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UB LE DA OG RA TRO M L SP E C INSPE TOR GEN E RA AL CI S S E T R E LI E F P R SIGTARP Office of the Special Inspector General for the Troubled Asset Relief Program Advancing Economic Stability Through Transparency, Coordinated Oversight, and Robust Enforcement Quarterly Report to Congress April 29, 2015 MISSION SIGTARP’s mission is to advance economic stability by promoting the efficiency and effectiveness of TARP management, through transparency, through coordinated oversight, and through robust enforcement against those, whether inside or outside of Government, who waste, steal or abuse TARP funds. STATUTORY AUTHORITY SIGTARP was established by Section 121 of the Emergency Economic Stabilization Act of 2008 (“EESA”), as amended by the Special Inspector General for the Troubled Asset Relief Program Act of 2009 (“SIGTARP Act”). Under EESA and the SIGTARP Act, the Special Inspector General has the duty, among other things, to conduct, supervise and coordinate audits and investigations of any actions taken under the Troubled Asset Relief Program (“TARP”) or as deemed appropriate by the Special Inspector General. In carrying out those duties, SIGTARP has the authority set forth in Section 6 of the Inspector General Act of 1978, including the power to issue subpoenas. Office of the Special Inspector General for the Troubled Asset Relief Program General Telephone: 202.622.1419 Hotline: 877.SIG.2009 SIGTARP@treasury.gov www.SIGTARP.gov M SP E L SIGTARP’s five-year investigation of UCB illustrates what it takes, and how long it takes to successfully investigate a massive fraud scheme inside a TARP bank, no small feat for an office created six years ago, and charged with finding a new kind of crime. These convictions reflect a turning point in SIGTARP’s ability to make significant headway in investigating TARP bankers—our most difficult type of investigation. Early on, SIGTARP has been successful in investigating crime by borrowers against TARP banks, crimes related to HAMP, and banks that unsuccessfully applied for TARP. It has been a much harder road to bring results against TARP bank officers where the fraud is concealed, and the TARP capital covers losses that would otherwise be exposed. While it took time, SIGTARP honed our expertise in finding crime inside a TARP bank. Since the beginning of 2013, SIGTARP has produced criminal charges against 29 TARP bankers as we gained greater expertise to find and unravel fraud at TARP banks even with no whistleblower or regulatory referral. We expect this number to rise significantly. Our ability to make a difference through a combination of audits and investigations has grown stronger with time. In this report, we identify the states where HAMP has underserved homeowners. We are leaving TARP and the financial system safer than we found it. We have much more we can do and must do. There is more to come. DA OG RA Significant criminal prosecutions from a young agency are not the norm. SIGTARP investigations combined with the difference we have been able to make through audits, other reports, and recommendations have protected taxpayers. SIGTARP nears a significant milestone, with 99 defendants we investigated sentenced to prison. With 52 additional convicted defendants awaiting sentencing, we expect that to rise. There have been 250 defendants we investigated charged with a crime. SIGTARP has escalated its efforts tenfold to recover funds lost to TARP crime, with $1.58 billion already recovered. CHRISTY L. ROMERO Special Inspector General C INSPE TOR GEN E RA UB LE Over the last six weeks, the Office of the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”) took action to protect TARP by publishing audit findings and nine recommendations over Treasury’s use of $372 million in TARP dollars to demolish vacant houses, and by obtaining two critical victories in SIGTARP’s fight against TARP-bailout related crime when two trials ended with both juries convicting a TARP bank officer. As we found in our audit, by keeping itelf in the dark about key decisions and activities in TARP blight elimination, Treasury is leaving the success of a TARP program to chance and losing opportunities to see how it can help the states and ensure the most effective use of TARP. We also found that Treasury has not taken a risk-based approach and does not have or monitor the contracts and subcontracts for which TARP funds are the source of payment, nor do the states. After a six-week trial, a jury found Ebrahaim Shabudin, senior officer of TARP-bank United Commercial Bank, guilty of fraud in, as described by the DOJ, “one of the largest criminal prosecutions brought by the [DOJ] of wrongdoing by bank officers arising out of the 2008 financial crisis.” This, with convictions of UCB officers Thomas Yu and Craig On, came after five years of SIGTARP and our partners unravelling a hidden financial fraud scheme. UCB was the 9th largest bank to fail, the first TARP bank to fail, causing a $300 million loss to TARP, and a $677 million loss to the FDIC. Also, after a five-day trial, a jury found David Weimert, senior officer of TARP-recipient AnchorBank, guilty of fraud. Respectfully, AL TRO Message from the Special Inspector General CI S S E T R E LI E F P R CONTENTS Executive Summary 3 The Evolution of SIGTARP During the Early Years 2009 through Mid-2012 10 SIGTARP’s Evolution Mid-2012 through Present 12 Section 1 THE OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR THE TROUBLED ASSET RELIEF PROGRAM SIGTARP Creation and Statutory Authority The SIGTARP Organization SIGTARP Oversight Activities Section 2 SIGTARP RECOMMENDATIONS Recommendations Concerning TARP’s Housing Programs Recommendations on the TARP HHF Blight Elimination Program Recommendations on HAMP Servicing Transfers 19 21 21 22 71 73 74 77 Section 3 TREASURY’S OPPORTUNITY TO INCREASE HAMP’S EFFECTIVENESS BY REACHING MORE HOMEOWNERS IN STATES UNDERSERVED BY HAMP 109 Introduction 111 HAMP Has Underserved Homeowners in Certain States 113 Homeowners in the States Most Underserved by HAMP Have Low HAMP Application Rates 114 Treasury Needs to do Much More to Reach HAMP-Eligible Homeowners in the States Most Underserved by HAMP 115 Section 4 TARP OVERVIEW TARP Funds Update TARP Programs Update Cost Estimates TARP Programs Housing Support Programs Financial Institution Support Programs Automotive Industry Support Programs Asset Support Programs Section 5 TARP OPERATIONS AND ADMINISTRATION TARP Administrative and Program Operating Expenditures Financial Agents Endnotes 123 125 128 129 131 136 259 323 329 331 333 334 346 APPENDICES A. Glossary B. Acronyms and Abbreviations C. Reporting Requirements D. Transaction Detail E. Debt Agreements, Equity Agreements, and Dividend/Interest Payments F. Cross-Reference of Report to the Inspector General Act of 1978 G. Public Announcements of Audits H. Key Oversight Reports and Testimony I. Peer Review Results J. Organizational Chart K. Correspondence 366 369 371 375 538 542 543 544 546 547 548 EXECUTIVE SUMMARY 4 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Over the last six weeks, SIGTARP took action to protect TARP by publishing audit findings and recommendations over Treasury’s use of TARP dollars to demolish vacant houses and by obtaining two critical victories in SIGTARP’s law enforcement fight against TARP-bailout related crime when two trials ended with both juries convicting a TARP bank officer investigated by SIGTARP. Last month, on March 26, 2015, after a six-week trial, a Federal jury found Ebrahaim Shabudin, a senior officer of TARP-recipient United Commercial Bank (UCB), guilty on all counts in “one of the largest criminal prosecutions brought by the Department of Justice of wrongdoing by bank officers arising out of the 2008 financial crisis,” (as described by the DOJ). Shabudin’s conviction with the criminal convictions by guilty plea of UCB officers including Senior Vice President Thomas Yu and CFO Craig On, came after five years of SIGTARP and our law enforcement partners finding and unravelling a hidden financial fraud scheme piece by piece. Our hard and careful work paid off as we gained expertise during those years, learning how best to uncover and expose a fraud scheme at a TARP-recipient bank with a magnitude of losses exceeding half a billion dollars. UCB was the first TARP bank to fail, and the ninth largest bank to fail since 2007, causing a loss of more than $300 million in TARP, and a $677 million loss to the FDIC. The following week, on April 3, 2015, after a five-day trial, another federal jury found David Weimert, senior officer of TARP-recipient AnchorBank, guilty of five counts of fraud, another critical victory in SIGTARP’s fight against TARP-bailout related crime. SIGTARP’s five-year investigation of UCB illustrates what it takes, and how long it takes, to investigate a massive fraud scheme inside a TARP bank with success, no small feat for an office created just six years ago, and charged with finding a new kind of crime in a constantly-evolving Government program. Weimert’s fraud was much smaller compared to the fraud at UCB, but it still took years to investigate and prosecute. We at SIGTARP cannot allow a TARP banker to get away with a crime that hurt the bank, no matter the size. These two TARP bankers’ convictions reflect a turning point in SIGTARP’s ability to make significant headway in investigating and aiding the prosecution of officers inside banks that received TARP funds — our most difficult type of investigation. The time it has taken to bring these types of prosecutions should not be surprising given that SIGTARP first had to define TARP-related crime. That definition expanded and evolved as TARP expanded into multiple industries and as those committing crime found new opportunities to do so. Beginning in our early years, SIGTARP has been very successful in investigating crime by bank borrowers against TARP banks (often reported by victim banks), crimes related to TARP’s housing program HAMP (often reported by victim homeowners or referred by Treasury), and banks that unsuccessfully applied for TARP (that may have high charge offs, be included on the FDIC problem bank list, or fail). Unlike other TARP-related crime, it has been a much harder road for SIGTARP to bring results against TARP bank officers where the fraud is concealed under 5 6 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM layer upon layer of secrecy, and the bank often looks healthier than it is because the TARP capital covers losses that would otherwise be exposed. While it took time, SIGTARP honed our expertise in finding crime inside a TARP bank. Since fiscal year 2013, SIGTARP has produced more results with criminal charges against 29 TARP bankers as we gained greater expertise with each case, leading us to find and unravel fraud at TARP banks even with no whistleblower or regulatory referral. We have gotten smarter about how to look behind false books by learning with each bank case how insiders at banks conceal their crime. Significant criminal prosecutions from a young agency are not the norm. SIGTARP investigations combined with the difference we have been able to make by bringing transparency and improvements to TARP through audit reports, other reports, and recommendations have protected taxpayers. SIGTARP has always used a combination of audits and investigations to protect TARP for taxpayers. Protecting the more than $450 billion bailout dollars in 13 different TARP programs, and enforcing the law, is a daunting challenge that those of us at SIGTARP accepted. We accepted that challenge the only way we knew how, by first getting smart about these new out-of-the-ordinary programs spanning different industries, recommending ways to reduce vulnerabilities, and conducting criminal investigations where fraud seeped in. This continues today. As Treasury actively disburses $372 million in TARP to six states for the demolition of vacant houses, SIGTARP is protecting taxpayers and conducting oversight. SIGTARP published an audit showing how Treasury has designed the program so that much of the decision making is in the hands of city or county/land banks/ non-profit or for-profit partners that are unknown to Treasury and whose decisions are unknown to Treasury. SIGTARP made nine recommendations to Treasury to increase the effectiveness of this use of TARP funds. SIGTARP also announced a new audit to assess risk factors that could impact the program’s effectiveness. By raising these recommendations and risk factors early, SIGTARP is acting to strengthen this TARP program’s effectiveness and protect it from fraud, waste, and abuse. 99 defendants investigated by SIGTARP sentenced to prison for their crimes related to the Government’s response to the financial crisis known as TARP. This month, SIGTARP nears a significant milestone, with 99 defendants who were investigated by SIGTARP sentenced to prison for their crimes, all of which are crimes related to TARP, the Government’s response to the financial crisis. Sentencing follows years of SIGTARP’s investigation and criminal prosecution. With 52 additional defendants investigated by SIGTARP already convicted and awaiting court sentencing, we expect that number to rise. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE ES.1 INCREASE IN DEFENDANTS INVESTIGATED BY SIGTARP WHO WERE SENTENCED TO PRISON (CUMULATIVE) 100 99 90 87 80 70 65 60 50 40 35 30 19 20 10 0 1 2009 +2 3 2010 +16 +16 2011 +30 2012 +22 2013 +12 2014 April 2015 The convictions of 178 defendants, 99 of which have already been sentenced by courts to prison, showcase the difference SIGTARP can make, after only six years, by combining forces with the DOJ and other law enforcement partners. As a law enforcement team standing firm together against bailout-related crime, we are getting better and better at bringing more accountability and justice to reprehensible crimes related to the Government’s extraordinary action and funded by taxpayers in TARP. SIGTARP desires constant improvement, always acting with a sense of urgency. That sense of urgency has led SIGTARP to gain in expertise and momentum in finding complex crimes never meant to be seen, and painstakingly gathering the evidence needed to prosecute those committing the crimes. We are applying that same grit to find and investigate crime inside TARP banks. SIGTARP has much more to do in the fight against TARP-bailout related crime, particularly investigating crime inside TARP banks and supporting prosecutions of TARP bankers. SIGTARP has much more to do in the fight against TARP bailout-related crime. We are only on the cusp of bringing justice through prosecutions in our highest priority cases — crime inside TARP banks, like UCB. Only 6 of the 99 defendants sentenced to prison so far are TARP bankers (along with four of their coconspirators). SIGTARP faced a steep learning curve to find crime inside of banks because unlike the Savings and Loan crisis, where investigators received thousands of referrals from regulators to develop patterns and criminal clues, whistleblowers were not calling and regulators were not referring TARP banks to law enforcement. SIGTARP expects the number of TARP bankers committing crime who will be sentenced to prison to rise significantly over the next years. Figure ES.2 shows SIGTARP’s escalating ability to investigate crime by TARP bankers to the point where prosecutors bring criminal charges. 7 8 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE ES.2 TARP RECIPIENT BANKERS CRIMINALLY CHARGED RESULTING FROM A SIGTARP INVESTIGATION (CUMULATIVE) 40 37 35 30 29 25 20 17 15 10 8 8 5 0 0 2009 +0 0 2010 +8 +0 2011 +9 2012 +12 2013 +8 2014 April 2015 FISCAL YEAR So far, 37 TARP bankers investigated by SIGTARP have been charged with a crime, 29 of which have been charged since 2013, evidencing the difficulty in getting these complex cases to prosecution. • No TARP banker investigated by SIGTARP was charged with crimes in fiscal years 2009, 2010, or 2012. In 2011, eight TARP bankers investigated by SIGTARP were charged with crimes, including UCB officers. • During these years, while SIGTARP successfully investigated other TARPrelated crime, we doubled our proactive efforts to find crime inside TARP banks using information we learned from our investigations of banks that applied unsuccessfully for TARP. Since fiscal year 2013, SIGTARP’s effectiveness at finding and unraveling crime inside TARP banks soared, after doubling our efforts, building on expertise gained from earlier cases. • In fiscal year 2013, nine TARP bankers investigated by SIGTARP were charged with a crime. • In fiscal year 2014, 12 additional TARP bankers investigated by SIGTARP were charged with a crime. • In this first half of fiscal year 2015, already an additional eight TARP bankers investigated by SIGTARP were charged with a crime. Criminal charges are the first step to bring justice. SIGTARP works with the end in mind – conviction and sentencing. It is the important role of SIGTARP to ensure that prosecutors have all of the evidence to prove guilt beyond a reasonable doubt. In some cases, such as the case against UCB officer Shahudin, the case will go to a trial. The trial against Shahudin took six weeks, and SIGTARP played an integral part during the trial. Our work supporting prosecutions has been very successful, with escalating results as cases reached the trial stage or guilty plea. As Figure ES.3 shows, 25 of the 37 charged TARP bankers investigated by SIGTARP have already been convicted of their crime, 20 of those convictions happening since 2013. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE ES.3 TARP RECIPIENT BANKERS CONVICTED RESULTING FROM A SIGTARP INVESTIGATION (CUMULATIVE) 30 25 25 20 17 15 10 8 5 5 2 0 0 2010 +2 +3 2011 +3 2012 +9 2013 +8 2014 April 2015 FISCAL YEAR While TARP bank investigations are a high priority, over SIGTARP’s six year journey, our ability to make a difference through a combination of audits and investigations has grown stronger and stronger with time spanning different industries. TARP’s quick and ever-changing evolution required SIGTARP to be nimble, adapting to new TARP programs, assessing and reporting on new vulnerabilities, and enforcing the law, with a three-pronged strategy. • First, SIGTARP learns the intricacies of TARP programs and their industry, to recommend improvements, and to reduce vulnerabilities for fraud, waste, and abuse (making our first recommendation our first week). • Second, we provide never-before-seen transparency to the American public. SIGTARP’s impact gives the public insight into the emergency bailout and informs Congress of SIGTARP’s recommendations to improve and make TARP programs more efficient and less susceptible to losses attributable to fraud, waste, and abuse. • Third, we develop ways to find TARP-related crime, a task that is not easy, and has evolved as the definition of TARP-related crime keeps changing and spans different industries. We rise to the challenge. SIGTARP applies the knowledge gained from earlier investigations and audit work to protect the interests of taxpayers, shareholders, communities, and the broader financial system. We dig deeper. Our knowledge continues to grow. 9 10 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM THE EVOLUTION OF SIGTARP DURING THE EARLY YEARS 2009 THROUGH MID-2012 SIGTARP audits of the largest TARP investments: With much of SIGTARP’s criminal investigations confidential, SIGTARP’s early years, 2009 through 2012, were publicly marked by significant audit work that brought transparency and oversight over Treasury’s and Federal regulator’s decisions. This included, for example, audits covering decisions to allow for payments of 100 cents on the dollar to AIG’s counterparties, and to reduce GM’s and Chrysler’s dealership networks. SIGTARP audit and investigation of Bank of America: SIGTARP published an audit on Treasury and the Federal Reserve’s decision to provide Bank of America with an additional TARP bailout. SIGTARP also investigated misrepresentations that Bank of America’s former CEO and CFO made to the Government about the Merrill Lynch merger to get the additional TARP funds. In 2010, the New York Attorney General sued the CEO and CFO under the Martin Act. SIGTARP audits of, and investigations related to, TARP housing programs: Through these early years of TARP, Treasury rolled out TARP’s two signature housing programs: HAMP and the Hardest Hit Fund. SIGTARP published hardhitting audits of Treasury’s administration of both programs, published a series of recommendations, and testified before Congress. SIGTARP evolved after learning about a new criminal threat related to HAMP’s promise to modify a homeowner’s mortgage to one that was more affordable and sustainable. To lure and trap their prey, con artists, often with a prior criminal record, began despicable “mortgage modification” fraud schemes where they “sold” a service that would guarantee a homeowner’s admission into HAMP. To look legitimate, these scammers used fake Federal seals, fake websites, and fake offices. But the damage was real. They stole millions from homeowners across the U.S. who wanted to apply for HAMP. Swiftly, SIGTARP evolved to counter this threat on a regional basis. For example, one early scheme SIGTARP uncovered involved Howard Shmuckler, a disbarred attorney, who guaranteed homeowners in Maryland and Virginia mortgage modifications in exchange for an upfront fee. Shmuckler performed little if any service in return for the fees, and in many cases, the homeowners’ properties fell into foreclosure. For his crimes, the court sentenced Shmuckler to 7½ years in prison. Talking to victimized homeowners, we learned that some homeowners had learned of the “service” from the internet—which meant that fraudsters could expand their criminal reach to harm victims in all 50 states. We used that knowledge to evolve by negotiating with the nation’s biggest search providers – Google, Yahoo, and Bing – to stop accepting advertising money from those associated with websites bearing the hallmarks of TARP fraud. To help homeowners avoid becoming a victim, SIGTARP disseminated an alert containing SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 the hallmarks of the scheme. We also used forensic skills to find the scams on the internet. SIGTARP Audit and Investigations into the TARP Bank Bailout SIGTARP issued hard-hitting audits on Treasury’s and regulator’s decisions to inject $125 billion in the first nine TARP banks, and to relax criteria for the largest banks to exit TARP. These audits were critical to bring accountability for the Government’s bank bailout decisions. SIGTARP could not prevent TARP money from going out to banks that might be committing fraud because Treasury did not inform SIGTARP of the banks it intended to invest TARP funds, with one exception. When Colonial Bank announced that it had raised the capital Treasury required before receiving TARP funds, SIGTARP alerted Treasury to stop the $553 million approved TARP funds from going to the bank. SIGTARP’s investigation uncovered a $2.9 billion 10-year fraud scheme, putting eight defendants in prison. Most were convicted in early 2011, including Lee Farkas, Chairman of Taylor Bean & Whitaker, who received 30 years behind bars, and his co-conspirator, Colonial Bank officer Cathy Kissick, who got an eight-year prison sentence. SIGTARP also conducted investigations of bank borrowers who defrauded TARP banks when taxpayers were shareholders in the banks through TARP. TARP Applicant Banks As Treasury continued to invest TARP funds in banks, SIGTARP realized the crucial need to bring justice and accountability to any banker that applied for TARP with fraudulent books both to deter future TARP applications laced with fraud and to remove from our precarious financial system those who were willing to commit a crime. Before SIGTARP learned how to best detect and uncover evidence of fraud at TARP banks, we started investigating unsuccessful TARP-applicant banks, such as Colonial Bank. With thousands of banks applying for TARP, and 707 receiving TARP in the first bank bailout, determining which banks to look inside proved difficult. TARP applicant banks initially showed more red flags. Without the TARP capital to help fill holes on their books caused by fraud, losses caused by fraud were exposed. These losses can lead to failure, high charge offs, or the bank ending up on the FDIC’s Problem Bank List. In our investigation of Park Avenue Bank, we learned how bank CEO Charles Antonucci used a round-trip transaction to make it appear to regulators that it had the capital needed for TARP; this led to his conviction. We saw a similar round trip transaction in our investigation of Orion Bank; that led to prison sentences of the CEO Jerry Williams, and two bank officers Thomas Hebble and Angel Guerzon. We learned from our Colonial Bank/ TBW investigation techniques bank officers used to hide a bank’s true financial condition through fraudulent schemes. We applied this new-found expertise to our investigation of TARP-applicant banks including Omni National Bank and FirstCity Bank, and to our investigations of TARP-recipient banks. TARP securities trading program: Treasury rolled out Public-Private Investment Program (PPIP) to unlock frozen trading in mortgage backed securities, by 11 12 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM becoming, through its PPIP money managers, part of the market, buying and selling these securities. SIGTARP issued an audit on the selection of managers for PPIP. SIGTARP also issued additional recommendations to address deficiencies, make trading less vulnerable, prevent money laundering, and avoid illegal conflicts of interest. We brought significant transparency by publishing quarterly what categories of mortgage-backed securities the PPIP funds were buying. Our investigations started with analyzing trade data. SIGTARP’S EVOLUTION MID-2012 THROUGH PRESENT SIGTARP expands its expertise to tackle new vulnerabilities as they arise. SIGTARP’s expertise evolves to cover numerous components of the financial system vulnerable to bank fraud, securities fraud, mortgage scams, or other TARPrelated crime. Each investigation sharpens our knowledge and strengthens our expertise. TARP Housing Programs: SIGTARP continues to investigate mortgage modification fraud related to TARP, evolving our investigative techniques based on what we see. In November 2013, SIGTARP supported the trial that resulted in seven year prison sentences for Christopher Godfrey and Dennis Fischer whose company, “HOPE,” ripped-off thousands of struggling homeowners in all 50 states for more than $4 million by “selling paperwork” virtually identical to the free HAMP applications. In the last two years, SIGTARP made 26 recommendations and issued six reports to make TARP’s housing programs more effective. Many of these recommendations are aimed at improving mortgage servicers’ treatment of homeowners in HAMP. SIGTARP also conducted a criminal investigation of one HAMP mortgage servicer, SunTrust Mortgage, that resulted in a DOJ non-prosecution agreement in July 2014, where SunTrust agreed to significant corporate changes and to pay $320 million to resolve criminal allegations of mail fraud, wire fraud and false statements to Treasury. SIGTARP’s investigation found that SunTrust severely under-resourced and under-funded its HAMP program, placing piles of unopened homeowners’ HAMP applications and paperwork on an office floor that eventually buckled. SunTrust lost homeowners’ documents. SunTrust issued “mass denials” to HAMP applicants and then lied to the Treasury Department. SunTrust made false statements to customers. Some homeowners in HAMP trial modifications saw their homes listed for sale in newspapers. Determined not to let any homeowners become victims to the same type of servicer misconduct, SIGTARP has evolved to use the expertise we gained into the way SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 SunTrust ran its HAMP mortgage servicing to make recommendations to Treasury to improve HAMP. SIGTARP Investigations Related to Mortgage-Backed Securities We knew there would be fraud involving the nearly $20 billion spent on PPIP. We looked; we found it. Following SIGTARP’s investigation with our law enforcement partners, and a jury trial that SIGTARP supported, a Federal court sentenced Jesse Litvak, a former senior trader and managing director at Jefferies, LLC, a global investment-banking firm, to two years in prison. Litvak defrauded Jefferies’ customers in the trading of securities, including making false statements to Treasury’s PPIP manager. The residential mortgage-backed securities market has no exchange, making pricing opaque. On 76 occasions over three years, Litvak lied to customers to either drive up the price they would pay to buy securities or drive down the price they would sell securities. He bragged about his lying in online chats. He even created fake sellers of the securities as a way to mislead them. Litvak committed his crime to boost profits. Jefferies, LLC entered into a non-prosecution agreement with the U.S. Attorney’s Office for the District of Connecticut relating to the firm’s purchase and sale of residential mortgage-backed securities and agreed to pay $25 million. SIGTARP Investigations of TARP-Applicant Banks SIGTARP gains expertise as we learn how to unravel complex fraud schemes hidden within the TARP-applicant banks’ books. After SIGTARP’s investigation of Appalachian Community Bank, the Vice President Adam Teague was sentenced to five years in prison. SIGTARP supported the recent jury trial of Appalachian Community bank officer William Rusty Beamon, Jr. that resulted in a jury finding of guilty; he awaits the court’s sentencing. The President of First Community Bank, Reginald Harper, received a two year prison sentence. With each of these bank cases, SIGTARP evolved its investigative techniques to uncover crime in banks. SIGTARP’s investigation of Bank of Commonwealth, the seventh largest bank to fail in 2011, resulted in a 10-week jury trial. Greedy for aggressive growth, the bank’s former CEO, Edward Woodard, made risky bank loans that violated industry standards and bank policies. He hid loan losses through criminal accounting fraud, covering them with lies to bank examiners. Woodard unsuccessfully tried to use cooked bank books and records to apply for TARP. SIGTARP’s investigation with our law enforcement partners held Woodard and his co-conspirators accountable. The court’s sentencing of four bank officers and their six co-conspirator borrowers to prison — including sentencing the CEO Edward Woodard to 23 years, his son and a bank officer, Troy Brandon Woodard, to eight years, and Vice President Stephen Fields to 17 years — means that these former bank officers will never be in a position to harm a bank again. SIGTARP has been successful uncovering crime at TARP-applicant banks. Twenty-six bankers at TARP-applicant banks have been charged with a crime; 13 14 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 21 were already convicted, while others await trial. In addition, 26 of their coconspirators have been charged with a crime; 25 were convicted and one awaits trial. FIGURE ES.4 TARP APPLICANT BANKERS CRIMINALLY CHARGED RESULTING FROM A SIGTARP INVESTIGATION (CUMULATIVE) 30 26 25 22 20 20 19 15 11 10 5 0 1 +10 2010 +8 2011 +1 2012 +2 2013 +4 2014 April 2015 FISCAL YEAR FIGURE ES.5 TARP APPLICANT BANKERS CONVICTED RESULTING FROM A SIGTARP INVESTIGATION (CUMULATIVE) 25 21 20 19 17 15 13 10 7 5 0 1 2010 +6 +6 2011 +4 2012 +2 2013 +2 2014 April 2015 FISCAL YEAR SIGTARP will continue to support the prosecution of these cases. Crime at banks that received TARP, however, continues to be our highest priority. SIGTARP’s Evolution to Uncover Crime at TARP Banks SIGTARP used the knowledge gained from earlier investigations to learn how best to uncover fraud at banks that received TARP. As a result, our cases involving TARP-recipients and TARP bankers escalated. