners
escape acute negative equity situations, help to slow the ongoing decline in property
value, and provide approved homeowners with reliable, affordable, sustainable
mortgages.

RHODE ISLAND
Loan Modification
Assistance for HAMP
Customers (LMA-HAMP)
Loan Modification
Assistance for NonHAMP Customers (LMANon-HAMP)
Temporary and
Immediate Homeowner
Assistance (TIHA)
Moving Forward
Assistance
Mortgage Payment
Assistance Unemployment Program
(MPA-UP)

To help Rhode Island homeowners who cannot qualify for a HAMP modification
because they do not have sufficient resources to achieve HAMP requirements.
This program is designed to help stabilize Rhode Island homeowners and help them
achieve an affordable modification. This assistance will, at a minimum, temporarily
adjust a homeowner’s payment to an affordable level for a 12 month period.
To help a homeowner avoid foreclosure when faced with temporary or immediate
crisis.
Rhode Island Housing envisions that these monies would be used to complement
other federal or lender programs designed specifically to stabilize communities by
providing assistance to borrowers who have suffered a financial hardship and as a
result are no longer financially able to stay in their home.
To assist unemployed and substantially underemployed homeowners to remain in
their homes and make on-time, monthly payments on their mortgages during their
hardship so that they may avoid delinquency and foreclosure; and to help stabilize
homeowners so that they can obtain a sustainable loan modification, if necessary,
after they have regained full employment.

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

Principal Reduction
Program

72

Leverage HHF dollars by reducing the principal balances of “underwater mortgages”
(specifically mortgages for which the mark-to-market LTV is greater than 115%) and
provide financial assistance to qualifying homeowners to remain in their homes during
this period of steep declines in value.
A reduction in principal can achieve desired income and loan-to-value ratios that result
in an affordable payment for a customer on the existing mortgage loan or can be used
in conjunction with a loan modification.

SOUTH CAROLINA
Monthly Payment
Assistance Program
Direct Loan Assistance
Program
HAMP Assistance
Program
Property Disposition
Assistance Program

To bridge eligible borrowers across a gap in employment or other reduction in income,
and allow them to stay current on their mortgages.
To help borrowers become current on their mortgage during or following a brief
interruption or reduction in income and to ensure long-term affordability.
To provide limited funding to help borrowers become eligible for HAMP.
To assist borrowers in unrecoverable situations in transitioning from homeownership
to rental housing.

TENNESSEE
Hardest Hit Fund
Program (HHFP)

To assist unemployed, or substantially underemployed, homeowners to remain in their
homes and make monthly payments on their mortgages and mortgage related
expenses such as property taxes, homeowner insurance, homeowner dues, and/or
past-due mortgage payments (arrearages) so that they may avoid delinquency and
foreclosure.

WASHINGTON, D.C.

HomeSaver Program

Foreclosure prevention – The primary goal of the HomeSaver Program is to prevent
foreclosures that will erode the base of homeowners in the city, which already lags
behind the national average in the rate of homeownership.
Synergistic interaction – The DCHFA will partner with other organizations (i.e.
DOES and the Urban Institute) to define the universe of potential candidates for the
HomeSaver Program, perform outreach and intake, and ultimately deliver timely
assistance to prevent foreclosure. DOES is the District agency that administers the
city’s UI and job training programs. The Urban Institute (the Institute) has conducted
extensive research into housing issues in DC including mortgage delinquencies and
foreclosures. The Urban Institute gathers data, conducts research, evaluates
programs, offers technical assistance overseas, and educates Americans on social
and economic issues – to foster sound public policy and effective government.
Simplicity – The DCHFA will employ a HomeSaver Program design that seeks to
minimize administrative costs thereby maximizing the amount of dollars available for
assistance.

Source: HFA Participation Agreements as of December 31, 2011.

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A
Append L – Management Commen
dix
M
C
nts

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Appendix M – Audit Team Members
This audit was conducted and the report was prepared under the direction of Kurt Hyde, Deputy Inspector
General for Audit and Evaluation, and Kimberley A. Caprio, Assistant Deputy Special Inspector General for
Audit and Evaluation, Office of the Special Inspector General for the Troubled Asset Relief Program.
Staff members who conducted the audit and contributed to the report include Anita Visser, Brenda James,
Clayton W. Boyce, Sarah Reed, Beth Preiss, Carol Placek, and Adam Tabaka.

April 12, 2012

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