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 SIGTARP investigations of Bank of America: In 2014, SIGTARP saw two major successes in investigations against Bank of America. The New York Attorney General settled its 2010 lawsuit related to the bank’s false statements made to get additional TARP funds. The bank and its former CEO and CFO agreed to pay $25 million, and the CEO and CFO received 3 year and 18 month industry bans, respectively. In addition, SIGTARP investigated and then supported a four-week jury trial of a case by the U.S. Attorney’s Office for the Southern District of New York against Bank of America for selling thousands of defective loans to Fannie Mae and Freddie Mac under a bank-generated program known as the “Hustle” (which stood for “High Speed Swim Lane” or “HSSL”). The bank generated, for sale, a high volume of mortgages at high speed by removing quality control checks and fraud prevention measures, despite repeated warnings that doing so would yield disastrous results. After the jury found the bank and its executive Rebecca Mairone liable, the court ordered the bank to pay $1.27 billion in civil penalties for defrauding the United States. This order is on appeal. TARP bank officers have also been criminally convicted, following a SIGTARP investigation, including: • • • • • • • • • • • • • • • David Weimert of AnchorBank; Justin Brough of Bank of America; Paul Ryan of Broadway Federal Bank; Christopher Tumbaga of Colorado East Bank and Trust; Brian Harrison and Michael Yancey of Farmer’s Bank & Trust; Darryl Woods of Mainstreet Bank; Matthew Sweet of One Bank & Trust; officers of Pierce Commercial Bank, including: çç Adam Voelker, Jeanette Salsi, Shawn Portmann, and Sonja Lightfoot; Phillip Owen of Superior Bank; Braxton Saddler of TNBank; Wilbur Tate of U.S. Bank; Michael Gesimondo of Washington Mutual/JPMorgan Chase; Jose Martins of Wells Fargo; officers of Wilmington Trust Company, including: çç Brian Bailey, Joseph Terranova, and Peter Hayes; officers of United Commercial Bank, including: çç Craig On, Ebrahim Shabudin, Lauren Tran, and Thomas Yu. Criminal charges that are pending prior to trial against other TARP bank officers investigated by SIGTARP include officers at: Premier Bank, Sonoma Valley Bank, One Bank & Trust, Front Range Bank, and Tifton Banking Company. Looking Forward With each SIGTARP audit and report, we protect additional TARP dollars and TARP programs. That important work has a net positive impact, though the calculation of that benefit is inherently imprecise and its impact is difficult 15 16 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM to measure. With nearly $22 billion remaining to be spent on TARP housing programs, it is critical that SIGTARP continue to protect those programs. In addition, SIGTARP recently created a forensic auditing unit to provide better insight into fraud, waste, and abuse. Through this new tool and the knowledge gained from our investigations, SIGTARP’s recommendations will make TARP and our financial system stronger, similar to the recommendations we made following our SunTrust investigation. SIGTARP will ensure that TARP crime does not pay, and that those responsible pay for their crimes through prison time, and returning money back to victims, including the Government. These escalating criminal results tell a story of how SIGTARP’s ability to make a difference for justice and accountability gets deeper each year. Figure ES.6 demonstrates SIGTARP’s results. FIGURE ES.6 RESULTS FROM RAMP UP OF SIGTARP INVESTIGATIONS (CUMULATIVE) September 2011 September 2012 September 2013 September 2014 April 2015 Criminal charges* 51 109 154 212 250 Convictions (others await trial) 28 71 112 146 178 Prison Sentences (others await sentencing) 19 35 65 87 99 Civil charges 55 84 114 133 133 60 89 93 Banned from Industry *Criminal charges are not evidence of guilt. Because TARP is complex, SIGTARP criminal investigations take time; trials take time; sentencings take time. But holding criminals accountable and deterring future crime is worth it. Sentences in SIGTARP cases average 64 months, compared to the 37 month average for white-collar crime – indicating the complexity, damage, reach, and sophistication of the criminal schemes SIGTARP uncovers. Significantly, 17% of the defendants (17 of 99) sentenced to prison following a SIGTARP investigation received sentences lasting 10 years or more. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE ES.7 AVERAGE PRISON SENTENCES OF DEFENDANTS INVESTIGATED BY SIGTARP (IN MONTHS) 200 176 150 100 64 50 37 National Average Prison Sentence for White Collar Crimes* 0 Defendants SIGTARP Investigated Sentenced to 10+ Years in Prison Average Prison Sentence for Crimes SIGTARP Investigated *U.S. Sentencing Commission 2013 data. SIGTARP has escalated its efforts tenfold to recover funds lost to TARP crime or civil violations of the law, a crucial component of long-term recovery from the crisis. SIGTARP has already helped recover $1.58 billion to the Government and other victims, increasing nearly tenfold since 2012. FIGURE ES.8 TENFOLD INCREASE IN MONEY RECOVERED FROM DEFENDANTS INVESTIGATED BY SIGTARP (CUMULATIVE) Asset Recovery (Millions) 2,000 $1.58B 1,500 $1.468B 1,000 500 $151M 0 $0 2009 2010 +$10M 2011 $186M $161M $151M +$0 +$151M +$25M 2012 +$1.283B 2013 2014 +$14M April 2015 Fiscal Year SIGTARP anticipates even more financial recovery for the Government and other victims. Court-ordered penalties and agreements with the Government resulting from a SIGTARP investigation total approximately $7.40 billion. Having already assisted in the recovery of $1.58 billion of these funds, we will continue to pursue additional recoveries from the remaining $5.82 billion where assets are available. 17 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE ES.9 SIGTARP’S ESCALATED EFFORTS INCREASED MONEY ORDERED/AGREED TO BE PAID (CUMULATIVE) $8,000 $7.38B Asset Recovery (Millions) 18 $7.40B 7,000 6,000 5,000 $4.68B 4,000 $3.89B $4.15B 3,000 2,000 1,000 0 $11M 2009 +$153M $164M 2010 +$3.73B +$261M 2011 +$527M 2012 +$2.7B 2013 +$2M 2014 April 2015 Fiscal Year SIGTARP is committed to fighting fraud and making TARP as efficient and effective as possible. We are leaving TARP and the financial system safer than we found it. We have much more we can do and must do. There is more to come. SECT IO N 1 THE OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR THE TROUBLED ASSET RELIEF PROGRAM 20 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 SIGTARP CREATION AND STATUTORY AUTHORITY The Office of the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”) was created by Section 121 of the Emergency Economic Stabilization Act of 2008 (“EESA”) as amended by the Special Inspector General for the Troubled Asset Relief Program Act of 2009 (“SIGTARP Act”). Under EESA and the SIGTARP Act, SIGTARP has the responsibility, among other things, to conduct, supervise, and coordinate audits and investigations of the purchase, management, and sale of assets under the Troubled Asset Relief Program (“TARP”) or as deemed appropriate by the Special Inspector General. SIGTARP is required to report quarterly to Congress in order to describe SIGTARP’s activities and to provide certain information about TARP over that preceding quarter. EESA gives SIGTARP the authorities listed in Section 6 of the Inspector General Act of 1978, including the power to obtain documents and other information from Federal agencies and to subpoena reports, documents, and other information from persons or entities outside the Government. Under the authorizing provisions of EESA, SIGTARP is to carry out its duties until the Government has sold or transferred all assets and terminated all insurance contracts acquired under TARP. In other words, SIGTARP will remain “on watch” as long as TARP assets remain outstanding. THE SIGTARP ORGANIZATION SIGTARP leverages the resources of other agencies, and, where appropriate and cost-effective, obtains services through SIGTARP’s authority to contract. Staffing and Infrastructure SIGTARP’s headquarters are in Washington, DC, with regional offices in New York City, Los Angeles, San Francisco, and Atlanta. As of March 31, 2015, SIGTARP had 144 employees. The SIGTARP organization chart as of April 21, 2015, can be found in Appendix J, “Organizational Chart.” SIGTARP posts all of its reports, testimony, audits, and contracts on its website, www.sigtarp.gov. From its inception through March 31, 2015, SIGTARP’s website has had more than 61.1 million web “hits,” and there have been more than 5.4 million downloads of SIGTARP’s quarterly reports. The site was redesigned in May 2012. From May 10, 2012, through March 31, 2015, there have been 302,728 page views.i From July 1, 2012, through March 31, 2015, there have been 19,645 downloads of SIGTARP’s quarterly reports.ii i In October 2009, Treasury started to encounter challenges with its web analytics tracking system and as a result, migrated to a new system in January 2010. SIGTARP has calculated the total number of website “hits” reported herein based on three sets of numbers: • Numbers reported to SIGTARP as of September 30, 2009 • Archived numbers provided by Treasury for the period of October through December 2009 • Numbers generated from Treasury’s new system for the period of January 2010 through September 2012 Starting April 1, 2012, another tracking system has been introduced that tracks a different metric, “page views,” which are different than “hits” from the previous system. Moving forward, page views will be the primary metric to gauge use of the website. ii Measurement of quarterly report downloads from SIGTARP’s redesigned website did not begin until July 1, 2012. 21 22 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Budget FIGURE 1.1 SIGTARP FY 2014 ACTUAL SPENDING ($ MILLIONS, PERCENTAGE OF $42.2 MILLION) Other Services $1.5, 4% Advisory Services $2.6 Interagency Agreements $10.2 6% 24% 64% Salaries and Figure 1.1 provides a detailed breakdown of SIGTARP’s fiscal year 2014 actuals, which reflects total spending of $42.2 million. The Consolidated Appropriations Act, 2014 (P.L. 113-76) provided $34.9 million in annual appropriations. The operating budget includes $34.9 million in annual appropriation and carryover of SIGTARP’s remaining no-year funding. Figure 1.2 provides a detailed breakdown of SIGTARP’s fiscal year 2015 operating budget, which reflects a spend plan of $41.9 million. The Consolidated and Further Continuing Appropriations Act, 2015 (P.L. 113-235) provided $34.2 million in annual funds, and SIGTARP’s carryover balances will provide funding for the remainder of SIGTARP’s fiscal year 2015 budget. $27.0 SIGTARP OVERSIGHT ACTIVITIES Travel $0.9, 2% FIGURE 1.2 SIGTARP FY 2015 ENACTED BUDGET ($ MILLIONS, PERCENTAGE OF $41.9 MILLION) Other Services $2.1, 5% Advisory Services $2.4 Interagency Agreements 23% $9.5 Communications with Congress 6% 64% Salaries and $27.0 Travel $0.9, 2% SIGTARP continues to fulfill its oversight role on multiple parallel tracks: investigating allegations of fraud, waste, and abuse related to TARP; conducting oversight over various aspects of TARP and TARP-related programs and activities through 24 published audits and evaluations, and 164 recommendations as of April 29, 2015; and promoting transparency in TARP and the Government’s response to the financial crisis as it relates to TARP. One of the primary functions of SIGTARP is to ensure that members of Congress remain adequately and promptly informed of developments in TARP initiatives and of SIGTARP’s oversight activities. To fulfill that role, the Special Inspector General and her staff meet regularly with and brief members of Congress and Congressional staff. SIGTARP Audit Activity SIGTARP has initiated 32 audits and 6 evaluations since its inception. As of April 29, 2015, SIGTARP has issued 24 reports on audits and evaluations. Among the ongoing audits and evaluations in process are reviews of: (i) Treasury’s and the state housing finance agencies’ implementation and execution of the Hardest Hit Fund; and (ii) the risk factors impacting the effectiveness of Treasury’s Hardest Hit Fund Blight Elimination Program. Recent Audits/Evaluations Released Treasury Should Do Much More To Increase the Effectiveness of the TARP Hardest Hit Fund Blight Elimination Program In order to understand the U.S. Department of the Treasury’s (“Treasury”) role and responsibility in the Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (“Hardest Hit Fund,” or “HHF”) Blight Elimination Program, SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 it is necessary to understand Treasury’s role and history under the Troubled Asset Relief Program (“TARP”) law and with other TARP programs. While stability of the nation’s financial system was the goal of TARP as initially proposed by Treasury, it was not the only worthwhile and necessary purpose or policy goal that Congress requires for Treasury to use TARP funds. Congress requires in the TARP law that the Treasury Secretary use TARP for purposes geared toward, not only the impact of the financial crisis on Wall Street, but on Main Street as well. Congress required in the final TARP law that Treasury use TARP funds to do more than restore stability and liquidity to the financial system, but also to protect home values, life savings, retirement funds, college funds, preserve homeownership, promote jobs and economic growth, and maximize returns to taxpayers. These purposes articulated by Congress in the TARP law are not a list of possible outcomes of TARP programs and investment of TARP dollars, but instead an expectation that Treasury will use TARP programs to achieve these purposes. Treasury’s role and responsibility as the steward over TARP has two equally important parts: (1) ensure that the TARP programs are successful in achieving the applicable TARP purposes required in the TARP law; and (2) ensure that TARP programs and funds are used effectively and efficiently and protected from fraud, waste, and abuse. Throughout TARP’s six years of history, Treasury has not waited until the end of a TARP program to measure progress and success toward the goals set out by Congress for TARP, nor has Treasury left achievement of the TARP goals to chance. Instead, Treasury has worked with regulators and others to set target outcomes early on in TARP programs – what Treasury expected to achieve by using TARP funds. These Treasury-defined target outcomes include targeted improvement in capital levels for banks in the Capital Purchase Program (“CPP”),iii targeted buffer of capital for the largest stress-tested CPP banks,iv a return to profitability and a target dealership structure for General Motors Corporation (“GM”) and Chrysler Group LLC (“Chrysler”),v targeted restructuring of American International Group (“AIG”) including the sale of assets,vi targeted capital for Ally Financial Inc. (“Ally”), formerly known as General Motors Acceptance Corp. (“GMAC Inc.”),vii and a positive return in CPP.viii Treasury did not wait until the end of these TARP programs to measure whether these programs would be successful. Treasury actively measured whether iii See Treasury Press Release, “Statement by Secretary M. Paulson, Jr. on Capital Purchase Program,” 10/20/2008; see Treasury Press Release, “Treasury Releases March Monthly Bank Lending Survey,” 5/15/2009. iv See SIGTARP audit report, “Exiting TARP: Repayments by the Largest Financial Institutions,” issued September 29, 2011; see Treasury Press Release, “Treasury Secretary Tim Geithner’s Written Testimony for Congressional Oversight Panel,” 4/21/2009. v See White House Press Release, “Fact Sheet: Financing Assistance to Facilitate the Restructuring of Auto Manufacturers to Attain Financial Viability,” 12/19/2008; Treasury Secretary Timothy Geithner Op-Ed: “A rescue worth fueling,” 5/31/2011. The op-ed was published on The Washington Post’s website 5/31/2011; see SIGTARP audit report, “Factors Affecting the Decisions of General Motors and Chrysler to Reduce Their Dealership Networks,” issued July 19, 2010. vi See Treasury Press Release, “Treasury to Invest in AIG Restructuring Under the Emergency Economic Stabilization Act,” 11/10/2008. vii See SIGTARP report, “Taxpayers Continue to Own 74% of GMAC (Rebranded as Ally Financial Inc.) from the TARP Bailouts,” issued January 30, 2013; see the Congressional Oversight Panel March Oversight Report, “The Unique Treatment of GMAC Under the TARP,” 3/10/2010. viii See Treasury Press Release, “Written Testimony of Herbert M. Allison, Jr., Assistant Secretary for Financial Stability Domestic Policy Subcommittee of the Oversight and Government Reform Committee,” 12/17/2009. 23 24 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM these TARP programs were on track to achieve the goals set out by Congress in the TARP law. Treasury reported publicly and to Congress on that progress.ix By measuring and reporting on progress, Treasury gained insight into program results that led to Treasury making changes in TARP programs to make them more effective with the end in mind – restored stability and liquidity, and maximized return to shareholders. This was particularly true for the largest TARP institutions. TARP dollars for the largest TARP institutions came with the full support and active involvement of Treasury to ensure success. Treasury was actively involved after investing initial TARP dollars, taking extraordinary action, as SIGTARP has reported, to support the largest banks, the auto manufacturers, AIG, and Ally.x For example, Treasury made additional TARP investments and agreed to guarantee certain losses for Bank of America Corporation and Citigroup Inc. (“Citigroup”),xi dedicated a Treasury Auto Team to the restructuring of Chrysler and GM and funded GM’s bankruptcy with TARP funds,xii invested additional TARP funds to purchase Federal Reserve Bank of New York’s interest in AIG,xiii converted its preferred stock in Citigroup to common stock to strengthen Citigroup’s capital structure,xiv made additional TARP investments and converted its stake in Ally to address capital needs identified in the stress test.xv When Treasury exited each of these large TARP investments, it reported publicly that the use of TARP funds for ix S ee Treasury’s Monthly Report to Congress, “United States Department of the Treasury Section 105(a) Troubled Asset Relief Program Report to Congress for the Period December 1, 2008 to December 31, 2008,” 1/6/2009; Testimony of Treasury Secretary Timothy F. Geithner before the Congressional Oversight Panel, 12/10/2009, www.gpo.gov/fdsys/pkg/CHRG-111shrg55245/pdf/CHRG111shrg55245.pdf, accessed 4/8/2015; Treasury Secretary Timothy F. Geithner Op-Ed: “A rescue worth fueling,” 5/31/2011. The op-ed was published on The Washington Post’s website 5/31/2011; Testimony of Treasury Secretary Timothy F. Geithner before the U.S. House of Representatives Committee on Financial Services, “Oversight of the Federal Government’s Intervention at American International Group,” 3/24/2009, archives.financialservices.house.gov/media/file/hearings/111/111-20.pdf, accessed 4/8/2015; Testimony of Treasury Secretary Timothy F. Geithner before the U.S. House of Representatives Committee on Oversight and Government Reform, 1/27/2010, oversight.house.gov/wp-content/uploads/2012/01/20100127geithner.pdf, accessed 4/8/2015; see Treasury Press Release, “TARP Bank Programs Nearing Profitability after Fifth Third Bancorp Repays $3.4 Billion,” 2/2/2011; see Treasury Press Release, “More than 99 Percent of TARP Disbursements to Banks Now Recovered as Six Financial Institutions Deliver Nearly Half Billion Dollars in Proceeds to Taxpayers,” 3/16/2011; see Treasury Press Release, “TARP Bank Programs Turn Profit After Three Financial Institutions Repay $7.4 Billion,” 3/30/2011. x See SIGTARP’s Quarterly Report to Congress dated January 28, 2015, “The Legacy of TARP’s Bank Bailout Known as the Capital Purchase Program”; see SIGTARP audit report, “Emergency Capital Injections Provided To Support the Viability of Bank of America, Other Major Banks, and the U.S. Financial System,” issued October 5, 2009; see SIGTARP audit report, “Extraordinary Financial Assistance Provided to Citigroup, Inc.” issued January 13, 2011; see SIGTARP audit report, “Exiting TARP: Repayments by the Largest Financial Institutions,” issued September 29, 2011; see SIGTARP audit report, “Factors Affecting the Decisions of General Motors and Chrysler to Reduce their Dealership Networks,” issued July 19, 2010; see SIGTARP audit report, “Treasury’s Role in the Decision for GM To Provide Pension Payments to Delphi Employees,” issued August 15, 2013; see SIGTARP report, “Taxpayers Continue to Own 74% of GMAC (Rebranded as Ally Financial Inc.) from the TARP Bailouts,” issued January 30, 2013; see SIGTARP’S Quarterly Report to Congress dated July 25, 2012, “AIG Remains in TARP as the Largest TARP Investment.” xi S ee SIGTARP audit report, “Extraordinary Financial Assistance Provided to Citigroup, Inc.,” issued January 13, 2011; see Treasury’s Monthly Report to Congress, “United States Department of the Treasury Section 105(a) Troubled Asset Relief Program Report to Congress for the Period December 1, 2008 to December 31, 2008,” 1/6/2009. xii See SIGTARP audit report, “Treasury’s Role in the Decision for GM To Provide Pension Payments to Delphi Employees,” issued August 15, 2013. xiii See Treasury Press Release, “Treasury Department Statement on AIG’s Transaction Agreement,” 12/8/2010. xiv See SIGTARP audit report, “Extraordinary Financial Assistance Provided to Citigroup, Inc.,” issued January 13, 2011; see Treasury Press Release, “Treasury Announces Participation in Citigroup’s Exchange Offering,” 2/27/2009. xv S ee Treasury Press Release, “Treasury Announces Additional Investment in GMAC LLC,” 5/21/2009; see Treasury Press Release, “Treasury Announces Restructuring of Commitment To GMAC,” 12/30/2009. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 these programs successfully achieved the goals in TARP such as stability, liquidity, maximized returns to taxpayers, and the promotion of jobs and economic growth.xvi Homeowners who benefit from TARP housing programs deserve no less from Treasury than the largest TARP recipients, and taxpayers who fund TARP deserve Treasury ensuring the success of TARP programs and the most effective use of taxpayer dollars to achieve success. TARP dollars for homeowners should come with the full support of Treasury to ensure a TARP program’s success. In the Home Affordable Modification Program (“HAMP”), Treasury has not waited until the end of the program to measure effectiveness and progress toward the TARP goals of protecting home values and preserving homeownership. Treasury has been actively involved measuring progress toward those goals. Treasury set a target outcome in HAMP of helping 3 million to 4 million at-risk homeowners avoid foreclosure by reducing monthly payments to sustainable levels.xvii Each quarter, Treasury measures and publicly reports on its progress toward that target outcome. This has given insight to Treasury that led to Treasury making changes to HAMP mid-program including, among other things, extending three times the deadline for homeowners to apply for HAMP, Treasury engaging in outreach, and Treasury paying counselors to help homeowners submit HAMP applications. In addition, although there is more Treasury can do as SIGTARP has recommended, Treasury has made many changes to HAMP in an effort to increase its effectiveness. Unlike what Treasury did in HAMP, Treasury did not set a target outcome with the Hardest Hit Fund, which has led to a lack of accountability, lost opportunities to increase the effectiveness of HHF mid-program, and a significant decrease in the number of homeowners who will receive HHF assistance. SIGTARP reported in April 2012 that HHF faced two years of delays in getting help to homeowners because Treasury did not conduct comprehensive planning, such as setting the target outcome, measuring progress, and then making mid-program changes to ensure success.xviii Treasury rejected SIGTARP’s 2012 recommendation that Treasury set measurable program goals, measure progress against those goals, and make changes needed to the program to reach those goals. As a result, homeowners have suffered. Treasury required participating states to estimate the number of homeowners to be helped, but did not set a target outcome of how many homeowners Treasury wanted to help. As a result, there is no baseline to measure progress. A lack of a baseline does not allow Treasury to escape accountability. With Treasury not setting a target outcome, such as the aggregate number of xvi See Treasury Press Release, “Treasury Department Releases Text of Letter from Secretary Geithner to Hill Leadership on Administration’s Exit Strategy for TARP,” 12/9/2009; see Treasury Press Release, “Treasury Receives $45 Billion Payment from Bank of America,” 12/9/2009; Testimony, “Secretary of the Treasury Timothy F. Geithner Written Testimony before the Congressional Oversight Panel,” 12/10/2009, www.treasury.gov/press-center/press-releases/Pages/tg437.aspx, accessed 4/10/2015; Treasury Secretary Timothy F. Geithner Op-Ed: “A rescue worth fueling,” 5/31/2011. The op-ed was published on The Washington Post’s website 5/31/2011; see Treasury Press Release, “Treasury Prices Sale of Citigroup Subordinated Notes for Proceeds of $894 Million, Providing an Additional Profit for Taxpayers on TARP Citigroup Investment,” 2/5/2013; see Treasury Press Release, “Treasury Sells Final Shares of GM Common Stock,” 12/9/2013; see Treasury’s “Four Year Retrospective Report,” March 2013, www.treasury.gov/initiatives/financial-stability/reports/Documents/TARP%20Four%20Year%20Retrospective%20Report.pdf; Treasury, “Remarks by Treasury Secretary Jacob J. Lew on Conference Call Highlighting Treasury Sale of Its Entire Ally Financial Stake and the Wind Down of TARP,” 12/19/2014; see Treasury Press Release, “Treasury Sells Entire Ally Financial Stake, Taking Total Recovery to $19.6 Billion and Closing Auto Rescue Program,” 12/19/2014. xvii Treasury later clarified that this meant that 3 million to 4 million homeowners will receive offers for a trial modification. See SIGTARP audit report, “Factors Affecting Implementation of the Home Affordable Modification Program,” issued March 25, 2010. xviii S ee SIGTARP audit report, “Factors Affecting Implementation of the Hardest Hit Fund Program,” issued April 12, 2012. 25 26 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM homeowners Treasury wants to help with HHF, the 18 states and the District of Columbia (“19 jurisdictions” or “states”) have collectively reduced by nearly half (44%) with the number of homeowners estimated to be helped, with HHF dropping from 546,562 homeowners in 2011 to 303,386 homeowners, as of September 30, 2014. Treasury has lost opportunities in HHF. Treasury is responsible for HHF not helping as many people as Treasury had expected. If Treasury had worked with each state’s housing finance agency (“HFA”) to set a realistic target outcome of the number of homeowners to be helped in each state, and rolled the number of homeowners into a Treasury target, Treasury could have measured against that target and gained better insight into which states were not meeting their portion of the target. This insight could have shown Treasury which states needed Treasury’s help and resources, or where improvements could have been made. Treasury’s desire to use TARP’s Hardest Hit Fund to seek locally tailored solutions administered by 19 state HFAs does not relieve Treasury of its important responsibilities. The two concepts of Federal responsibility and locally tailored solutions are by no means mutually exclusive. As SIGTARP reported in 2012, a senior Treasury official told SIGTARP: “This is not our program. These are their programs.”xix HHF is not a grant program. It is an investment made by taxpayers nationwide for the nationally important interest in the hardest-hit states.xx Each state has an interest only in its state and has limited resources. Treasury, not each state, has an interest in leveraging each of the 19 state resources with Treasury resources to provide further relief to states that were unable to help homeowners on their own. More is required of Treasury than dollars. Treasury cannot defer its oversight responsibility to anyone to ensure that HHF progresses in the most effective way to achieve the TARP goals of protecting home values and preserving homeownership. Congress put Treasury in charge of TARP, so Treasury must act to fulfill that responsibility. It cannot do that with limited knowledge and limited involvement. SIGTARP is not expressing an opinion as to whether the use of TARP funds for blight elimination activity is an appropriate use of TARP funds, just as SIGTARP has not expressed an opinion on whether any TARP investment was appropriate. Just as it has done with other TARP programs, Treasury should not wait until the end of HHF in December 2017 to measure success toward the goals set out by Congress for TARP, nor should Treasury leave achievement of the TARP goals to chance. Homeowners in the hardest-hit states chosen by Treasury deserve every chance of success, as do taxpayers who are funding this blight elimination. Treasury should follow the same pattern with HHF that Treasury has taken in other TARP programs to gain insight, be actively involved, and take action beyond initial TARP dollars to ensure the TARP funds are used effectively to ensure the program’s success. This includes every use of TARP dollars in HHF, including for demolition xix Treasury, however, has the right to review all press on HHF and HHF blight elimination. xx E ven grant programs need greater Federal oversight. See GAO audit report (GAO-12-34), “Vacant Properties: Growing Number Increases Communities’ Costs and Challenges,” issued November 2011. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 of vacant properties. However, SIGTARP has found that is not what Treasury is doing. First, SIGTARP found that the Hardest Hit Fund Blight Elimination Program is designed in a way that leaves Treasury in the dark on strategies, decisions, and blight elimination activity conducted under HHF and paid for with TARP dollars. Treasury has allowed the state HFAs to place much of the decision making and the actual blight elimination activities in the hands of city or county/land bank/nonprofit/for-profit partners, whose identities are unknown to Treasury, whose activities using TARP funds are unknown to Treasury, whose strategies and decisions on how to execute blight elimination under HHF are unknown to Treasury, that are not under contract with Treasury or even in contact with Treasury, and over which Treasury conducts no oversight. Treasury has very limited knowledge about blight elimination activity being paid for with TARP dollars and taking place under a TARP program. Treasury is not keeping itself informed or gaining insight of critical activities taking place under HHF blight elimination. The city or county/land bank/non-profit/for-profit partners, not the HFAs that contract with Treasury, make the following decisions under HHF: • selection of neighborhoods for demolition; • selection of how much of the vacant residential properties in those neighborhoods should be demolished; • selection of specific properties for demolition; • determination of applicable laws and regulations; • whether to conduct engineering and environmental studies, and determining the presence of any asbestos to comply with applicable laws and regulations; • selection of engineering firms and asbestos-removal contractors necessary to comply with applicable laws and regulations and contracting with those firms; • selection of demolition contractors, greening contractors, maintenance contractors, and contracting with those vendors; and • completion of work as required under the contract. Treasury does not know the outcome of these decisions. Treasury does not know the strategies being employed by city or county/land bank/non-profit/for-profit partners to select neighborhoods, the number of homes to be demolished in each neighborhood, or the properties for blight elimination under HHF. Treasury has very limited knowledge and is not keeping itself informed or gaining insight of critical activities taking place under HHF blight elimination being paid for with TARP dollars. Treasury does not require a detailed accounting on how the TARP funds are spent on blight elimination. Treasury does not know the aggregate number or dollar value of demolition, greening, or other awarded contracts and subcontracts under HHF for blight elimination. Treasury does not know the details of those contracts or subcontracts or even the recipients. SIGTARP found that Treasury does not collect, maintain, or review the contracts for demolition, greening, and maintenance. Treasury’s HHF Program Director told SIGTARP that contract awards are “the state’s business.” However, apparently 27 28 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM state HFA officials believe that contract awards are the city or county land bank’s business. Officials from the two state HFAs that have reported to Treasury that they started demolitions under HHF (Michigan and Ohio) told SIGTARP that they do not collect the contracts and subcontracts. Officials from Ohio’s HFA told SIGTARP that the Ohio HFA “does not collect all documentation pertaining to current and future contracts for the local land banks. We require thorough support documentation, including invoices and proof of payment, for all expenses that are reimbursed with HHF funds.” In another example, the Michigan HFA told SIGTARP that it does not monitor or approve the contracts or even have a listing of the contractors that their land banks or other partners have entered into with external entities. In other words, Treasury does not have or monitor the contracts and subcontracts for which TARP funds are the source of payment, and neither do the states. Treasury and HFA officials told SIGTARP that would require going to each individual partner to obtain the listing of contracts and subcontracts. However, Treasury and the HFAs do not do that. Unlike other blight demolition funds these states may receive, TARP funds are not grant funds and this is not a grant program. Greater knowledge and insight by Treasury of the participants in HHF demolition activities, strategies, and decisions, blight elimination activity, and expenditures do not take away a state’s ability to tailor local solutions.xxi The opposite is true. Treasury’s role as a steward of TARP is more than about money. These states that are still struggling from the crisis need Treasury’s involvement and full support. Being in the dark makes it difficult for Treasury to fulfill its important responsibilities as the steward of TARP. Limited knowledge about strategies, decisions, and blight elimination activity decreases Treasury’s ability to ensure that HHF in this area is on track to success or that states and cities or counties are proceeding with the most effective use of TARP funds. Limited knowledge about strategies, decisions, and blight elimination activity decreases Treasury’s ability to protect against fraud, waste, and abuse, which could diminish the effectiveness of the HHF Blight Elimination Program. Treasury can defer administration of a TARP program to another entity, but Treasury cannot defer its responsibility and oversight under the TARP law to ensure that a TARP program is successful, nor should it because these are the hardest-hit states that Treasury selected to help. Responsibility requires knowledge. Treasury cannot improve what it does not know. Treasury cannot protect what it does not know. Treasury cannot bring transparency to what it does not know. Second, SIGTARP found that Treasury takes a hands-off approach to the HHF Blight Elimination Program and has very limited involvement in the planning or execution of the program. Treasury has not conducted comprehensive planning that could ensure the success of blight elimination under HHF, ensure that TARP funds are spent in xxi Some of these states, such as Michigan, are already used to providing a detailed accounting and additional information on their partners and expenditures for blight elimination activity in non-TARP blight programs, and making that accounting and information public. Some land banks are putting addresses of properties demolished under HHF on their websites. If there is no harm in the public seeing them, then there is no harm in Treasury seeing them. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 the most effective manner, and protect HHF against the risk of fraud, waste, and abuse. Treasury has left much of the planning to the HFAs, which have left much of the planning to the city or county/land bank/non-profit/for-profit partners. Treasury’s only goal is a high-level goal to stabilize neighborhoods and decrease foreclosures, which tie to the goals in the TARP law. SIGTARP recognizes the challenge of using a Federal program to offer local solutions administered by state agencies and Treasury’s desire to give states flexibility because HFAs know best about the problems in their states. However, flexibility should not mean free rein. This challenge can be mitigated by comprehensive planning to ensure that Federal interests and state interests align. The first part of mitigating this challenge is for Treasury to identify its Federal interests to the states in the form of Treasury-defined target outcomes as it has for other TARP programs, rather than let the HFAs or anyone else set the desired outcome for a TARP program. SIGTARP found that, unlike other TARP programs, Treasury has not set target outcomes that it wants the HHF Blight Elimination Program to achieve in order for Treasury to ensure that it will meet the high-level goals of stabilized neighborhoods and decreased foreclosures, instead deferring to each HFA to set the target outcome. Treasury’s HHF Program Director told SIGTARP that Treasury left it up to the states to tell Treasury what the states would point to as showing that TARP funds went to stabilize neighborhoods and decrease foreclosures. Treasury’s HHF Program Director told SIGTARP that it is incumbent on the states “to develop their own means or metrics that will point to success of the program.” Treasury asking states to measure progress toward success is not the same thing as asking states to define success. SIGTARP found that HHF Blight Elimination Program is designed so that the city or county/land bank/non-profit/for-profit partners are responsible for defining the target outcome and measuring their own progress toward that outcome. Treasury’s contracts with state HFAs on blight specifically reference the states will develop performance indicators in connection with the city- or county-level partners. Performance indicators measuring progress are not the same thing as defining what targeted outcome is necessary to ensure that the HHF Blight Elimination Program successfully achieves stabilized home prices and decreased foreclosures. Treasury is relying on the states to set target outcomes. However, the HFAs are not actually setting target outcomes, but instead deferring to the city or county/land bank/non-profit/for-profit partners. Two state HFAs told SIGTARP that they do not have target outcomes, but are deferring to the city or county land banks. Flexibility of states to offer locally tailored solutions should not mean that states or city or county/land bank/non-profit/for-profit partners set the target outcome of a Federal TARP program. It is one thing to have the states and the city and county land banks measure their own success against Treasury’s target outcome, but states, cities, and counties should not define what level of success is expected for a TARP program to achieve its high-level TARP goals. That is Treasury’s responsibility under TARP law and as the Federal agency administering TARP. Treasury did not 29 30 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM ask mortgage servicers to define how many homeowners would receive affordable and sustainable help from HAMP. Treasury did not ask banks to define what level of capital they thought they should hold. Treasury did not ask GM to define how it would be restructured. These were all target outcomes that Treasury set. If Treasury does not set a target outcome for HHF blight elimination, it is leaving the success of a TARP program to chance. This leads to a lack of accountability at the city or county level, state level, and Treasury level. Treasury-defined target outcomes that Treasury expects to achieve does not take away the flexibility of states, but instead gives insight for Treasury and the states into whether improvements can be made to make the HHF Blight Elimination Program more effective as the program progresses. Treasury has an opportunity right now to increase the effectiveness of the program. However, that opportunity will diminish with time, given the fast pace of demolition activity.xxii If Treasury sets target outcomes now, Treasury and the states would then have something to measure progress against to determine if each state is on track. State HFA officials from Michigan and Ohio told SIGTARP that the only goal Treasury has given them is to have the HHF blight money spent by December 31, 2017.xxiii Spending the available TARP money should not be Treasury’s end goal. Just as the high-level goals of each of Treasury’s largest TARP investments were not met upon Treasury investing TARP funds (for example, in banks, auto companies, and AIG), Treasury’s high-level goals to stabilize neighborhoods and decrease foreclosures is not met upon Treasury investing funds for blight elimination. This type of comprehensive planning is not new to Treasury and is a recognized best practice for the Federal Government that does not harm a state’s ability to tailor local solutions that are aligned with Treasury’s target outcomes. Knowing the target outcomes that Treasury is trying to achieve provides a framework for states and cities or counties to make choices that are locally tailored, and are also consistent with Federal objectives. Just as Treasury has worked with regulators and others before to develop target outcomes for TARP programs, Treasury could use its own resources and expertise on economic outcomes in consultation with each of the six participating states to set Treasury-defined target outcomes it wants that are realistic for that state. Some potential target outcomes that Treasury could set using its own expertise and resources and after consultation with states to gain insight as to whether HHF blight elimination is on track for success in each city or county or whether improvements could be made are: • target level of decrease in foreclosures overall for cities and states; • target decrease in vacancy rates in targeted neighborhoods, cities and states; • target level of increases in home values in targeted neighborhoods, cities and states; xxii For example, in the second quarter of 2014, Michigan reported cumulative demolitions of 315 properties, which had increased to 816 the next quarter, and further increased to 1,887 the following quarter. xxiii The only other targeted impact that Treasury wants the states to report on and achieve is to spend a maximum of either $25,000 or $35,000 per property for demolition and greening. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 • target reduction in the percentage of properties with negative equity in targeted neighborhoods, cities and states; and • target reduction in crime rates in targeted neighborhoods, cities and states.xxiv Treasury cannot assume that any amount of demolition of vacant properties in any area of the city or county will result in stabilized home prices and decreased foreclosures. For example, prior to agreeing to allow Michigan to use HHF funds for blight elimination, Treasury’s Economic Policy group conducted an economic analysis to estimate the stabilization of home prices and decrease in foreclosures that would come from demolitions in the City of Detroit, and that analysis assumed that the impact would only be felt within a 200-foot radius of the demolished property. Additionally, the Government Accountability Office (“GAO”) reported that officials in Las Vegas, Nevada, and the surrounding areas told GAO that they were able to acquire a few hundred properties with U.S. Department of Housing and Urban Development (“HUD”) grant funds for blight elimination, as of June 2011, but that this number was not enough to stabilize the neighborhood.xxv Without establishing target outcomes for each state (in consultation with each state), Treasury will not be able to see which states need Treasury’s help or additional oversight to ensure that the HHF Blight Elimination Program is on track for success. The state HFAs do not have the level of expertise and resources of Treasury on economic outcomes. Officials from three state HFAs told SIGTARP that they do not have an economic analysis to serve as a baseline by which they make demolition decisions. For example, a Michigan HFA official told SIGTARP that Treasury has not shared its economic analysis on the impact of demolitions in Detroit with Michigan’s HFA. This is a perfect example of where Treasury could use its significant resources and expertise in consultation with the states to ensure the success of the program. If Treasury through its Economic Policy group can conduct an economic analysis to determine the target outcome of HHF demolition for one city, it can conduct them for others. Treasury could combine its expertise and resources with the states to conduct economic analysis that leads to Treasury setting realistic target outcomes that the states can work towards achieving. The economic analysis that Treasury already conducted for Detroit provides a baseline for Treasury to develop its target outcome. Treasury estimated that demolishing a vacant house and greening the lot in Detroit would lower the default probability of nearby properties by between 0.7 and 1.7 percentage points on average with likely impact on foreclosure rates toward the 1.7 percentage point end. Just as it did for Detroit, Treasury could estimate a decrease in foreclosure rates that it expects to see in each city or county with the HHF Blight Elimination Program and use that to set its target outcome. A Treasury-defined outcome would give Treasury and the states immediate and ongoing insight into ways to xxiv Treasury may have other targeted outcomes it wants to achieve such as one, a certain number of contracts awarded with best value or low cost, timeliness of the demolition and greening work, demolition in low-income or middle-income neighborhoods, demolition in neighborhoods with senior citizens, and demolition in certain areas with high crime or drug rates. xxv See GAO audit report (GAO-12-34), “Vacant Properties: Growing Number Increases Communities’ Costs and Challenges,” issued November 2011. 31 32 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM improve the effectiveness of the HHF Blight Elimination Program as the program progresses. Treasury has not waited until the end of other TARP programs to measure progress and success toward the goals set out by Congress for TARP, but that is what Treasury is doing with HHF blight elimination. With blight elimination, Treasury is only requiring reporting on the number of properties demolished, and the average cost. Demolition is not the end that Treasury should have in mind. It is the outcome of that demolition, not the demolition itself. Neither Treasury nor the HFAs have developed performance indicators or are measuring the impact of demolition, which decreases Treasury’s ability to see areas for improvement to ensure effective use of TARP dollars and success in TARP goals. Treasury’s contract provides that the HFAs will develop performance indicators and measure progress; however, states are deferring to city or county/ land bank/non-profit/for-profit partners. The states can and should develop performance indicators at the start of the program so that performance can be measured as the program progresses, but that has not happened. Michigan, Ohio, and Indiana HFA officials told SIGTARP that the program is too new to identify metrics and performance indicators to measure program effectiveness. For example, one state HFA official told SIGTARP that “it is something that we are set up to do once we’re further into the program.” Officials from Treasury and the HFAs told SIGTARP that progress cannot be measured for a long time, possibly until after the program closes. A Michigan HFA official told SIGTARP that measurement of the progress would be conducted post program. Treasury is aware that the states have not established performance indicators and are not measuring progress of the impact of HHF blight elimination activities. Treasury does not require that the HFAs currently report on progress toward target outcomes or Treasury’s high-level goal of stabilizing neighborhoods and decreasing foreclosures. Treasury does not know when they would require states to develop performance indicators or report on those performance indicators. A Treasury official told SIGTARP that the states will design their own reports to Treasury and will not provide those to Treasury “until the program is further seasoned.” Treasury’s HHF Program Director told SIGTARP that she did not know in the time that Treasury’s HHF program was around that Treasury would see increases in property values. If this is a target outcome that Treasury considers important, then it should make that apparent to the states and set a target for the increase. Treasury is a permanent department and will continue to be around to measure progress. Treasury’s oversight can and should continue well past the expenditure of the HHF funds. Federal funds require steps be taken to ensure program success and protect taxpayers’ investment. It is Treasury’s responsibility to conduct oversight over a TARP program. The best way for Treasury to ensure that these TARP funds are used in the most effective way to stabilize home prices and decrease foreclosures caused by vacant homes is by measuring with short-term feedback. This will allow Treasury to make decisions based on what the HHF Blight Elimination Program is actually doing, not based on a high-level goal Treasury projects about the future with no specificity SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 or targeted approach. It will help Treasury make decisions about how much TARP funding to put toward blight elimination and help decide whether to expand to other states and other cities within states already participating. Measuring backward with short-term feedback can lead to improvements. Treasury decreases its ability to conduct effective oversight without this feedback. While certain indicators of the impact of HHF blight elimination (in combination with other factors) may take time to measure the progress, others do not. For example, if Treasury set a target decrease in foreclosures, two performance indicators that could measure progress could be a specified decrease in mortgage defaults and foreclosure filings in each targeted city or county where HHF blight elimination is conducted, aggregated by state. A zero or very low decrease in the default rate of foreclosure filings of cities or counties that had HHF demolition might indicate that the city or county land bank’s strategy in choosing properties or neighborhoods may not be as effective as it should be. If Treasury set a target increase in home values, states could set performance indicators including measuring the price of home sales on an ongoing basis, measuring home values as determined by local tax authorities annually, and by measuring the number of short sales. No improvement in these indicators within a set period of time might indicate that the city or county land bank’s strategy in choosing properties or neighborhoods may not be effective as it should be. Tracking the impact of HHF blight elimination on a periodic basis would allow Treasury and the HFAs to give guidance to the city and county land banks that could allow for a greater economic impact. By keeping itself in the dark, and having little involvement in strategic decisions on blight elimination, Treasury misses an opportunity to help states and cities or counties develop a strategy that has the most effective use of HHF dollars and the best chance for success.xxvi SIGTARP found that the HHF Blight Elimination Program is designed so that the city or county/land bank/non-profit/for-profit partners are responsible for measuring progress. In other words, Treasury is allowing the city and county land banks to measure their own success. As currently envisioned, that may not be until the program ends. In addition to concerns over how this leads to a lack of accountability at a Federal, state, and local level, without that measurement, Treasury could lose opportunities to ensure the success of the program through improvements. Although Treasury should have developed its target outcomes at the beginning of the program in 2013, it is not too late for Treasury to do so now, and it is also not too early for states to develop performance indicators. The source of TARP funds 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. xxvi Treasury is also missing an opportunity as it oversees blight elimination in all six states to provide guidance on best practices or lessons learned to ensure the most effective use of HHF for blight elimination. Treasury should be proactive in providing this program and each state all of its resources. Treasury guidance including best practices would not take away a state’s ability to create locally tailored approaches. 33 34 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Treasury has not taken a risk-based approach to identify and mitigate risks that could form barriers to the most effective use of TARP funds for demolition activity or could lead to fraud, waste, and abuse. The design of the HHF Blight Elimination Program that places much of the control and decision making in the hands of city and county land banks far removed from Treasury, which conduct work through contractors removed even farther from Treasury, produces certain risks that Treasury should assess and mitigate through comprehensive planning. Treasury does not have or monitor the contracts and subcontracts for blight elimination activity for which TARP funds are the source of payment, and neither do the two state HFAs that have started demolitions (Ohio and Michigan). A Michigan HFA official told SIGTARP that the HFA does not monitor or approve the contracts or even have a listing of the entities that the city- or county-level partners contract with to undertake blight elimination activities under HHF. Treasury has an oversight responsibility to ensure that the HFAs, and their city or county local partners, are ready for, and can effectively handle, any increase in demolition and other activities under HHF. One of the risks that Treasury has already experienced with HHF is that the HFAs did not have the resources, staffing, training, and knowledge to implement HHF, which led to significant delays in getting help to homeowners. Even if some of these six state HFAs (Alabama, Ohio, Illinois, Indiana, Michigan, and South Carolina) have experience with blight elimination, the TARP funds allocated for blight elimination will likely result in a significant increase in the amount of blight elimination activities these states and cities have conducted. An Indiana HFA official told SIGTARP that there has never been a program like this in Indiana. Treasury should learn the identities of the city or county/land bank/non-profit/ for-profit partners, and conduct oversight to ensure that they have the staffing, knowledge, experience, and training to handle the level of contracting and demolition and other blight activities required under this TARP program. HUD Office of Inspector General has issued several reports on blight elimination using a HUD grant program including a January 2014 report on weaknesses for the City of Detroit because the city department was without the necessary knowledge, experience, and training to handle the increase in demolition jobs that came with HUD grant funds. It is unknown whether this same entity is involved with the TARP-funded demolitions; however, the problem could reside with any entity. Treasury will not know that if it has no insight. By allowing itself to be in the dark, Treasury has created a TARP program with very limited transparency to Treasury and the public, which impacts risk. Greater transparency would not hurt HHF’s approach to find locally tailored solutions. Greater transparency to the public builds trust and empowers taxpayers who fund TARP programs and have a right to transparency in how those funds are spent. Greater transparency allows taxpayers to hold Treasury accountable for how Federal dollars are used and what results they achieve. Greater transparency is required for oversight. As a result of the lack of transparency, it is difficult for SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Treasury and taxpayers to understand details of HHF Blight Elimination Program decisions, strategies, and activities, making oversight difficult and impacting risk. Given that Treasury decided to make a TARP investment in eliminating vacant properties, Treasury should do much more to fulfill its oversight responsibilities and ensure success, including setting target outcomes, providing guidance, conducting oversight, and monitoring activities while still allowing states to have flexibility in execution. Treasury should bring all that it can to leverage its own resources, knowledge, and experience with those of the states. Federal oversight and support are not mutually exclusive from a state’s flexibility to tailor a program to local problems. Federal dollars must come with some Federal involvement, guidance, assistance, transparency, and oversight. Homeowners deserve the same extraordinary Treasury action and support that Treasury gave the largest TARP institutions. Treasury cannot do that if it continues to be in the dark, with a handsoff approach and limited involvement that limits transparency, oversight, and can impact risk. As it has done with other TARP programs, Treasury needs to be able to ensure that blight elimination is operating in the way to most effectively use TARP dollars. It is Treasury, not the individual six states, that is responsible for reporting on an interim basis that the HHF Blight Elimination Program is on track to achieve the protection of home values and preservation of homeownership as required by TARP, just as Treasury has done with other TARP programs. When HHF ends in December 2017, it is Treasury, not the individual six states, that is responsible for reporting whether Treasury’s use of those TARP funds successfully achieved TARP goals. SIGTARP Investigations Activity SIGTARP is a white-collar law enforcement agency. For SIGTARP’s ongoing criminal and civil investigations, SIGTARP partners with other agencies in order to leverage resources. SIGTARP takes its law enforcement mandate seriously, working hard to deliver the accountability the American people demand and deserve. SIGTARP’s investigations have delivered substantial results, including: • criminal chargesxxvii against 250 individuals, including 162 senior officers (CEOs, owners, founders, or senior executives) • criminal convictions of 177 defendants (others are awaiting trial) • prison sentences for 99 defendants (others are awaiting sentencing) • civil cases and other actions against 66 individuals (including 52 senior officers) and 67 entities (in some instances an individual will face both criminal and civil charges) • orders temporarily suspending or permanently banning 93 individuals from working in the banking or financial industry, working as a contractor with the Federal Government, working as a licensed attorney, or in other types of businesses xxvii Criminal charges are not evidence of guilt. A defendant is presumed innocent until proven guilty. 35 36 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 1.3 CRIMINAL CHARGES FROM SIGTARP INVESTIGATIONS RESULTING IN PRISON SENTENCES 3% 2% 1% 4% 6% 4% 6% 35% 7% 13% 19% Wire & Mail Fraud Conspiracy to Commit Fraud Bank Fraud False Statements & Entries State Charges (Conspiracy to collect upfront fees/commit grand theft) Securities Fraud Money Laundering Loan Fraud Bankruptcy Fraud Alteration of records Other Note: Numbers may not total due to rounding. FIGURE 1.4 DEFENDANTS CONVICTED IN CASES FILED AS A RESULT OF SIGTARP INVESTIGATIONS, BY EMPLOYEE TYPE 5% 5% 9% 2% 9% 70% Senior Executive MMS/MHA Scam Bank Employee Straw Borrower/Investor Individual Other Note: Numbers may not total due to rounding. • orders of restitution and forfeiture and civil judgments and other orders entered for $7.4 billion. This includes restitution orders entered for $4.2 billion, forfeiture orders entered for $251.8 million, and civil judgments and other orders entered for $2.95 billion. Although the ultimate amount recovered is not known, as of March 31, 2015, SIGTARP has already assisted in the recovery of $1.58 billion. These orders happen only after conviction and sentencing or civil resolution and many SIGTARP cases have not yet reached that stage; accordingly, any recoveries that may come in these cases would serve to increase the $1.58 billion • savings of $553 million in TARP funds that SIGTARP prevented from going to the now-failed Colonial Bank SIGTARP’s investigations concern a wide range of possible violations of the law, and result in charges including: bank fraud, conspiracy to commit fraud or to defraud the United States, wire fraud, mail fraud, making false statements to the Government (including to SIGTARP agents), securities fraud, money laundering, and bankruptcy fraud, among others.xxviii These investigations have resulted in charges against defendants holding a variety of jobs, including 162 senior executives. Figure 1.3 represents a breakdown of criminal charges from SIGTARP investigations resulting in prison sentences. Figure 1.4 represents a breakdown of defendants convicted in cases filed as a result of SIGTARP investigations, by employment or position of the individual. Although the majority of SIGTARP’s investigative activity remains confidential, over the past quarter there have been significant public developments in several SIGTARP investigations, described below. TARP-Related Investigations Activity Since the January 2015 Quarterly Report Former United Commercial Bank Chief Credit Officer Convicted of Securities Fraud and Other Corporate Fraud; The Fraud Caused the Ninth Largest TARP Bank Failure with Estimated Losses in Excess of $677 Million - Ebrahim Shabudin On March 25, 2015, a federal jury seated in San Francisco, California, convicted Ebrahim Shabudin, of Moraga, California, of seven felony counts of conspiracy, securities fraud, and other corporate fraud offenses stemming from the massive failure of TARP recipient United Commercial Bank (“UCB”) following a six-week jury trial before United States District Judge Jeffrey S. White of the Northern District of California. Shabudin was the Chief Operating Officer and Chief Credit Officer of UCB in 2008 and 2009 and the second most senior officer in executive management at UCB after former Chief Executive Officer, Thomas Shiu-Kit (“Tommy”) Wu. xxviii The prosecutors partnered with SIGTARP ultimately decided which criminal charges to bring resulting from SIGTARP’s investigations. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 The jury found Shabudin guilty of conspiring with others within the bank to falsify key bank records as part of a scheme to conceal millions of dollars in losses and to falsely inflate the bank’s financial statements, including those filed with the U.S. Securities and Exchange Commission (“SEC”) and the Federal Deposit Insurance Corporation (“FDIC”) related to the third and fourth quarters of 2008 describing UCB’s “Allowance for Loan Losses.” Also falsified were documents relating to UCB’s quarterly and year-end earnings per share as announced by the bank to the investing public. More specifically, testimony at trial revealed that in an effort to have the bank “break even” in the third quarter 2008, Shabudin and his co-conspirators delayed downgrading loans despite knowing that collateral had declined in value or was missing, hoping that something would change. However, based on what they knew, that hope was unfounded. For instance they knew that: new appraisals showed collateral value that had declined significantly; there was a third-party offer to buy one loan for far less than what was owed; the bank did not have proper documentation for collateral; and one borrower was in receivership. Furthermore, Shabudin and his co-conspirators were so concerned that inventory securing one loan was either missing or non-existent, that they thought the bank had been defrauded and referred it to law enforcement. Indeed, according to trial testimony the warehouse that was supposed to contain the inventory securing that loan looked like a staged set. Shabudin and his co-conspirators continued this “delayand-pray” scheme the following quarter, all while the bank applied for and received $298 million in TARP. The jury convicted Shabudin of one count of conspiracy to commit securities fraud; one count of securities fraud; one count of falsifying corporate books and records; one count of false statements to accountants; one count of circumventing internal accounting controls; one count of conspiracy to commit false bank entries, reports, and transactions; and one count of false bank entries, reports, and transactions. In all, at sentencing which is currently set for June 30, 2015, Shabudin faces a maximum term of 145 years of imprisonment for the charges collectively; up to $16,750,700 in fines and assessments; and up to 27 years of supervised release. As previously reported, on November 14, 2008, UCB received approximately $298 million in TARP funds. UCB failed less than a year later, and on November 6, 2009, was closed by the California Department of Financial Institutions and taken over by the FDIC, at which point the entire TARP investment was lost. Until 2009, the bank’s holding company, United Commercial Bank Holdings, Inc. (“UCBH”), was publicly traded on the NASDAQ. With over $10.9 billion in assets, UCB’s failure was the ninth largest failure of a bank insured by the FDIC’s Deposit Insurance Fund since 2007, according to the FDIC. In 2013, the FDIC estimated that total losses for UCB would exceed $1.1 billion. Through 2014, with the recovery of the U.S. economy, the FDIC now estimates the loss to the Deposit Insurance Fund to be approximately $677 million. As previously reported, on December 9, 2014, UCB’s Chief Financial Officer, Craig S. On, pled guilty to one count of conspiracy to make a materially false and 37 38 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM misleading statement to an accountant. Additionally, on October 7, 2014, the bank’s Senior Vice President, Thomas Yu, pled guilty to one count of conspiracy to commit false bank entries, reports and transactions related to his role in preparing the false and misleading reports. This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of California, the Federal Bureau of Investigation, the Federal Deposit Insurance Corporation Office of Inspector General, and the Office of Inspector General for the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau. Bank Executive Indicted for Role in a TARP Bank Fraud Scheme Leading to Bank Failure – James House, Sonoma Valley Bank On January 14, 2015, the United States Court for the Northern District of California unsealed an information and guilty plea in which James House, a businessman, admitted to one count of conspiracy to commit wire fraud, one count of bank fraud, one count of wire fraud affecting a financial institution, one count of conspiracy to make false statements to a federally insured bank, and one count of conspiracy to commit money laundering in connection with a three-year scheme to defraud TARP recipient Sonoma Valley Bank (“SVB”). As previously reported, on March 18, 2014, in the United States District Court for the Northern District of California, two former SVB executives, Sean Cutting, the former President and CEO of SVB and Brian Melland, the former Chief Lending Officer of SVB, together with Bijan Madjlessi, a commercial real estate developer, and David Lonich, Madjlessi’s attorney and business partner, were each charged with money laundering, making false bank entries, wire fraud, conspiracy to commit wire and bank fraud, conspiracy to make false statements, conspiracy to commit money laundering, and bank fraud in connection with the scheme. Madjlessi and Lonich were also charged with obstructing the Federal Government’s investigation into the fraud scheme. According to the plea agreement and other court documents, between March 2009 and November 2009, House admitted to working with the other defendants to defraud SVB by serving as a straw purchaser on a $9.5 million loan so that the funds could be used by Madjlessi to repurchase part of a condominium project for which Madjlessi had already defaulted on a construction loan. For their parts, Melland and Cutting are alleged to have authorized the fraudulent $9.5 million loan to the other two defendants by skirting the bank’s internal controls and while knowing House was serving as the straw buyer. Furthermore, in order to help Madjlessi regain control of residential units in the project that had already been sold, House once again agreed to serve as a straw buyer and made false statements to a contractor working on behalf of the Federal Deposit Insurance Corporation. Cutting allegedly produced letters, on SVB letterhead, falsely stating that straw buyers had sufficient funds at the bank to purchase the units so that the Madjlessi and Lonich could obtain financing from Freddie Mac. Earlier, in April and August 2007, House also agreed to act as a straw buyer for other real estate associated with SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Madjlessi, making false statements to the lenders Countrywide and TARP recipient Bank of America in the process. In February 2009, Sonoma Valley Bancorp, SVB’s parent company, received approximately $8.7 million in TARP funds. On August 20, 2010, SVB was closed by the California Department of Financial Institutions, and taxpayers lost a total of $9 million from the principal TARP investment and missed dividend payments. When it failed, SVB had multiple outstanding loans to Madjlessi, and the FDIC estimated the cost of SVB’s failure to its deposit insurance fund to be $10.1 million. At sentencing, House faces a maximum of 30 years in federal prison on the bank fraud, wire fraud, and conspiracy to commit wire fraud counts; five years imprisonment on the conspiracy to make false statements count; and 10 years imprisonment on the conspiracy to commit money laundering count. This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of California, the Federal Housing Financing Agency – Office of Inspector General, and the Federal Deposit Insurance Corporation – Office of Inspector General. Former Chairman and President of TARP Applicant Bank Charged in Scheme to Obtain Bailout Funds – Brian Hartline & Barry Bekkedam, NOVA Bank On January 16, 2015, the United States District Court for the Eastern District of Pennsylvania unsealed an indictment charging Brian Hartline, of Collegeville, Pennsylvania, and Barry Bekkedam, of Hobe Sound, Florida, in a fraud conspiracy involving TARP applicant, NOVA Bank, where Hartline was President and Chief Executive Officer and Bekkedam had served as Chairman. According to the indictment, Hartline and Bekkedam devised the scheme in an attempt to defraud the government of more than $13 million through TARP. Each are charged with conspiracy to defraud the United States, TARP fraud, two counts of false statements to the federal government, and bank fraud. Bekkedam is charged with two additional counts of wire fraud. Together with others, Bekkedam and Hartline formed NOVA Bank in 2002. Bekkedam also owned and operated a financial advisory company, Ballamor Capital Management, and allegedly advised Ballamor clients to invest in NOVA. In 2008, however, bad loans and investments placed NOVA at risk of failure and its investors were at risk of losing their investments. In October 2008, NOVA Financial Holdings, Inc., of Berwyn, Pennsylvania, the parent company of NOVA Bank, applied for approximately $13.5 million in TARP funds. Later, in June 2009, NOVA Bank was approved to receive the TARP funds contingent upon the bank raising $15 million in additional, private capital. The bank was ultimately unable to raise private capital, did not receive TARP funds, and, in October 2012, it failed and was closed by state and federal banking regulators. According to the indictment, Bekkedam and Hartline devised a scheme in which NOVA would loan money to a Florida businessman, for the businessman to transfer to NOVA’s parent company so it would appear as though the bank had received new capital from an outside investor. On June 30, 2009, NOVA wired 39 40 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM $5 million to the businessman’s bank account in Florida, and approximately two hours later, the businessman wired $5 million to an account used for investments in NOVA Financial Holdings, Inc. The indictment further alleges that, in October and December 2009, Bekkedam and Hartline convinced two others to make similar phony “investments” using loans from NOVA, in order to make NOVA appear more financially sound that it actually was. The defendants also allegedly told and directed employees to tell the Treasury Department that NOVA had raised new capital, when it, in fact, had not. The defendants are also accused of having concealed the true purpose of the loan to the Florida businessman and falsely stated the purposes of the two other loans. If convicted of the most serious offense, each defendant faces up to 30 years in federal prison. The case is being investigated by SIGTARP, the Federal Bureau of Investigation and the Pennsylvania Department of Banking and is brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Former President and Chief Executive Officer of Failed TARP Recipient Bank Indicted for TARP Fraud and Bank Fraud – Gary Patton Hall, Jr. & Tifton Banking Company On February 12, 2015, Gary Patton Hall, Jr., of Tifton, Georgia, a former President and Chief Executive Officer (“CEO”) of TARP recipient Tifton Banking Company (“TBC”), was charged with six counts of bank fraud and one count of TARP fraud in the United States District Court for the Middle District of Georgia for his role in a scheme to hide underperforming and at-risk loans from the bank and the Federal Deposit Insurance Corporation (“FDIC”), among others. According to the indictment, Hall, who was TBC’s President and CEO from August 2005 until June 2010, engaged in a long-running scheme to mislead the bank and its loan committee about loans TBC made to local individuals and businesses. As part of the scheme, Hall allegedly hid past due loans from the FDIC and the TBC loan committee which resulted in the bank continuing to approve and renew delinquent loans and loans where were lacking collateral. Several of the borrowers eventually defaulted on the loans, resulting in millions of dollars of losses to TBC and others. In addition, Hall also allegedly hid his personal and business interest in at least two of the transactions over which he exercised his approval authority. For instance, in one case, Hall allegedly approved several loans to the buyer of his condominium in Panama City Beach, Florida, providing 100 percent financing. In doing so, Hall also is alleged to have made several false representations about the loans to the TBC loan committee, and he failed to disclose his personal interest in the transaction. When the buyer’s loan payments became delinquent, Hall allegedly hid the loan from both the FDIC and state banking regulators. Hall furthermore allegedly received $50,000 from the sale of his condominium in this transaction, which was funded in full by an unsecured loan to the buyer approved by Hall. Eventually the buyer declared bankruptcy, resulting in a loss of over $400,000 to TBC. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 In November 2010, the Georgia Department of Banking and Finance closed TBC as a result of its poor financial condition, and, at that time, TBC had not repaid the $3.8 million of TARP funds it had received, nor a missed dividend payment. If convicted, Hall faces up to thirty years in Federal prison for each of the bank fraud counts and ten years in Federal prison for the TARP fraud count. The case is being investigated by SIGTARP, the Federal Bureau of Investigation and the Small Business Administration’s Office of the Inspector General, the Federal Deposit Insurance Corporation’s Office of the Inspector General, the Department of Agriculture’s Office of Inspector General and the Tifton County Sheriff’s Office. Executives of Construction Company Charged with Bank Fraud in Scheme to Defraud TARP Recipient Bank – Ronald Onorato and Larry Milder (Integra Bank) On January 6, 2015, Ronald Onorato, the Chief Executive Officer, and Larry Milder, the Chief Operating Officer, of The Northpoint Group (“Northpoint”), a construction holding company based in Alpharetta, Georgia, were charged in the United States District Court for the Northern District of Georgia (Gainesville Division), with two counts of bank fraud and one count of conspiracy to commit bank fraud in connection with their scheme to defraud TARP recipient Integra Bank, of Evansville, Indiana, as well as Huntington National Bank (“Huntington National”). On January 16, 2015, Onorato and Milder were arrested by law enforcement. If convicted, Onorato and Milder each face up to 30 years in federal prison for each count. According to the indictment, in 2007, through a limited liability company, Onorato applied to Integra for a $35,613,000 construction loan to build a sevenstory commercial, retail and office building. Because of its size, Integra participated $20 million of the loan to Huntington National. Once approved, in order to obtain loan proceeds, the loan agreement required Onorato and Milder to submit draw requests with supporting invoices for construction work actually performed. Despite this, Onorato and Milder conspired to defraud Integra and Huntington National, by, among other means, submitting false and fraudulent invoices and draw requests for work that had not been performed, including by a contractor who never performed any work for the project. Onorato and Milder took the additional loan proceeds, totaling approximately $1.3 million, for their own personal use. Additionally, in another instance, Onorato and Milder requested and obtained loan proceeds for work that had been completed by a subcontractor. Onorato and Milder, however, did not pay the subcontractor but rather kept the more than $438,000 for themselves. In February 2009 Integra Bank Corporation, also of Evansville, Indiana, Integra Bank’s parent company, received $83.6 million in TARP funds. During the time it held TARP funds, Integra Bank missed seven dividend payments totaling $7,313,775 owed to the Treasury Department. On July 29, 2011, Integra Bank National Association, the banking subsidiary of Integra Bank Corporation, was closed by the Office of the Comptroller of the Currency, which appointed the 41 42 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FDIC as receiver. This resulted in a loss of the $83.6 million principal TARP investment. Additionally, at the time of Integra Bank’s failure, the FDIC estimated an additional loss of $170.7 million to the FDIC’s deposit insurance fund. This case is being investigated by SIGTARP and the Federal Bureau of Investigation, and is being prosecuted by the United States Attorney’s Office for the Northern District of Georgia in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Four Senior Executives, including Chief Financial Officer & Chief Operating Officer Charged with Defrauding TARP Recipient Bank – Gary Alan Rickenbach, Michael Francis Heald, Tom Monroe Whitehead, Bradley Stephen Paul/ One Bank & Trust, N.A. (“Onebanc”); Former Onebanc Vice President & Controller Separately Admits to Money Laundering of Embezzled Funds – Matthew D. Sweet On March 3, 2015, the United States District Court for the Eastern District of Arkansas unsealed an indictment charging four former senior executives of TARP recipient One Bank & Trust, N.A. (Onebanc), Tom Monroe Whitehead (former Chief Financial Officer); Michael Francis Heald (former Chief Operating Officer); Gary Alan Rickenbach (former Senior Executive Vice President); and Bradley Stephen Paul (former Executive Vice President) with conspiracy to commit bank fraud, misapplication of loan proceeds, making false entries in Onebanc’s books and records, making false statements to influence Onebanc, and obstructing a federal bank examination in connection with a long-running scheme to deceive Onebanc’s regulators. A trial is scheduled to begin on December 14, 2015, and, if convicted, each defendant faces up to thirty years in federal prison on the bank fraud, misapplication, and false entries counts; up to twenty years on the money laundering count and up to five years on the conspiracy count. Specifically, the indictment alleges that, in April 2007, the defendants approved a $1.5 million personal line of credit to a borrower (“Borrower A”) which was due in one year. Borrower A, however, failed to make any payments on the loan and, by July 2008, Onebanc sued Borrower A and received a judgment against Borrower A. Richenbach later made clear that it was “remote” Onebanc would “ever recover anything” from Borrower A. Nonetheless, from December 2007 through around September 2012, the defendants conspired to make loans to companies that were created in order to use the loan proceeds to make payments on Borrower A’s defaulted line of credit. Specifically, the defendants authorized Onebanc to make loans to two sham companies one of which was created at Rickenbach and Heald’s direction and the other which was created at the direction of, and for, the President of Onebanc. The Defendants also allegedly conspired to authorize a line of credit to a different Onebanc customer for the same purpose, i.e., to use loan proceeds to repay Onebanc for the defaulted line of credit made to Borrower A. Furthermore, the defendants allegedly undertook to prevent examiners from the FDIC and Office of the Comptroller of the Currency (“OCC”) from discovering these financial transactions. In the process, the defendants also allegedly misled the non-bank members of Onebanc’s Board of Directors, who owned shares in Onebanc’s parent SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 company, about parts of the transactions and allegedly failed to report the past due status of Borrower A’s loan on a quarterly regulatory report filed with the FDIC. Ultimately, in September 2012, Rickenbach admitted to the Onebanc Board of Directors that “there [was] no doubt that my actions…[have] been devious and misleading” and acknowledging that the purpose of the loans was to “prevent the Bank from having to recognize a loss on [Borrower A’s] loan in January 2009.” In addition, on January 7, 2015, Matthew D. Sweet, a Onebanc former Vice President and Controller, pled guilty in the United States District Court for the Eastern District of Arkansas to one count of money laundering in connection with his scheme to defraud Onebanc. Specifically, according to court documents, from January 2009 to October 2011, Sweet obtained 30 cashier’s checks drawn on a Onebanc account by using his position as a senior executive to sign cashier’s checks. He would then mail the cashier’s checks to his two personal credit cards to pay off the credit card bills. In total, Sweet embezzled nearly $75,000. When confronted by Onebanc management, Sweet admitted his actions. He was allowed to resign and he paid back the amount he had stolen with two cashier’s checks from another bank. In June 2009, One Financial Corporation (“OneFinancial”), also of Little Rock, Arkansas, the bank holding company for Onebanc, received $17.3 million in TARP funds. During the time it held the TARP funds, OneFinancial missed eleven dividend payments totaling more than $4,330,000 owed to taxpayers. As previously reported, on April 2, 2014, Rickenbach was indicted in the U.S. District Court for the Eastern District of Arkansas on related charges. In addition, on November 6, 2013, Onebanc customer Alberto Solaroli was charged with bank fraud for fraudulently obtaining funds from Onebanc in connection with Solaroli’s alleged submission to Onebanc of falsified financial documents to obtain a $1.5 million loan, which Solaroli allegedly used for personal expenses and on which Solaroli did not make a single payment. This case is being investigated by SIGTARP, the Internal Revenue Service Criminal Investigation, the Federal Bureau of Investigation, the Federal Reserve Board Office of Inspector General, and the Federal Deposit Insurance Corporation Office of Inspector General. The case is being prosecuted by the U.S. Attorney’s Office for the Eastern District of Arkansas, and is being brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Former Bank of America Senior Vice President Pleads Guilty to Misapplication of Bank Funds – Justin T. Brough On February 24, 2015, Justin T. Brough, a former Senior Vice President of TARP recipient Bank of America (“BOA”), of North Las Vegas, Nevada, pled guilty in the United States District Court for the District of Nevada to one count of misapplication of bank funds in connection with a scheme designed to bypass the bank’s controls on requiring personal guarantees for certain loans and that led to more than $6.4 million in losses to BOA on two business-related loans. At sentencing, which is scheduled for May 28, 2015, Brough faces up to thirty years in Federal prison. 43 44 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM According to court documents, Brough was a senior vice president at BOA in Las Vegas, where he served as a business banking market executive and provided financial services, including origination of loans, to high-net-worth clients. Brough admitted to misapplying bank funds in connection with two business loans: a $6.3 million short-term construction loan, and a $600,000 line of credit in connection with the acquisition of a business. Brough further admitted that neither borrower met the bank’s underwriting requirements and thus neither in fact qualified for the loans. Brough also admitted that he falsified documents to help both borrowers obtain the loans, including forging signatures on loan papers. When the borrowers had difficulty making payments on the loans, Brough misused the bank’s general ledger fund in an attempt to conceal his scheme and, in total, made $436,676 in payments on the loans on the borrowers’ behalf and keep the loans current. He admitted that he disguised those payments as “goodwill,” “miscellaneous adjustments,” and refunds of various fees, among other ways. He also conceded that he kept each of the individual loan payments under $10,000 so he would not need additional approval within BOA. Ultimately, both borrowers defaulted on the loans and, according to the plea agreement, the loss to BOA was almost $6.5 million: $5,291,000 on the first loan and $1,177,167 on the second. BOA received a total of $45 billion in TARP funds, and repaid the funds in full in December 2009. The case is being investigated by SIGTARP, the Federal Bureau of Investigation and is brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Former Vice President and Loan Officer of TARP Recipient Bank Pleads Guilty to Bank Fraud – Brian W. Harrison, Farmers Bank & Trust On March 23, 2015, Brian W. Harrison, of Great Bend, Kansas, a former vice president and loan officer at TARP recipient Farmers Bank and Trust (“Farmers Bank”), also of Great Bend, pled guilty in the United States District Court for the District of Kansas to one count of bank fraud in connection with his long-running scheme to defraud Farmers Bank by hiding the performance of various loans he made. As previously reported, Harrison was arrested by law enforcement in January 2015, having been indicted in November 2014. According to court documents, Harrison’s duties included reviewing, approving and disbursing loans within his lending authority without the approval of the bank’s loan committee. In furtherance of his scheme to defraud the bank, from around 2005 to 2012, Harrison made (or caused to be made) false statements designed to hide the poor performance of a number of loans he made. Harrison’s false statements were intended to deflect questions from the bank about problems with the loans. Additionally, he falsified credit and loan applications, promissory notes and security agreements on behalf of a purported debtor without the debtor’s proper authority. At sentencing, which is set for June 8, 2015, the parties have agreed to recommend a sentence of six months in prison, followed by six months home SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 detention, as well as an order requiring Harrison to pay more than $124,000 in restitution. Farmers Enterprises, Inc. (“Farmers Enterprises”), of Great Bend, Kansas, the parent company for Farmers Bank, received $12 million in TARP funds in June 2009. In November 2012, Farmers Enterprises exited TARP by partially repaying the U.S. Treasury to redeem the original TARP funding. The bank’s repurchase of the shares at a discount resulted in a principal loss of approximately $560,000 on the TARP investment. Additionally, as previously reported, on June 25, 2014, Michael W. Yancey, a former Farmers Bank Senior Vice President and loan officer pled guilty to one count of conspiracy to commit an offense against the United States in connection with a false statement on a borrower’s loan application to purchase a property in Basehor, Kansas. At sentencing, Yancey faces up to five years imprisonment. This case is being investigated by SIGTARP and the Federal Bureau of Investigation, and is being prosecuted in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Investment Executive Pleads Guilty to Participating in $30 Million Insurance Fraud Scheme; Admits to Having Conspired with Senior Executives of TARP Applicant Bank – Allen Reichman On February 20, 2015, Allen Reichman, a former executive director of investments at a New York investment firm, of Irvington, New York, pled guilty in the United States District Court for the Southern District of New York to conspiracy to commit wire fraud in connection with his participation in a massive scheme to defraud his employer and insurance regulators involving the fraudulent purchase of an Oklahoma insurance company by the former President and Chief Executive Officer (“CEO”) of TARP applicant, Park Avenue Bank, with whom Reichman conspired. According to the information, plea agreement, and statements made during court proceedings: During the relevant time period, Reichman was an executive at an investment bank and financial services company headquartered in New York, New York (the “Investment Firm”). From July 2008 to November 2009, Reichman conspired with Charles J. Antonucci, Sr. and Matthew L. Morris, the President and Senior Vice President, respectively, of TARP applicant Park Avenue Bank, a New York bank, and Wilbur Anthony Huff, a Kentucky businessman who controlled numerous entities located throughout the United States, to defraud the Investment Firm and Oklahoma insurance regulators regarding Antonucci’s purchase of Providence Property and Casualty Insurance Company (“Providence P&C”), an Oklahoma insurance company that was owed $5 million by a company Huff controlled. Providence P&C was licensed to operate by the Oklahoma Insurance Department (“OID”), which regulated various practices of Oklahoma insurance companies. Under the OID’s regulations and applicable Oklahoma law, Providence P&C was required to maintain a certain amount of assets to ensure that adequate funds were on hand to pay policyholders’ claims and anticipated claims. 45 46 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Reichman and his co-conspirators schemed to defraud the Investment Firm into providing a $30 million loan to finance Antonucci’s purchase of Providence P&C and to mislead Oklahoma insurance regulators into approving the purchase. The $30 million loan from the Investment Firm to purchase Providence P&C was secured by Providence P&C’s own assets, including the reserve assets to pay claims. Because Oklahoma insurance regulators had to approve any sale of Providence P&C, and because Oklahoma law forbade the use of Providence P&C’s assets as collateral for such a loan, Reichman, Huff, Morris, and Antonucci, made, and conspired to make, a number of material misstatements and material omissions to the Investment Firm and Oklahoma insurance regulators concerning the true nature of the financing for the purchase, including that Park Avenue Bank was funding the purchase. Specifically, Investment Firm executives and others warned Reichman on several occasions that using Providence P&C’s assets as collateral for the loan was illegal and that he should not cause the loan to be issued. Reichman, however, ignored these warnings and instead provided misleading information to various individuals at the Investment Firm and elsewhere regarding the loan, including directing Antonucci to sign a letter that provided false information regarding the collateral that would be used for the loan. Despite the warnings from Investment Firm executives and others, and Reichman’s knowledge that the loan was in fact illegal, on or about January 30, 2009, Reichman caused the Investment Firm to issue the illegal $30 million loan, secured by the very assets that were supposed to be unencumbered and maintained in reserve to pay Providence P&C’s policyholder claims. After deceiving the Investment Firm into issuing the $30 million loan, Reichman received at least $200,000 in commissions from the Investment Firm as a result of the illegal loan. Ultimately, in November 2009, Providence P&C became insolvent and was placed in receivership because its surplus reserves were encumbered by the $30 million loan, and therefore unavailable to pay policyholder claims, and because Huff, Morris, and Antonucci had pilfered Providence P&C’s remaining assets. At sentencing, Reichman faces up to five years in federal prison. Additionally, as part of his plea agreement, Reichman also agreed to forfeit $200,000 to the United States and to provide restitution of $10 million to the Investment Firm. As previously reported, on October 8, 2010, Antonucci, who was charged separately for his role in the scheme, pled guilty. On October 17, 2014 and December 24, 2014, respectively, Morris and Huff also pled guilty in connection with the case. This case is being investigated by SIGTARP, the Federal Bureau of Investigation, the Internal Revenue Service, the New York State Department of Financial Services, Immigration and Customs Enforcement Homeland Security Investigations, and the Federal Deposit Insurance Corporation Office of Inspector General. It is being prosecuted in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 California Man Sentenced to 24 Years in Federal Prison for Leading Massive Foreclosure Rescue Scam; Co-defendant Sentenced to Five Years Imprisonment for His Role – Alan David Tikal, Ray Kornfeld (KATN Trust) On March 5, 2015, Alan David Tikal, formerly of Brentwood, California, was sentenced in the United States District Court for the Eastern District of California to serve 24 years in federal prison following his convictions on eleven counts of mail fraud and one count of mail fraud relating in connection with a massive, nationwide foreclosure rescue scam. The sentence followed a September 15, 2014, conviction after a bench trial before United States District Judge Troy L. Nunley. Additionally, on February 19, 2015, co-defendant, Ray Jan Kornfeld, of Las Vegas, Nevada, was sentenced in the same court to five years in federal prison for his role in the mortgage relief scam, after having pled guilty to one count of conspiracy. According to evidence presented at Tikal’s trial, between January 7, 2010, and August 20, 2013, Tikal was the principal behind a business known as KATN, which targeted distressed homeowners experiencing difficulties making their existing monthly mortgage payments. Many of the victims did not speak English. Tikal promised to reduce their outstanding mortgage debt by 75 percent, falsely claiming he was a registered private banker with access to an enormous line of credit and the ability to pay off homeowners’ mortgage debts in full. Tikal told homeowners that in return for various fees and payments, their existing loan obligations would be extinguished, and the homeowners would then owe new loans to Tikal in a reduced amount equaling 25 percent of their original obligation. In reliance on misrepresentations made by Tikal, many of these homeowners stopped making payments on their existing mortgage loans and, as a result, lost their homes to foreclosure. In fact, however, Tikal never made any payments to financial institutions on behalf of homeowners in satisfaction of their pre-existing mortgage debt obligations; the purported “loan” payments homeowners paid to Tikal were deposited into accounts at, among others, TARP recipient bank, JPMorgan Chase, and simply spent by Tikal, his family and his associates for personal use; and there was not a single instance in which a homeowner’s debt was paid, forgiven or otherwise extinguished as a result of the mortgage relief program. In all, Tikal and his associates convinced more than 1,000 homeowners in California and other states to participate in the program. As a result of their participation, many homeowners became delinquent on their loans and ultimately had their homes foreclosed upon. Collectively, those homeowners paid more than $5,800,000 in fees and monthly payments into the program. Of that, $2,500,000 or more was paid into accounts controlled by Tikal and/or his family. In sentencing Tikal, Judge Nunley discussed the victims who, as a result of their participation in Tikal’s scam, “can’t reside in houses they had, in some instances, spent their entire lives trying to pay off.” Judge Nunley called Tikal “the mastermind behind this whole scheme,” and said Tikal was deserving of the sentence he was receiving. As previously reported, Tamara Tikal, Alan Tikal’s wife and co-defendant, pled guilty in August 2014 to conspiracy, mail fraud, and money laundering for her role 47 48 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM in the scheme, and faces up to five years in federal prison when sentenced on April 23, 2015. The case is being investigated by SIGTARP, the Internal Revenue Service – Criminal Investigation, the California Department of Justice, and the Stanislaus County District Attorney’s Office. It is being prosecuted by the U.S. Attorney’s Office for the Eastern District of California and the California Attorney General’s Office, in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Florida Man Sentenced to More Than 11 Years in Federal Prison for Mortgage Relief Scam – Jonathan L. Herbert On March 27, 2015, Jonathan L. Herbert, of Lighthouse Point, Florida, was sentenced in the United States District Court for the Southern District of Illinois to 140 months in federal prison, followed by five years of supervised release and mandatory restitution to his victims for wire fraud in connection with a fraudulent mortgage relief scam. Also, as a special condition of his supervised release, Herbert is prohibited from engaging in telemarketing, direct mail, or national advertising campaigns for business purposes. As previously reported, Herbert pled guilty in December 2014. According to court filings, Herbert operated the fraud scheme from a strip mall office in Fort Lauderdale, Florida. As part of his guilty plea, Herbert admitted that he usually contacted his victims through unsolicited telephone calls, introducing himself as a “federal loan officer” with the “Federal Debt Commission,” “Federal Mortgage Marketplace,” or “Federal Assistance Program.” Herbert employed these names and title in order to deceive his victims into believing that his fraudulent program was either operated or approved by the United States government, when in fact it was not. Herbert told his victims that they qualified for a loan modification because of financial hardship or some type of illegal conduct perpetrated by their lenders. After the initial phone calls, Herbert mailed letters to the victims who expressed interest in his bogus loan modification programs. These letters congratulated the victims on their acceptance into the purported program, quoted a new monthly mortgage payment rate, and directed the victims to begin sending their monthly mortgage payments to one of two addresses located in Washington, DC. In truth, however, the Washington, DC, addresses were for mailboxes Herbert had rented at UPS stores. Victims’ payments were then forwarded to Herbert in Florida, per his directions to the UPS stores. In his plea agreement, Herbert admitted that he did not apply any of the money he received from the victims to reduce their home loan debt. Rather, he used the money for his own personal expenses and to continue his fraudulent operation. Herbert also acknowledged that the total of the losses sustained by the victims as a result of his scheme is approximately $750,000. This case was investigated by SIGTARP, the United States Attorney’s Office for the Southern District of Illinois, and the United States Postal Inspection Service, with assistance from the Federal Trade Commission which took civil action to SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 shut down Herbert’s business in July 2014. The prosecution was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Senior TARP Bank Executive Indicted For Embezzlement, Stealing More than $90,000 Including From Client Accounts – Candice L. White, Front Range Bank On March 25, 2015, Candice L. White of Centennial, Colorado, a former Senior Vice President of TARP recipient Front Range Bank, also of Centennial, Colorado, was arrested by law enforcement after having been indicted on March 24, 2015, in the United States District Court for the District of Colorado, on thirty-seven felony counts of embezzlement and willful misapplication of funds from a federally insured bank. According to the indictment, from July 2009 through March 2011, White allegedly embezzled more than $92,000 from the bank for her own personal use and for the use of others. In addition, White is charged with willfully misapplying additional funds from other client accounts to an escrow account from which White embezzled the majority of the $92,000 in order to conceal and facilitate her ongoing criminal activity. A trial is set for June 1, 2015. If convicted, White faces a maximum of thirty years in federal prison for each count. White was also charged with two misdemeanor counts of embezzlement and willful misapplication of funds from a federally insured bank, and, if convicted on those counts, she faces up to one year in federal prison. Omega Capital Corporation (“Omega”), of Centennial, Colorado, the holding company for Front Range Bank, received $2,816,000 in TARP funds in April 2009. During its time in TARP, Omega missed fifteen dividend payments totaling more than $575,000 owed to Treasury. Ultimately, in July 2013, Treasury sold its stake in Omega at auction at a loss and Omega’s missed payments were not repaid, resulting in a total taxpayer loss of more than $600,000. The case is being investigated by SIGTARP, the Federal Bureau of Investigation and is brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Senior RBS Trader Admits to Defrauding Customers in Multimillion Dollar Securities Fraud Scheme – Matthew Katke, RBS Securities, Inc. On March 11, 2015, Matthew Katke, of New York, New York, pled guilty in the United States District Court for the District of Connecticut, to one count of conspiracy to commit securities fraud in connection with his participating in a multimillion dollar securities fraud scheme. In addition, Katke also entered into an agreement to cooperate in the government’s ongoing investigation of fixed income securities such as residential mortgage-backed securities (“RMBS”). This criminal activity came to light during SIGTARP’s initiative on PPIP-related activities. According to court documents and statements made in court, between April 2008 and August 2013, Katke was a registered broker-dealer and managing director at RBS Securities Inc. RBS is a global securities firm with headquarters in 49 50 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Stamford, Conn. RBS also has a trading floor in Stamford where Katke and other members of RBS’s Asset Backed Products division traded fixed income investment securities such as RMBS and collateralized loan obligations (“CLOs”). In pleading guilty, Katke admitted that he and others conspired to increase RBS’s profits on CLO bond trades at the expense of customers. As part of the scheme, Katke and his co-conspirators made misrepresentations to induce buying customers to pay inflated prices and selling customers to accept deflated prices for CLO bonds, all to benefit RBS. Katke further admitted that the conspiracy was perpetrated in two ways. In certain transactions, Katke misrepresented the CLO seller’s asking price to the buyer (or vice versa), keeping the difference between the price paid by the buyer and the price paid to the seller for RBS. In other transactions, Katke misrepresented to the CLO buyer that bonds held in RBS’s inventory were being offered for sale by a fictitious third-party seller invented by Katke, which allowed Katke to charge the buyer an extra commission to which RBS was not entitled. The investigation revealed numerous fraudulent transactions by Katke that cost at least 20 victim customers—including firms affiliated with TARP recipient banks—millions of dollars. At sentencing, which is scheduled for November 20, 2015, Katke faces a maximum of five years in federal prison. This case is being investigated by SIGTARP and the Federal Bureau of Investigation, and is being prosecuted by the United States Attorney’s Office for the District of Connecticut in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force’s Residential Mortgage Backed Securities Working Group, a federal and state law enforcement effort focused on investigating fraud and abuse in the RMBS market that helped lead to the 2008 financial crisis and the federal government’s subsequent bailout. Los Angeles-Area Executive Arrested in $9 Million Bank Fraud Scheme Against TARP Banks – Chung Yu “Louis” Yeung & Guo Xiang “David” Fan On February 24, 2015, Chung Yu “Louis” Yeung, of San Dimas, California, was arrested by federal agents following the unsealing of his October 22, 2014, indictment in the United States District Court for the Central District of California for one count of conspiracy to commit bank fraud and five counts of bank fraud in connection with a $9 million scheme to defraud TARP recipients United Commercial Bank (“UCB”) and East West Bank, which took over UCB’s accounts. Additionally, on the same day, Guo Xiang “David” Fan was indicted for bank fraud, and conspiracy to commit bank fraud, as well as conspiracy to commit money laundering for his alleged role in the scheme. As of March 31, 2015, Fan remained at large. If convicted, Yeung and Fan each face a maximum of 30 years imprisonment for each count of bank fraud and conspiracy to commit bank fraud, and Fan faces up to ten years imprisonment on the money laundering conspiracy count. According to the indictment, from around June 2007 to September 2012, Yeung, who was Vice President of Eastern Tools and Equipment (“Eastern SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Tools”), an Ontario, California, company that sold portable generators and other equipment, and Fan, who was Eastern Tool’s President, along with others overstated Eastern Tools’ accounts receivable to increase its line of credit with UCB and later East West Bank. To support the inflated accounts receivable, Yeung, Fan and others allegedly opened approximately 20 shell companies backstopped with fictitious business name statements, post office boxes, bank accounts, and telephone numbers. Then, Yeung, Fan and others allegedly moved money from Eastern Tools’ bank accounts into the shell companies’ bank accounts to create the false appearance of substantial commercial activity and make fraudulent requests to both draw down money under the line of credit and increase the maximum amount of available funds. Finally, Yeung, Fan and others allegedly siphoned those funds into their own personal accounts. East West Bank allegedly sustained a loss of around $9,157,000 as a result of the scheme. In November 2008, UCBH Holdings, Inc., UCB’s parent company, received $298.7 million in TARP funds. On November 6, 2009, UCB failed and was taken over by state and federal regulators. As a result of the bank’s failure, none of the TARP funds were repaid and the entire $298.7 million TARP investment has been written off. The case is being investigated by SIGTARP, the Federal Bureau of Investigation, and the Internal Revenue Service – Criminal Investigation. The case is being prosecuted by the United States Department of Justice Criminal Division’s Fraud Section in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Six Charged in Massive $33 Million Mortgage Modification Scam – Chad Gettel, John McCall, Noemi Lozano, Sheridan Black, James Scott Creasey, and Jeremiah Barrett/CC Brown Law LLC On February 25, 2015, Chad Gettel, of Salt Lake City, Utah; John McCall, of Park City, Utah; Noemi Lozano (aka “Noemi Sayama”), of San Diego, California; Sheridan Black, of South Jordan, Utah; James Scott Creasey, of Riverton, Utah; and Jeremiah Barrett, of Bountiful, Utah, were charged in a forty-count indictment (unsealed on March 5, 2015) in the United States District Court for the District of Utah (Salt Lake City) alleging conspiracy, mail fraud, wire fraud, telemarketing fraud, conspiracy to commit money laundering, and money laundering in connection with a massive scheme to market and sell home loan modification services to distressed homeowners trying to save their homes from foreclosure following the financial crisis of 2008. The alleged scheme is believed to have involved more than 10,000 victims and spanned nearly every state in the country with losses totaling more than $33 million, and illegal profits were allegedly funneled through banks that received TARP funding, among others. According to the indictment, the object of the conspiracy was for the defendants to market and sell loan modification services using false and fraudulent pretenses to obtain money from customers and to enrich themselves. Specifically, Gettel and Lozano started a loan modification business in July 2009 and set up CC 51 52 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Brown Law LLC (“CC Brown”) and other purported law firms, hiring attorneys to create the false impression that their loan modification business was a law firm. According to the indictment, however, CC Brown attorneys provided little to no actual legal services for individual customers, while misrepresenting to the public that attorneys were providing the core legal services for which the customers were paying. In fact, the indictment alleges, non-attorney “processors” and telemarketers working for them performed most, if not all, of the work for customers seeking loan modifications. In August 2009, according to the indictment, Gettel obtained information about homeowners who were delinquent on their mortgage payments and hired third parties, including a telemarketing center in California, to market his loan modification business to these homeowners. Furthermore, the telemarketers pitched CC Brown using false and misleading statements provided them by Gettel, including statements that CC Brown had a 90 percent success rate in obtaining loan modifications; offered a money back guarantee in the event it could not obtain successful loan modification; and that CC Brown’s attorneys would provide the loan modification work. Other misleading statements defendants caused telemarketers to make to customers included that: (i) loan modifications typically occurred in four months; (ii) the purported attorneys had over 100 years combined experience in real estate law; and (iii) they had obtained over 6,000 successful loan modifications and averaged 300-400 successful loan modifications per month. In purchasing the loan modification services, customers relied on these misleading and fraudulent statements. Gettel and McCall eventually instructed the telemarketers to sign up every potential customer who called regardless of whether the customer qualified for a home loan modification under the Treasury’s TARP-funded Home Affordable Modification Program, “HAMP,” or otherwise. Defendants also sent mass mailer solicitations to homeowners purporting to be pre-qualification notices for home loan modifications under government programs. In around January 2010, Gettel hired McCall, and around April 2010, Gettel and McCall created in-house teams of telemarketers in Utah. Black and Barrett joined CC Brown Law to work in the Utah telemarketing center. Creasey joined CC Brown Law in early 2011. As alleged in the indictment, Black, Barrett, and Creasey eventually managed or supervised the Utah-based telemarketing operation. Complaints to state and federal agencies in Utah and other states reflected a pattern of fraudulent conduct. For instance, customers would go for months without knowing the status of their loan modification, and those who were already in default continued to receive letters and phone calls from the lender or debt collector. In some instances, customers lost their homes to foreclosure while still waiting for word on their loan modification from CC Brown. The case is being investigated by SIGTARP, Internal Revenue Service Criminal Investigation, the Federal Bureau of Investigation, the Office of Inspector General Board of Governors of the Federal Reserve System and Consumer Financial Protection Bureau, and the Federal Housing Finance Agency-Office of Inspector General. The case is being prosecuted by the United States Attorney’s SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Office for the District of Utah and is brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Perpetrator of Various Investor Fraud Schemes Sentenced to 21 Months in Federal Prison, Ordered to Pay More Than $400,000 in Restitution to Victims – Michael P. Ramdat On January 21, 2015, Michael P. Ramdat, of Palm Beach, Florida was sentenced in the United States District Court for the Northern District of California to 21 months in federal prison, followed by three years of supervised release, and ordered to pay more than $416,000 in restitution in connection with a fraud scheme he perpetrated against small business owners and others seeking lines of credit around the nation and in which illegal profits were funneled through banks that received TARP funding. Also, as a special condition of his supervised release, Ramdat is prohibited from maintaining a position that involves acting in a fiduciary capacity. As previously reported, on February 26, 2014, Ramdat pled guilty to conspiracy and five counts of wire fraud for his role in the scheme. According to his plea agreement, Ramdat and his partner, Leigh Farrington Fiske, operated a business known as “Corporate Funding Solutions,” the purported purpose of which was to obtain lines of credit for customers in exchange for a fee. Ramdat’s role was to vouch for the legitimacy of the business with victims recruited by Fiske and to provide “customer service” by giving excuses to the victims. In reality, however, neither Fiske nor Ramdat ever intended to provide any services to their customers and, instead, accepted approximately $433,000 from around 30 victims without ever helping any of the victims obtain credit. Ramdat further admitted that he kept more than $200,000 of these payments for himself and that funds obtained through the scheme were routed through TARP recipient banks. As previously reported, Ramdat and his co-conspirator, Fiske, were indicted by a Federal grand jury on November 21, 2013. Fiske and Ramdat were arrested by SIGTARP agents and their law enforcement partners on September 16, 2013, and December 2, 2013, respectively. In December 2014, Fiske was sentenced to 37 months imprisonment and also ordered to pay restitution, joint and several, with Ramdat. Former Bank President Pleads Guilty to Bank Fraud and Money Laundering – Michael “Sean” Davis, Premier Community Bank of the Emerald Coast On March 13, 2015, Michael “Sean” Davis, of Crestview, Florida, pled guilty in the United States District Court for the Northern District of Florida to a total of nine counts including one count of conspiracy to commit bank and mail fraud; one count of conspiracy to commit money laundering; four counts of making false statements to a federally insured financial institution; two counts of fraudulently benefitting from a loan by a federally insured institution; and one count of money laundering in connection with a long-running short sale fraud scheme involving TARP recipient, Bank of America. As previously reported, Davis was indicted on October 21, 2014, in connection with the same conduct. 53 54 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM According to the plea agreement, beginning in January 2006, while the president of Premier Community Bank of the Emerald Coast (“Premier Community Bank”), Davis devised a scheme to defraud Premier Community Bank, Bank of America, and Beach Community Bank. As a part of the scheme, Davis solicited a straw buyer to submit false documents to purchase real properties via short sales from Bank of America. At Davis’ direction, the straw buyer then sold the properties the same day to third-party buyers. Davis authorized and approved loans from Premier Community Bank to these third-party buyers for the purchase of two of these properties from Davis’ straw buyer. As a result of these loans, Davis received more than $297,000 through his company, MSD Investments. Through this scheme, Davis discharged more than $743,000 in debt he owed to Bank of America for mortgage loans issued to Davis personally. At sentencing, scheduled for May 28, 2015, Davis faces: • up to 30 years in federal prison on each of the conspiracy to commit bank and mail fraud, false statement to a federally insured financial institution, and fraudulently benefitting from a loan by a federally insured institution counts; • a maximum of 20 years imprisonment on the conspiracy to commit money laundering count; and • up to 10 years imprisonment on the money laundering count. In addition, Davis will be required to make full restitution to the victims which include, among others, Bank of America, and the FDIC as receiver of Premier Community Bank of the Emerald Coast. The case is being investigated by SIGTARP, Internal Revenue Service – Criminal Investigation, the Federal Deposit Insurance Corporation Office of Inspector General and the Okaloosa County Sheriff’s Office as part of the Northwest Florida Financial Crimes Task Force. The case is being prosecuted by the United States Attorney’s Office for the Northern District of Florida in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Executives of Mortgage Lender and Former TARP Bank CEO Charged in Scheme to Defraud TARP Recipient Bank – Gateway Bank FSB On January 15, 2015, the United States District Court for the Eastern District of New York (Central Islip Division) unsealed plea proceedings in which Robert Savitsky, an attorney for mortgage origination company, Lend America, pled guilty to conspiracy to commit bank fraud for his role in defrauding TARP applicant, Gateway Bank FSB (“Gateway”). At sentencing, Savitsky faces up to five years in Federal prison. Additionally, as previously reported, on March 31, 2014, Poppi Metaxas, former President and Chief Executive Officer of Gateway, was charged in the United States District Court for the Eastern District of New York with conspiracy to commit bank fraud, bank fraud and perjury for her role in the scheme. Metaxas surrendered to authorities on April 2, 2014. Metaxas’ trial is scheduled to begin in June 2015, and, if convicted, she faces up to thirty years SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 imprisonment on the bank fraud charge and up to five years on each the conspiracy and perjury charges. According to court documents, Savitsky admitted that he, Metaxas, and others engaged in a series of financial transactions to make it appear that Gateway took steps to improve its poor financial condition, when, in reality, those transactions defrauded Gateway, depleted its capital and placed the institution at financial risk. In 2008, Gateway applied for TARP funds through the Capital Purchase Program, and, during that time, the Office of Thrift Supervision (“OTS”), Gateway’s banking regulator, instructed Gateway to improve the bank’s financial condition by increasing capital and reducing the number of problem and non-performing loans. Metaxas is alleged to have spearheaded and Savitsky admitted that he and others helped execute a plan to raise capital and ensure that a significant portion of problem assets would be sold. Specifically, Savitsky admitted that, together with others, he executed a sham round-trip transaction totaling more than $3.6 million that caused Gateway to use its own funds to subsidize a sale of Gateway’s nonperforming mortgage loans. Furthermore, Metaxas allegedly failed to disclose the true source of the funds to the OTS when she testified during a formal examination process. According to the Metaxas indictment, the round trip transaction resulted in significant losses to Gateway. In November 2009, Lend America ceased operations after receiving a court-ordered injunction that prevented it from making loans insured by the Federal Housing Administration and Gateway was required to write off the entire loan to Lend America. In addition to Savitsky, three additional Lend America executives have pled guilty in the United States District Court for the Eastern District of New York to bank fraud for their roles in the scheme, including Lend America’s: President, Michael Primeau; Chief Operations Officer, Helene Decillis; and Chief Business Strategist, Michael Ashley. Each faces up to 30 years in Federal prison at sentencing. This case is being investigated by SIGTARP, the Federal Bureau of Investigation, and the Department of Housing and Urban Development Office of Inspector General. The prosecution is being brought by the U.S. Attorney’s Office for the Eastern District of New York, in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Illinois Businessman Pleads Guilty for Defrauding TARP Bank – Steven J. Moorhouse, Old Second National Bank On, January 12, 2015, Steven J. Moorhouse, the former president and majority shareholder of Jefsco Manufacturing Co., Inc. (“Jefsco”) of Sandwich, Illinois, pled guilty in United States District Court for the Northern District of Illinois one count of making a false statement to a financial institution in connection with a scheme to defraud TARP recipient Old Second National Bank (“Old Second”) in which Moorhouse allegedly overstated the value of collateral he used to secure loans from Old Second. As previously reported, Moorhouse was charged in May 2013 with four counts of bank fraud and two counts of making a false statement to a financial institution. 55 56 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM According to court documents, in 2009, Old Second required Moorhouse to submit certain financial information in order to obtain two loans. Old Second granted Moorhouse a $1 million loan on the condition that Jefsco pledge its accounts receivable as collateral for the loan. Old Second also required that Jefsco open a deposit account at Old Second and deposit all accounts receivable payments into the account. One of the loans provided by Old Second allowed Moorhouse to borrow a percentage of Jefsco’s inventory and account receivables in the form of cash advances. On December 4, 2012, Moorhouse submitted a false “Borrowing Base Certificate” which he knew falsely inflated the value of Jefsco’s accounts receivable by hundreds of thousands of dollars. Moorhouse also knew that the amount of the loan proceeds Old Second would disburse would be determined, in part, by the misrepresented receivables figures contained in the document. Also, instead of depositing customer payments to an account at Old Second as promised, Moorhouse, with the intent to deceive, fraudulently transferred the payments into an account at another financial institution. Old Second Bancorp, Inc., the parent company of Old Second, received $73 million in TARP funds in January 2009. During the time it was in TARP, Old Second Bancorp missed ten required dividend payments totaling $9,125,000. Additionally, in March 2013, Treasury sold its stake in Old Second Bancorp at auction at a loss of approximately $47 million of the principal investment, resulting in a total taxpayer loss of $56,577,680. At sentencing, Moorhouse faces up to 30 years imprisonment. This case is being investigated by SIGTARP and the Federal Bureau of Investigation and is being prosecuted by the United States Attorney’s Office for the Northern District of Illinois in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Executives at Debt Collection Agency Sentenced for Role in $10 Million Fraud Scheme and Defrauding TARP Recipient Bank – Carlos Novelli, Randall Silver, & Charles Harris/Oxford Collection Agency On January 13, 2015, Carlos Novelli, of Vero Beach, Florida, former Chief Operations Officer for Oxford Collection Agency, Inc. (“Oxford”), was sentenced in the United States District Court for the District of Connecticut in Bridgeport, Connecticut, to two years of probation and ordered to pay more than $1.7 million in restitution to his victims, which included TARP recipient banks, having pled guilty in December 2012 to conspiracy to commit wire fraud and bank bribery stemming from a $10 million fraud scheme. Additionally, Novelli’s co-defendants, Randall Silver, Oxford’s former Vice President of Finance and Chief Financial Officer, of New Hyde Park, New York, and Charles Harris, an Oxford Executive Vice President, of Babylon, New York, each pled guilty in December 2012 for their roles in the scheme. Silver, who pled guilty to one count of conspiracy to commit wire and bank bribery and one count of wire fraud unrelated to the conspiracy offenses, was sentenced in October 2014, to five years probation. Harris pled guilty to one count of conspiracy to commit wire fraud and bank bribery and was sentenced to four years probation. Both Silver and Harris were also ordered to pay SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 restitution of $10,401,227, joint and several, to the victims, which included TARP recipient banks. According to court documents, various businesses and other entities contracted with Oxford to collect debts owed them by consumers. Oxford collected debts from consumers under the pretense that it would report all such collections to its clients and remit the appropriate amount to the client. However, Silver, Harris, Novelli, and other Oxford executives routinely caused Oxford to collect debts that were never remitted to its clients and referred to these unremitted collections as a client’s “backlog.” To hide the backlog, Silver, Harris, Novelli and others would make periodic fraudulent collection reports to certain clients that under-reported the amount of funds collected. Furthermore, starting in April 2007, Oxford secured a line of credit from Connecticut-based TARP recipient, Webster Bank, without informing Webster Bank about its significant client backlogs or outstanding payroll taxes. Oxford executives, including Richard Pinto, Oxford’s Chairman of the Board, and his son, Peter Pinto, Oxford’s President and Chief Executive Officer, sent falsified financial statements to Webster Bank. With Silver’s assistance in the fraud scheme, the Webster Bank credit line was increased to $6 million. Richard Pinto, Peter Pinto, Silver, and others also laundered funds from the credit line to promote the ongoing fraud scheme against their clients. During this same period, the Pintos, Silver, and others also solicited millions of dollars in investments from various investors, without ever disclosing to their investors the existence of their backlogs. Some of the investor funds were transferred into Richard Pinto’s personal bank account without investor knowledge. As part of the scheme, certain co-conspirators also paid kickbacks to employees of one or more financial institutions, including TARP recipient banks, in order to compensate them for providing Oxford with the bank’s debt collection business. As previously reported, on May 11, 2012, Richard Pinto and Peter Pinto each pleaded guilty to one count of conspiracy to commit wire fraud, bank fraud, and money laundering and one count of wire fraud stemming from this scheme. In addition, as previously reported, on April 9, 2014, Michael Gesimondo, a former collections manager at Washington Mutual Bank, was sentenced to one year of probation following his January 10, 2014, guilty plea in the United States District Court for the District of Connecticut, to taking kickbacks from Oxford executives. In May 2014, Gesimondo was barred from participating in the affairs of any insured depository institution. This case was investigated by SIGTARP, the Internal Revenue Service – Criminal Investigation, the Federal Bureau of Investigation, and the Connecticut Securities, Commodities and Investor Fraud Task Force and was prosecuted by the United States Attorney’s Office for the District of Connecticut in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. 57 58 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM New York Man Pleads Guilty to Role in HAMP Mortgage Modification Scam that Victimized Struggling Homeowners Nationwide – Angel Gonzalez, Homesafe America On March 5, 2015, Angel Gonzalez, of Rosedale, New York, a sales manager for various mortgage modification companies, pled guilty in the United States District Court for the Southern District of New York to conspiracy to commit wire fraud and wire fraud in connection with operating a massive mortgage modification scheme that defrauded hundreds of victims out of millions of dollars. Gonzalez was charged in October 2013 together with four co-defendants. According to court documents, Gonzalez admitted that between January 2009 and June 2011, he and the other defendants operated several companies that falsely promised to help financially struggling homeowners refinance their mortgages for lower interest rates and monthly payments after the homeowners had paid upfront fees of thousands of dollars. The defendants enticed homeowners to pay advanced fees by making numerous false statements through advertisements, websites, promotional letters and direct conversations. Those misrepresentations included, among others: • The defendants’ companies were associated with the Home Affordable Modification Program, “HAMP,” a TARP-funded official U.S. government mortgage relief program; • A mortgage modification was guaranteed and would only take 30 to 60 days; • Mortgage payments submitted to defendants could “assist” with the modification approval process; and • Homeowners’ fees would be refunded in the event defendants could not modify the homeowners’ loan. Furthermore, defendants also altered customer financial information used by an online service to determine eligibility for HAMP modifications which caused false modification approvals to be generated and lulled customers into believing work was actually being done on their behalf. Customers who received those approvals erroneously believed that they were eligible for a home loan modification. In reality, after receiving the upfront fees, defendants did nothing and instead used the funds for the own personal use. The defendants’ companies obtained at least $2.3 million from more than 500 homeowners throughout the United States. At sentencing, which has been scheduled for September 17, 2015, Gonzalez faces a maximum of 30 years in federal prison for each count. As previously reported, on October 23, 2013, in addition to Gonzalez, Guy Samuel, of Richmond Hill, New York; Anthony Blackwell, of New York, New York; Aren Goldfaden, of East Rockaway, New York; and Jonathan Lyons, of Rockville Center, New York, were charged for their roles in the scheme. Additionally, on October 16, 2013, Scott Schreiber, of Brooklyn, New York, pled guilty to conspiracy to commit wire fraud and wire fraud, and, on September 19, 2013, Darrell Keys, of Uniondale, New York, pled guilty to conspiracy to commit wire fraud in connection with their roles in the scheme. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 This case is being investigated by SIGTARP and the Federal Bureau of Investigation. It is being prosecuted by the United States Attorney’s Office for the Southern District of New York in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Former Senior Vice President & Senior Loan Officer of TARP Bank Admits to Willful Misapplication of Bank Funds – Braxton L. Sadler, TNBank On February 5, 2015, Braxton L. Sadler, a former Senior Vice President and senior loan officer of TARP recipient bank TNBank, of Oak Ridge, Tennessee, was sentenced in the United States District Court for the Eastern District of Tennessee, in Knoxville, Tennessee, to two years probation following his August 2014 guilty plea to willfully misapplying bank funds in connection with a long-running scheme to defraud TNBank. Sadler was also ordered to pay restitution of approximately $963,900 to TNBank. As previously reported, according to court documents, Sadler admitted that from 1995 through July 2009 he willfully processed loans for a borrower without investigating the borrower’s ability to repay the loan and then allowed the loan proceeds to be used for the borrower’s failed construction project, rather than for their stated purpose. In addition, Sadler lent personal funds to the borrower without disclosing these personal loans to TNBank or listing the loans on internal TNBank documents as debts the borrower owed and which impacted the borrower’s ability to repay the TNBank loans. Sadler also made payments with personal funds on several borrowers’ accounts, causing TNBank records to reflect that those customers were timely with payments when, in actuality, they were not. Finally, Sadler admitted that his actions resulted in misstatements on the bank’s application for TARP funds. In December 2008, Tennessee Valley Financial Holdings, Inc., (“Tennessee Valley”) the parent company of TNBank, received $3 million in taxpayer funds through TARP. During the time TARP funds were outstanding, Tennessee Valley missed a total of thirteen required dividend payments, totaling $531,375. This case is being investigated by SIGTARP and the Federal Bureau of Investigation and is being prosecuted by the United States Attorney’s Office for the Eastern District of Tennessee in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Prison Sentences Resulting from SIGTARP Criminal Investigations Of the 177 defendants convicted as a result of a SIGTARP investigation, 99 defendants have already been sentenced to prison for TARP-related crimes, 27 were sentenced to probation, and the remainder await sentencing. The consequences for TARP-related crime are severe. The average prison sentence imposed by courts for TARP-related crime investigated by SIGTARP is 64 months, which is nearly double the national average length of prison sentences involving white collar fraud of 36 months.xxix Seventeen defendants investigated xxix See the U.S. Sentencing Commission’s 2013 Sourcebook of Federal Sentencing Statistics for additional information. 59 60 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM by SIGTARP were sentenced to 10 years or more in Federal prison, including Lee Farkas, former chairman of mortgage company Taylor, Bean and Whitaker Mortgage Corporation LLC (“TBW”), who is serving a 30-year prison sentence, and Edward Woodard, former chairman of the Bank of the Commonwealth, who is serving a 23-year prison sentence. David Alan Tikal, who was convicted of defrauding homeowners in a foreclosure rescue scam, was recently sentenced to 24 years in federal prison. Many of the criminal schemes uncovered by SIGTARP had been ongoing for years, and involved millions of dollars and complicated conspiracies with multiple co-conspirators. On average, as a result of SIGTARP investigations, criminals convicted of crimes related to TARP’s banking programs have been sentenced to serve 71 months in prison. Criminals convicted for mortgage modification fraud schemes or other mortgage fraud related investigations by SIGTARP were sentenced to serve an average of 55 months in prison. Criminals investigated by SIGTARP and convicted of investment schemes such as Ponzi schemes and sales of fake TARP-backed securities were sentenced to serve an average of 57 months in prison. Figure 1.5 shows the people sentenced to prison, the sentences they received, and their affiliations. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 1.5 INDIVIDUALS SENTENCED TO PRISON Lee Bentley Farkas 360 months 3 years supervised release Chairman Taylor, Bean and Whitaker Alan Tikal 288 months 5 years supervised release Principal KATN Trust Edward Woodard 276 months 5 years supervised release President & CEO Bank of the Commonwealth Stephen Fields 204 months 5 years supervised release Executive Vice President Bank of the Commonwealth David McMaster 188 months 5 years supervised release Vice President American Mortgage Specialists, Inc. Mark Anthony McBride [deceased] 170 months 5 years supervised release Omni National Bank Delroy Davy 168 months 5 years supervised release Omni National Bank George Hranowskyj 168 months 3 years supervised release Owner/Operator 345 Granby, LLC Mark A. Conner 144 months 5 years supervised release President FirstCity Bank Jonathan L. Herbert 140 months 5 years supervised release Owner Federal Dept Commission Eric Menden 138 months 3 years supervised release Owner/Operator 345 Granby, LLC Robert Egan 132 months 3 years supervised release President Mount Vernon Money Center Mark Farhood 132 months 3 years supervised release Owner Home Advocate Trustees Glen Alan Ward 132 months 3 years supervised release Partner Timelender Shawn Portmann 120 months 5 years supervised release Senior Vice President Pierce Commercial Bank John Farahi 120 months 3 years supervised release Investment Fund Manager and Operator New Point Financial Services, Inc. Gordon Grigg 120 months 3 years supervised release Financial Advisor and Owner ProTrust Management, Inc. Isaak Khafizov 108 months 3 years supervised release Principal American Home Recovery Scott Powers 96 months 5 years supervised release CEO American Mortgage Specialists, Inc. Robin Bruhjell Brass 96 months 3 years supervised release Owner/Operator BBR Group, LLC Catherine Kissick 96 months 3 years supervised release Senior Vice President Colonial Bank Troy Brandon Woodard 96 months 5 years supervised release Vice President Bank of the Commonwealth Subsidiary Howard Shmuckler 90 months 3 years supervised release Owner/Operator The Shmuckler Group, LLC Clayton A. Coe 87 months 5 years supervised release Vice President/ Senior Commercial Loan Officer FirstCity Bank David Tamman 84 months 3 years supervised release Attorney Nixon Peabody LLP Christopher Godfrey 84 months 3 years supervised release President H.O.P.E. Dennis Fischer 84 months 3 years supervised release Vice President H.O.P.E. Lawrence Allen Wright 75 months 5 years supervised release Owner Wright & Associates Lori Macakanja 72 months 3 years supervised release Housing Counselor HomeFront, Inc. (a HUD-approved company) Jerry J. Williams 72 months 3 years supervised release President, CEO, and Chairman Orion Bank Desiree Brown 72 months 3 years supervised release Treasurer Taylor, Bean and Whitaker Jason Sant 72 months 2 years supervised release Co-owner Home Advocate Trustees Edward Shannon Polen 71 months 5 years supervised release Owner Polen Lawn Care and Maintenance/F&M Adam Teague 70 months 5 years supervised release Vice President Appalachian Community Bank Francesco Mileto 65 months 5 years supervised release 61 62 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Glenn Steven Rosofsky [deceased] 63 months 3 years supervised release Owner Federal Housing Modification Department Frederic Gladle 61 months 3 years supervised release Operator Timelender William Cody 60 months 5 years supervised release Owner/Operator C&C Holdings, LLC Jeffrey Levine 60 months 5 years supervised release Executive Vice President Omni National Bank Richard Pinto [deceased] 60 months 5 years supervised release Chairman Oxford Collection Agency Delton de Armas 60 months 3 years supervised release CFO Taylor, Bean and Whitaker Bernard McGarry 60 months 3 years supervised release Chief Operatiing Officer Mount Vernon Money Center Ray Kornfeld 60 months 3 years supervised release Employee KATN Trust Steven Pitchersky 51 months 5 years supervised release Owner/Operator Nationwide Mortgage Concepts Dwight Etheridge 50 months 5 years supervised release President Tivest Development & Construction, LLC Peter Pinto 48 months 3 years supervised release President/COO Oxford Collection Agency Winston Shillingford 48 months 3 years supervised release Co-owner Waikele Properties Corp. Michael Edward Filmore 48 months 3 years supervised release Straw Borrower Julius Blackwelder 46 months 3 years supervised release Manager Friends Investment Group Paul Allen 40 months 2 years supervised release CEO Taylor, Bean and Whitaker Brent Merriell 39 months 5 years supervised release Robert E. Maloney, Jr. 39 months 3 years supervised release In-house Counsel FirstCity Bank Leigh Farrington Fiske 37 months 3 years supervised release External Owner Salvador Management, LLC dba Corporate Funding Solutions S.A. Cheri Fu 36 months 5 years supervised release Owner/President Galleria USA, Inc. Christopher Tumbaga 36 months 4 years supervised release Loan Officer Colorado East Bank and Trust Brian Headle 36 months 4 years supervised release Borrower Colorado East Bank and Trust Marleen Shillingford 36 months 3 years supervised release Co-owner Waikele Properties Corp. Roger Jones 33 months 3 years supervised release Federal Housing Modification Department Thomas Hebble 30 months 3 years supervised release Executive Vice President Orion Bank Michael Trap 30 months 3 years supervised release Owner Federal Housing Modification Department Raymond Bowman 30 months 2 years supervised release President Taylor, Bean and Whitaker Tommy Arney 27 months 3 years supervised release Owner Residential Development Company Marvin Solis 27 months 3 years supervised release Owner Hawk Ridge Investments, LLC Joseph D. Wheliss, Jr. 24 months 5 years supervised release Owner/Operator National Embroidery Works Inc Clint Dukes 24 months 5 years supervised release Owner Dukes Auto Collision Repair Angel Guerzon 24 months 3 years supervised release Senior Vice President Orion Bank Reginald Harper 24 months 3 years supervised release President and CEO First Community Bank Jesse Litvak 24 months 3 years supervised release Managing Director Jefferies LLC James Ladio 24 months 3 years supervised release President/CEO MidCoast Community Bank, Inc. Karim Lawrence 21 months 5 years supervised release Officer Omni National Bank SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Thomas Fu 21 months 5 years supervised release Owner/CFO Galleria USA, Inc. Ziad Nabil Mohammed Al Saffar 21 months 3 years supervised release Operator Compliance Audit Solutions, Inc. Michael Ramdat 21 months 3 years supervised release Troy A. Fouquet 18 months 3 years supervised release Owner Team Management, LLC TRISA, LLC Matthew Amento 18 months 3 years supervised release Owner Blue and White Management, Ameridream Christopher Woods 18 months 3 years supervised release Owner Blue and White Management, Ameridream Robert Ilunga 18 months 3 years supervised release Manager Waikele Properties Corp. Walter Bruce Harrell 18 months 3 years supervised release Owner Lynn Nunes 12 months 5 years supervised release Owner Network Funding Andrew M. Phalen 12 months 5 years probation Operator CSFA Home Solutions Sara Beth Bushore Rosengrant 12 months 3 years supervised release Operator Compliance Audit Solutions, Inc. Brian M. Kelly 12 months 3 years supervised release Employee H.O.P.E. Gregory Flahive 12 months 3 years probation Owner/Attorney Flahive Law Corporation Carlos Peralta 12 months 3 years supervised release Park Avenue Bank Vernell Burris 12 months 2 years supervised release Employee H.O.P.E. Justin D. Koelle 9 months 5 years probation CEO CSFA Home Solutions Jacob J. Cunningham 8 months 5 years probation CEO CSFA Home Solutions John D. Silva 8 months 5 years probation Senior Official CSFA Home Solutions Jeanette R. Salsi 7 months 3 years supervised release Senior Underwriter Pierce Commercial Bank Phillip Alan Owen 6 months 5 years supervised release Branch Manager Superior Financial Services, LLC Dominic A. Nolan 6 months 5 years probation Owner CSFA Home Solutions Daniel Al Saffar 6 months 3 years supervised release Sales Representative Compliance Audit Solutions, Inc. Teresa Kelly 3 months 3 years supervised release Operations Supervisor Colonial Bank Sean Ragland 3 months 3 years supervised release Senior Financial Analyst Taylor, Bean and Whitaker Eduardo Garcia Sabag 3 months Deported Borrower Alice Lorrraine Barney 2 months 3 years supervised release Marketing & Administrative Assistant Pierce Commercial Bank Sonja Lightfoot 1 month 3 years supervised release Senior Vice President Pierce Commercial Bank Mark W. Shoemaker 1 day (with credit for time served) 5 years supervised release Michael Bradley Bowen 1 day (with credit for time served) 5 years supervised release 63 64 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Location of TARP-Related Crimes SIGTARP has found, investigated, and supported the prosecution of TARP-related crime throughout the nation. Our investigations have led to criminal charges against 250 defendants (177 of whom have been convicted as of March 31, 2015, while others await trial).xxx These defendants were charged in courts in 28 states and Washington, DC. SIGTARP investigations have identified victims of TARPrelated crimes in all 50 states and Washington, DC. Victims of TARP-related crimes include taxpayers, the Federal Government, including Treasury and FDIC, TARP recipient banks, and homeowners targeted by mortgage modification scams. Figure 1.6 shows locations where criminal charges were filed by Federal or State prosecutors as a result of SIGTARP investigations.xxxi xxx Criminal charges are not evidence of guilt. A defendant is presumed innocent until and unless proven guilty. xxxi The prosecutors partnered with SIGTARP ultimately decide the venue in which to bring criminal charges resulting from SIGTARP’s investigations. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 1.6 LOCATIONS WHERE CRIMINAL CHARGES WERE FILED AS A RESULT OF SIGTARP INVESTIGATIONS Tacoma Fargo Concord Boston Hartford Brooklyn New Haven Madison White Plains Bridgeport New York Central Islip Rockford Chicago Newark Wheaton Philadelphia Omaha Columbus Wilmington Upper Marlboro Lincoln Washington, DC Denver Alexandria Kansas City (KS) Kansas City (MO) Norfolk East St. Louis Wichita Jefferson City St. Louis Buffalo Sacramento Salt Lake City Oakland San Francisco Las Vegas Nashville Los Angeles Santa Ana Riverside San Diego Little Rock Birmingham San Antonio Knoxville Gainesville Atlanta Macon Valdosta Pensacola New Orleans Fort Myers Northern District of Alabama Birmingham Eastern District of Arkansas Little Rock Central District of California Los Angeles Riverside Santa Ana Eastern District of California Sacramento Northern District of California Oakland Northern District of California San Francisco Southern District of California San Diego Superior Court of California Sacramento Santa Ana Northern District of Georgia Atlanta Gainesville Northern District of Illinois Chicago Rockford Southern District of Illinois East St. Louis Circuit Court of Cook County, Illinois Chicago Circuit Court of DuPage County, Illinois Wheaton District of Kansas Kansas City Wichita Eastern District of Louisiana New Orleans District of Connecticut Bridgeport Hartford New Haven Prince George’s District Court Upper Marlboro District of Delaware Wilmington Eastern District of Missouri St. Louis District of Columbia Washington, DC Western District of Missouri Jefferson City Kansas City Middle District of Florida Fort Myers Northern District of Florida Pensacola Middle District of Georgia Macon Middle District of Georgia Valdosta Note: Italics denote state cases. District of Massachusetts Boston District of Nebraska Lincoln Omaha District of Nevada Las Vegas District of New Hampshire Concord District of New Jersey Newark Eastern District of New York Brooklyn Eastern District of New York Central Islip Southern District of New York New York White Plains Western District of New York Buffalo District of North Dakota Fargo Southern District of Ohio Columbus Eastern District of Pennsylvania Philadelphia Eastern District of Tennessee Knoxville Middle District of Tennessee Nashville Western District of Texas San Antonio District of Utah Salt Lake City Eastern District of Virginia Alexandria Norfolk Western District of Washington Tacoma Western District of Wisconsin Madison 65 66 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP Helping to Bring Money Back to Victims and the Government As of March 31, 2015, investigations conducted by SIGTARP have resulted in more than $7.4 billion in post-conviction court orders and Government settlements for the return of money to victims or the Government. These orders happen only after conviction and sentencing or civil resolution and many SIGTARP cases have not yet reached that stage; therefore, any additional court orders would serve to increase this amount. Two cases in particular that SIGTARP investigated have resulted in not only lengthy prison sentences for a number of individuals in each case but also significant orders of forfeiture and restitution. First, in the Colonial Bank/ Taylor, Bean and Whitaker Mortgage Corporation LLC (“TBW”) case, former TBW chairman Lee Bentley Farkas spearheaded a $2.9 billion fraud scheme that contributed to the failure of Colonial Bank, the sixth largest bank failure in U.S. history. The case resulted in not only prison time for eight people including Farkas but also court-ordered restitution of $3.5 billion and forfeiture of $38.5 million. Second, in the Bank of the Commonwealth case (“BOC”), where former chairman Edward J. Woodard led a $41 million bank fraud scheme that masked nonperforming assets at BOC and contributed to the failure of BOC in 2011, the court entered a restitution order of $333 million and a forfeiture order of $65 million against nine defendants, each responsible for at least a portion. Other SIGTARP investigations result in government settlements. SunTrust, in order to resolve the criminal investigation into its administration of the HAMP program, agreed to pay $320 million. The settlement is broken down as follows: $179 million in restitution to compensate borrowers; $16 million in forfeiture; and an additional $20 million to establish a fund for distribution to organizations providing counseling and other services to distressed homeowners. A settlement was also reached with Bank of America and two of its top executives, former CEO Kenneth Lewis and former CFO Joe Price after a SIGTARP investigation revealed massive losses at Merrill Lynch (which Bank of America was in the process of acquiring) were not disclosed to shareholders. Bank of America and Lewis agreed to pay $25 million. Price agreed to pay $7.5 million. Overall in SIGTARP cases, orders of restitution and forfeiture to victims and the Government of numerous assets as well as seized assets pending final order include dozens of vehicles, more than 25 properties (including businesses and waterfront homes), more than 30 bank accounts (including a bank account located in the Cayman Islands), bags of silver, U.S. currency, antique and collector coins (including gold, silver, and copper coins), artwork, antique furniture, Civil War memorabilia, NetSpend Visa and CashPass MasterCard debit cards, Western Union money orders with the “Pay To” line blank, and the entry of money judgments by courts against more than 20 defendants. Of the vehicles ordered to be forfeited (including automobiles, a tractor, water craft, recreational and commercial vehicles) several are antique and expensive cars, including a 1969 Shelby Mustang, a 1932 Ford Model A, a 1954 Cadillac Eldorado convertible, a 1963 Rolls Royce, and a 1965 Shelby Cobra. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 As part of the Bank of the Commonwealth case, Thomas Arney, who pled guilty for his role in the bank fraud scheme, agreed to forfeit the proceeds from the sale of two antique cars to the Government: a 1948 Pontiac Silver Streak and a 1957 Cadillac Coup de Ville. Figure 1.7 includes pictures of the cars that have been ordered forfeited, as well as other examples of assets seized by the Government in SIGTARP investigations. FIGURE 1.7 ORDERED SEIZED 1957 Cadillac Coupe de Ville. 1948 Pontiac Silver Streak. 2010 Mercedes-Benz GLK 350 4Matic. Estimated value in 2013: $29,000. (Source Kelley Blue Book) 2005 Hummer H2. Estimated value in 2013: $24,000. (Source Kelley Blue Book) Property located in Norfolk, Virginia. (Photo courtesy of Bill Tiernan, The Virginian-Pilot) 1958 Mercedes-Benz Cabriolet 220. Estimated value in 2013: $185,000. (Source Hagerty.com) 67 68 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Property located in Chesapeake, Virginia. (Photo courtesy of Bill Tiernan, The Virginian-Pilot) French-style gilt, bronze, and green malachite columnar 16-light torchères with bronze candelabra arms. Estimated appraised value: $8,000. 2005 Scout Dorado. (Sold for $1,800) Cash seized from safe, $158,000. Alabama property ordered forfeited. Kubota tractor. Artwork with a total value of $71,525, including paintings worth up to $10,000 each. 19th century English painting of “Royal Family,” oil on canvas. Estimated appraised value: $6,000. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TARP-Related Prohibitions from Working in Banking and Financial Services; as a Government Contractor; or as a Licensed Attorney SIGTARP investigations not only have led to lengthy prison terms, restitution and forfeiture orders and civil judgments for TARP-related offenses, but also have resulted in senior executives being suspended or permanently banned from working in certain industries. As of March 31, 2015, SIGTARP investigations have resulted in orders temporarily suspending or permanently banning 93 individuals from working in the banking or financial industry, working as a contractor with the Federal Government, or working as a licensed attorney. Many of these people were at the highest levels of companies that applied for or received a TARP bailout. They were trusted to exercise good judgment and make sound decisions. However, they abused that trust, many times for personal benefit. The suspensions and bans remove these senior executives from the banking and financial industries in which many practiced for years. A violation of the removal, in some instances, could be a basis for further prosecution. These high-level executives, some of whom were chief executive officers, chief financial officers, or licensed attorneys, have been sanctioned in a variety of ways, many by more than one authority: (i) by a sentencing court as part of the terms of supervised release after a prison term has been served; (ii) by the executive branch of the Federal Government as a bar from engaging in a Government contract; (iii) by a Federal banking regulator, which has the authority to ban an individual from working in the banking industry; (iv) by the Securities and Exchange Commission (“SEC”), which has the authority to issue certain bans relating to working in the securities industry; (v) by a Federal court in enforcing a Federal Trade Commission (“FTC”) request to order a ban against advertising, marketing, promoting, or selling mortgage assistance or mortgage relief; and (vi) by a state bar association, which has the authority to suspend or disbar a licensed attorney. Of the 93 individuals, 54 were heads or owners of companies, including those who were chairmen, chief executive officers, and presidents of financial institutions. Most of the remaining 39 individuals were chief financial officers, senior vice presidents, chief operating officers, chief credit officers, licensed attorneys, and other senior executives. This quarter, SIGTARP investigations resulted in two industry prohibitions as special conditions of supervised release. First, in addition to a more-than eleven year prison sentence for a massive foreclosure relief scam in which he defrauded distressed homeowners out of around $750,000, pretending to be operated or approved by the federal government, Jonathan L. Herbert has been prohibited from engaging in telemarketing, direct mail, or national advertising campaigns for business purposes. Second, on top of his 21 month prison sentence for a scheme in which he and a co-conspirator defrauded small business owners and others out of more than $430,000 by charging upfront fees while failing to deliver promised lines of credit, Michael P. Ramdat has been prohibited from maintaining a position that involves acting in a fiduciary capacity. 69 70 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM S ECT I O N 2 SIGTARP RECOMMENDATIONS 72 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Congress created SIGTARP to prevent vulnerabilities for fraud, waste, and abuse in TARP, improve TARP’s efficiency and effectiveness, and enforce the law where fraud has seeped in. SIGTARP’s 164 recommendations in TARP programs are designed to protect TARP programs and dollars. However, they can only provide that protection if Treasury implements them. Of the 164 recommendations, Treasury has failed to implement 92 recommendations, representing lost opportunities. This section discusses developments with respect to SIGTARP’s recommendations. The table at the end of this section summarizes all of SIGTARP’s recommendations and indicates whether Treasury or other Federal agencies related to TARP implemented them. As TARP’s housing programs continue to evolve, SIGTARP evolves. SIGTARP applies its knowledge and expertise gained from audits and investigations to protect the interests of taxpayers, communities, and the broader financial system through recommendations that can improve TARP now, when struggling homeowners need it most. SIGTARP’s oversight of a TARP program does not end when Treasury sells its investment. SIGTARP has published several audit reports to bring transparency to historical decision-making concerning TARP. These reports provide important lessons learned that can be applied in the future or to make ongoing TARP programs more efficient and effective. SIGTARP will continue to issue recommendations on TARP’s ongoing programs, including: • • • Treasury’s implementation and execution of TARP’s signature housing program, HAMP; Treasury’s implementation and execution of TARP’s Hardest Hit Fund, including the TARP Hardest Hit Fund Blight Elimination Program; and TARP’s Capital Purchase Program and the Community Development Capital Initiative. RECOMMENDATIONS CONCERNING TARP’S HOUSING PROGRAMS Treasury can increase the effectiveness of HAMP and HHF. In November 2014, Treasury again extended by one year the period in which certain HAMP incentives may be paid. In June 2013, Treasury expanded HHF to include blight elimination and greening of certain vacant and abandoned properties. HAMP will continue until 2023. Participating states have until 2017 to use HHF funds. TARP’s housing programs require oversight because: • Treasury can still spend over $21 billion towards TARP’s housing programs, an amount larger than most Government programs; 73 74 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM • TARP’s housing programs need improvement to increase effectiveness; • Information gained through SIGTARP audits and investigations highlights deficiencies and areas for improvement in TARP’s housing programs; and • Congress did not authorize TARP as first proposed, but instead required that Treasury provide foreclosure relief programs for homeowners. SIGTARP’s audit and other reporting ensure that TARP is not just a bailout of the largest institutions. Specifically, SIGTARP has made 67 recommendations concerning TARP’s housing programs, including nine recommendations concerning TARP’s HHF blight elimination program; Treasury has not implemented 61 of those recommendations. In the last two years, SIGTARP made 26 recommendations just on TARP’s housing programs. Some of SIGTARP’s most significant unimplemented recommendations to Treasury address problems in HAMP and HHF. Without further delay, Treasury should set meaningful and measurable performance goals for HHF at the Treasury level and instruct each of the state housing agencies to establish similar measures at the state level. Treasury should set milestones at which the state housing finance agencies in HHF must review the progress of their state’s programs and make adjustments from this review. Treasury should also conduct in-depth analysis to determine the causes of re-defaults in HAMP, and make public its findings so others can learn from this research. After two or more years, Treasury should implement these important recommendations to increase the effectiveness of TARP. RECOMMENDATIONS ON THE TARP HHF BLIGHT ELIMINATION PROGRAM In its April 21, 2015, audit report, “Treasury Should Do Much More to Increase the Effectiveness of the TARP Hardest Hit Fund Blight Elimination Program,” SIGTARP found that the program is designed in a way that leaves Treasury in the dark on strategies, decisions, and blight elimination activity conducted under HHF and paid for with TARP dollars. Much of the decision-making and the actual blight elimination activities is in the hands of city or county/land banks/non-profits or for profit partners, whose identities are unknown to Treasury. SIGTARP concluded Treasury should instead follow the same pattern with HHF that Treasury has taken in other TARP programs to gain insight, conduct comprehensive planning, set targeted outcomes, and do more than disburse TARP dollars to ensure the TARP funds are used effectively to ensure the program’s success, and prevent fraud, waste, and abuse. While SIGTARP recognizes the challenge of using a Federal program to offer local solutions administered by state agencies and Treasury’s desire to give states flexibility because the states know best about problems in their states, flexibility SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 should not mean free rein. This challenge can be mitigated by comprehensive planning to ensure that Federal interests and state interests align. SIGTARP found that, unlike other TARP programs, Treasury has not set target outcomes that it wants the HHF Blight Elimination Program to achieve, instead deferring to each HFA to set the target outcome. If Treasury does not set a target outcome for HHF blight elimination, it is leaving the success of a TARP program to chance. This leads to a lack of accountability at the city or county level, state level, and Treasury level. This type of comprehensive planning is not new to Treasury and is a recognized best practice for the Federal Government that does not harm a state’s ability to tailor local solutions that are aligned with Treasury’s target outcomes. Knowing the target outcomes that Treasury is trying to achieve provides a framework for states and cities or counties to make choices that are locally tailored, and are also consistent with Federal objectives. Treasury has not waited until the end of other TARP programs to measure progress and success toward the goals set out by Congress for TARP, but that is what Treasury is doing with HHF blight elimination. Treasury is also aware the states have not established performance indicators and are not measuring progress of the impact of HHF blight elimination activities. Tracking the impact of HHF blight elimination on a periodic basis would allow Treasury and the HFAs to give guidance to the city and county and other HFA partners that could allow for a greater economic impact. By keeping itself in the dark, Treasury misses an opportunity to help states and cities or counties develop a strategy that has the most effective use of HHF dollars and the best chance for success. Further, by allowing itself to be in the dark, Treasury has created a TARP program with very limited transparency to Treasury and the public. Greater transparency to the public builds trust and empowers taxpayers who fund TARP programs and have a right to transparency in how those funds are spent. Given that Treasury decided to make a TARP investment in eliminating vacant properties, rather than more direct aid to homeowners, Treasury should do much more to fulfill its oversight responsibilities and ensure success, including setting target outcomes, providing guidance, conducting oversight, and monitoring activities while still allowing states to have flexibility in execution. SIGTARP recommended: • Treasury should ensure that state housing finance agencies and all of their city or county/land bank/non-profit/for-profit partners have the resources, staffing, training, and knowledge, and are ready for, and can effectively handle the increase in contracting, demolition, and other blight elimination activities contemplated under HHF. • Treasury should keep itself informed and gain insight of critical activities taking place under HHF blight elimination by knowing the identities of all who will participate in blight elimination activity under HHF or receive TARP funds including city or county/land bank/non-profit/for profit 75 76 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM • • • • • • partners and their subcontractors through required reporting by state HFAs to Treasury on an ongoing basis. Treasury should keep itself informed and gain insight of critical activities taking place under HHF blight elimination by requiring reporting by state HFAs on: (1) the neighborhoods selected for HHF blight elimination and the strategy for choosing that neighborhood; and (2) property address including zip codes for any property demolished or removed under HHF. Treasury should increase transparency by publicizing on its website: (1) a list of all city or county/land bank/non-profit/for-profit partners that will participate in blight elimination activity under HHF on a state by state basis; (2) a list of addresses including zip code where a property has been demolished or removed under HHF on a city and state basis; (3) Treasury’s expected target outcomes by city and state; and (4) performance indicators to measure progress by city and state. Treasury should engage in comprehensive planning to ensure that blight elimination under HHF progresses in the most effective way by, within 60 days, setting target outcomes for HHF blight elimination of how much Treasury expects blight elimination under TARP to increase home values and decrease foreclosures by city and state. Treasury can consult with the state HFAs as to set realistic target outcomes, but should not defer to state HFAs to define success. Treasury should share its target outcome with each state HFA. Treasury should engage in comprehensive planning to ensure that blight elimination under HHF progresses in the most effective way by, within 60 days, requiring state HFAs participating in blight elimination activities under TARP to develop performance indicators such as decreases in default rates or foreclosure filings, or increases in home values through home sales and annual tax assessments to measure progress towards Treasury’s target reduction in foreclosures and target increase in home values. Treasury should use its expertise and resources to help the state HFAs develop performance indicators. Treasury should require reporting by state HFAs on a periodic basis no less than bi-annually on chosen performance indicators and use that reporting to monitor which cities and states are on track to achieve successfully Treasury’s goal and to identify improvements to increase effectiveness. Treasury should require quarterly detailed accounting by state HFAs of how TARP funds are spent reimbursing local partners for blight elimination activities under HHF that lists actual TARP reimbursed expenditures for each local partner by each category of blight elimination activity, including demolition, acquisition, greening, maintenance, asbestos removal, engineering studies, environmental studies, or any other category of expenditures. Treasury should require state HFAs to develop a system of internal controls targeted specifically at blight elimination. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 • Treasury should increase the effectiveness of oversight at both the Treasury and state HFA levels by (1) collecting all contracts and subcontracts for HHF blight elimination activities; and (2) requiring the state HFAs to collect all contracts and subcontracts for HHF blight elimination activities. RECOMMENDATIONS ON HAMP SERVICING TRANSFERS In a March 15, 2015, letter to Treasury Secretary Lew, SIGTARP expressed concerns that homeowners who applied for HAMP (or are currently in HAMP) remain vulnerable to having their HAMP application (or modification) lost or delayed when their servicer transfers their mortgage. Mortgage transfers can cause significant damage for homeowners applying to or participating in HAMP. Delays, omissions, or miscommunications between the transferring servicer and the new servicer can seriously delay, deny, or decrease appropriate relief to HAMP-eligible homeowners. Homeowners applying for HAMP may be required to submit new applications months later, requiring all new documentation because the past documentation becomes stale. Many struggling homeowners who could not afford their original mortgage payment may fall further behind during a new extended application period, putting their homes at risk or hurting their chances of receiving a HAMP modification. Homeowners with a HAMP trial or permanent modification suffer if the new servicer is not promptly informed, or does not honor the modification. Even when the homeowner makes timely modified HAMP payments, if the new servicer does not understand that the homeowner has a HAMP modification before the first monthly payment is due, the new servicer will only see the original terms of the mortgage and deem the homeowner delinquent on the original terms. New servicers also may recalculate income or payments in a way that disadvantages homeowners. Treasury bears the ultimate responsibility to ensure that a transfer of a homeowner’s mortgage will not harm any homeowner who applied for or is already participating in HAMP. Homeowners have little ability to protect themselves because the decision to transfer their mortgage lies outside their control. To protect homeowners pursuing and participating in HAMP, SIGTARP recommended that: • Treasury require mortgage servicers administering HAMP to designate a single point of responsibility at the transferring servicer and the new receiving servicer to ensure that submitted HAMP applications (whether complete or not), HAMP trial modifications, and HAMP permanent modifications transfer to the new mortgage servicer at the time the mortgage servicing is transferred. • Treasury should require that a transferring servicer’s single point of responsibility employee be responsible for: (1) transferring all information and documents related to the homeowner and HAMP to the new servicer 77 78 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM at the time of service transfer; (2) confirming receipt in writing of the HAMP information and documents from the new servicer; (3) ensuring that the transferring servicer retains all documents and information provided to the new servicer related to HAMP; (4) ensuring that the transferring servicer fully complies with all HAMP rules and Treasury reporting requirements related to mortgage servicing transfers; and (5) promptly informing homeowners in writing that their HAMP information and documents were transferred to the new servicer, the date of the transfer of HAMP information and documents, and the name and contact information of the original transferring servicer’s single point of responsibility. • Treasury should require that a new receiving servicer’s single point of responsibility employee be responsible for: (1) confirming receipt in writing of the HAMP information and documents from the transferring servicer at the time of transfer; (2) ensuring that the receiving servicer fully complies with all HAMP rules and Treasury reporting requirements related to mortgage servicing transfers; and (3) promptly informing homeowners that their HAMP information and documentation has been received, confirming their status in HAMP, and providing the name and contact information of the receiving servicer’s single point of responsibility. • Treasury should increase its oversight of mortgage servicers to ensure that they are following all HAMP rules and Treasury reporting requirements related to mortgage servicing transfers on a timely basis, that they have designated a single point of responsibility for transfers, and that single point of responsibility is effectively fulfilling its responsibilities. Treasury should publicly report the results of its oversight in this area in its quarterly servicer assessment, and should assess fines and permanently withhold financial incentives for servicers not in compliance. Treasury should not allow mortgage servicing transfers to hurt even one homeowner. Treasury must realize that the problem will not go away without change. Treasury rejected SIGTARP’s recommendations. Treasury instead affirms that its current compliance process, including sample testing, does enough to ensure that servicers follow HAMP rules and Treasury reporting requirements. It does not, or this problem would not exist. Anticipating this response, SIGTARP’s March 15th letter warned, “SIGTARP recognizes that [existing HAMP rules on servicing transfers] should be sufficient to alleviate the problem, but the fact is that Treasury’s current rules and oversight have not been enough to eliminate the problem, as SIGTARP’s and CFPB’s findings, and homeowner complaints prove.” Responding to SIGTARP’s letter, Treasury did express plans to expand and refine its compliance testing. Treasury should not just hope to catch in the future what it failed to catch before. Moreover, compliance testing would only catch the problem one servicer at a time and loses the opportunity to force program-wide change. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Treasury’s response sends a huge signal to servicers that they do not expect any change in this area. Instead, Treasury should assert its authority and prevent and deter the damage mortgage transfers can cause, rather than testing samples to find harmful transfers after they have already occurred. In April 2015, HAMP servicer Green Tree Servicing agreed to pay $63 million and take additional actions to protect homeowners to settle charges by the Federal Trade Commission and the Consumer Financial Protection Bureau that the servicer harmed homeowners with illegal loan servicing and debt collection practices. According to the allegations, after mortgages were transferred to Green Tree, it often did not honor modification agreements in their final stages. Green Tree allegedly also required consumers behind on their mortgages to make loan payments to be considered for a loan modification even when assistance programs prohibited such up-front payment requirements, and insisted on doing its own due diligence to the detriment of struggling homeowners. Green Tree also allegedly tried to collect the original mortgage payment on loans it knew or had reason to know had been modified by the previous servicer. Green Tree’s collectors allegedly threatened and harassed homeowners with aggressive tactics; one collector said to a woman, “You should leave your husband if he can’t provide for you.” Treasury’s response ignores that any problem exists with servicing transfers that strip away the HAMP application or modification. How Treasury can take that stance in light of warnings by SIGTARP and CFPB is astounding. SIGTARP presented Treasury with an opportunity to shut down this barrier completely, not piecemeal, one servicer at a time, if Treasury happens to find the problem in sample testing. Treasury must stop ignoring problems and instead recognize warnings that are in front of it. As SIGTARP originally recommended, “Servicers will adjust their actions based on the message Treasury sends publicly, and therefore Treasury must send a strong message of what it will not accept by HAMP servicers. If Treasury is not willing to do anything beyond conducting compliance oversight over existing rules, servicers may conclude that Treasury sees no need for change. Instead, Treasury should actively stand up for homeowners and swiftly and aggressively send a new message to servicers that Treasury will not tolerate harm to homeowners applying for or receiving HAMP who face a transfer of their mortgage.” Treasury must recognize problems and do all it can to stop them. Servicers will not change on their own, and Treasury should not wait, hope, or expect they will. It is Treasury, not the servicers, that remains responsible for efficient and effective HAMP administration. As Treasury continues its push to get more homeowners into HAMP, it should also give every available opportunity to those who have already applied for HAMP or are participating in HAMP. These homeowners have no ability to protect themselves when servicers transfer their mortgage. SIGTARP’s recommendations make sense. They should not be difficult for servicers to execute. They could have the same impact for homeowners as the single point of contact that Treasury already requires for servicers. Treasury must change its tune and fully implement these important recommendations. 79 * * * * * * * 2 3 4 5 6 7 8 Agreements with TALF participants should include an acknowledgment that: (1) they are subject to the oversight of OFS-Compliance and SIGTARP, (2) with respect to any condition imposed as part of TALF, that the party on which the condition is imposed is required to establish internal controls with respect to each condition, report periodically on such compliance, and provide a certification with respect to such compliance. In formulating the structure of TALF, Treasury should consider requiring, before committing TARP funds to the program, that certain minimum underwriting standards and/ or other fraud prevention mechanisms be put in place with respect to the ABS and/or the assets underlying the ABS used for collateral. Treasury begins to develop an overall investment strategy to address its portfolio of stocks and decide whether it intends to exercise warrants of common stock. Treasury quickly determines its going-forward valuation methodology. Treasury should require all TARP recipients to report on the actual use of TARP funds. All existing TARP agreements, as well as those governing new transactions, should be posted on the Treasury website as soon as possible. Treasury should include language in new TARP agreements to facilitate compliance and oversight. Specifically, SIGTARP recommends that each program participant should (1) acknowledge explicitly the jurisdiction and authority of SIGTARP and other oversight bodies, as relevant, to oversee compliance of the conditions contained in the agreement in question, (2) establish internal controls with respect to that condition, (3) report periodically to the Compliance department of the Office of Financial Stability (“OFSCompliance”) regarding the implementation of those controls and its compliance with the condition, and (4) provide a signed certification from an appropriate senior official to OFS-Compliance that such report is accurate. Treasury should include language in the automobile industry transaction term sheet acknowledging SIGTARP’s oversight role and expressly giving SIGTARP access to relevant documents and personnel. X X X X X Implemented X X Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. * 1 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X Not Implemented TBD/NA Continued on next page The Federal Reserve adopted mechanisms that address this recommendation. While Treasury has required CDCI participants to report on their actual use of TARP funds, no other TARP recipients were required to do so. Treasury made the reporting by CPP recipients only voluntary. Although Treasury has made substantial efforts to comply with this recommendation in many of its agreements, there have been exceptions, including in its agreements with servicers in MHA. Comments 80 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM * * * * * 13 14 15 16 17 X X X X X X Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. Treasury should not allow Legacy Securities PPIFs to invest in TALF unless significant mitigating measures are included to address these dangers. Treasury should design a robust compliance protocol with complete access rights to all TALF transaction participants for itself, SIGTARP, and other relevant oversight bodies. Treasury should require additional anti-fraud and credit protection provisions, specific to all MBS, before participating in an expanded TALF, including minimum underwriting standards and other fraud prevention measures. In TALF, Treasury should require significantly higher haircuts for all MBS, with particularly high haircuts for legacy RMBS, or other equally effective mitigation efforts. In TALF, Treasury should dispense with rating agency determinations and require a security-by-security screening for each legacy RMBS. Treasury should refuse to participate if the program is not designed so that RMBS, whether new or legacy, will be rejected as collateral if the loans backing particular RMBS do not meet certain baseline underwriting criteria or are in categories that have been proven to be riddled with fraud, including certain undocumented subprime residential mortgages. Treasury and the Federal Reserve should provide to SIGTARP, for public disclosure, the identity of the borrowers who surrender collateral in TALF. * 12 Treasury should oppose any expansion of TALF to legacy MBS without significant modifications to the program to ensure a full assessment of risks associated with such an expansion. Treasury should formalize its valuation strategy and begin providing values of the TARP investments to the public. * 10 Treasury should give careful consideration before agreeing to the expansion of TALF to include MBS without a full review of risks that may be involved and without considering certain minimum fraud protections. (CONTINUED) 11 * 9 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X Not Implemented X X TBD/NA Comments Continued on next page The Federal Reserve adopted mechanisms that address this recommendation with respect to CMBS, and did not expand TALF to RMBS. This recommendation was implemented with respect to CMBS, and the Federal Reserve did not expand TALF to RMBS. The Federal Reserve announced that RMBS were ineligible for TALF loans, rendering this recommendation moot. On December 1, 2010, the Federal Reserve publicly disclosed the identities of all TALF borrowers and that there had been no surrender of collateral. SIGTARP will continue to monitor disclosures if a collateral surrender takes place. Treasury has formalized its valuation strategy and regularly publishes its estimates. This recommendation was implemented with respect to CMBS, and the Federal Reserve did not expand TALF to RMBS. This recommendation was implemented with respect to CMBS, and the Federal Reserve did not expand TALF to RMBS. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 81 * * * * * * 19 20 21 22 23 24 Treasury should require PPIP managers to provide most favored nation clauses to PPIF equity stakeholders, to acknowledge that they owe Treasury a fiduciary duty, and to adopt a robust ethics policy and compliance apparatus. Treasury should require that all PPIF fund managers (1) have stringent investor-screening procedures, including comprehensive “Know Your Customer” requirements at least as rigorous as that of a commercial bank or retail brokerage operation to prevent money laundering and the participation of actors prone to abusing the system, and (2) be required to provide Treasury with the identities of all the beneficial owners of the private interests in the fund so that Treasury can do appropriate diligence to ensure that investors in the funds are legitimate. Treasury should impose strict conflict-of-interest rules upon PPIF managers across all programs that specifically address whether and to what extent the managers can (1) invest PPIF funds in legacy assets that they hold or manage on behalf of themselves or their clients or (2) conduct PPIF transactions with entities in which they have invested on behalf of themselves or others. Treasury should require CAP participants to (1) establish an internal control to monitor their actual use of TARP funds, (2) provide periodic reporting on their actual use of TARP funds, (3) certify to OFS-Compliance, under the penalty of criminal sanction, that the report is accurate, that the same criteria of internal controls and regular certified reports should be applied to all conditions imposed on CAP participants, and (4) acknowledge explicitly the jurisdiction and authority of SIGTARP and other oversight bodies, as appropriate, to oversee conditions contained in the agreement. Treasury should significantly increase the staffing levels of OFS-Compliance and ensure the timely development and implementation of an integrated risk management and compliance program. Treasury should address the confusion and uncertainty on executive compensation by immediately issuing the required regulations. All TALF modeling and decisions, whether on haircuts or any other credit or fraud loss mechanisms, should account for potential losses to Government interests broadly, including TARP funds, and not just potential losses to the Federal Reserve. (CONTINUED) X X X Implemented X X X Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. * 18 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process Not Implemented X TBD/NA Continued on next page Treasury’s agreements with PPIF managers include investor-screening procedures such as “Know Your Customer” requirements. Treasury has agreed that it will have access to any information in a fund manager’s possession relating to beneficial owners. However, Treasury did not impose an affirmative requirement that managers obtain and maintain beneficial owner information. Treasury has adopted some significant conflict-of-interest rules related to this recommendation, but has failed to impose other significant safeguards. Treasury closed the program with no investments having been made, rendering this recommendation moot. According to Treasury, OFS-Compliance has increased its staffing level and has contracted with four private firms to provide additional assistance to OFSCompliance. Comments 82 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM In MHA, Treasury should require a closing-like procedure be conducted that would include (1) a closing warning sheet that would warn the applicant of the consequences of fraud; (2) the notarized signature and thumbprint of each participant; (3) mandatory collection, copying, and retention of copies of identification documents of all participants in the transaction; (4) verbal and written warnings regarding hidden fees and payments so that applicants are made fully aware of them; (5) the benefits to which they are entitled under the program (to prevent a corrupt servicer from collecting payments from the Government and not passing the full amount of the subsidies to the homeowners); and (6) the fact that no fee should be charged for the modification. * * * * * 26 27 28 29 30 X Implemented X X Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. In MHA, Treasury should defer payment of the $1,000 incentive to the servicer until after the homeowner has verifiably made a minimum number of payments under the mortgage modification program. In MHA, Treasury should require that verifiable, third-party information be obtained to confirm an applicant’s income before any modification payments are made. In MHA, Treasury should require the servicer to compare the income reported on a mortgage modification application with the income reported on the original loan applications. Additional anti-fraud protections should be adopted in MHA to verify the identity of the participants in the transaction and to address the potential for servicers to steal from individuals receiving Government subsidies without applying them for the benefit of the homeowner. Treasury should require servicers in MHA to submit thirdparty verified evidence that the applicant is residing in the subject property before funding a mortgage modification. (CONTINUED) 25 Recommendation SIGTARP RECOMMENDATIONS TABLE X In Process X X Not Implemented TBD/NA Comments Continued on next page Rather than deferring payment of the incentive until after the homeowner has verifiably made a minimum number of payments on its permanent modification, Treasury will pay the incentive after the servicer represents that the homeowner has made three payments during the trial period. Treasury has rejected SIGTARP’s recommendation and does not require income reported on the modification application to be compared to income reported on the original loan application. Treasury has taken steps to implement policies and conduct compliance reviews to address this recommendation. However, it remains unclear if Treasury has an appropriate method to ensure the irregularities identified in the compliance reviews are resolved. Treasury rejected SIGTARP’s recommendation for a closing-like procedure. However, since this recommendation was issued, Treasury has taken several actions to prevent fraud on the part of either MHA servicers or applicants. Treasury has decided to adopt this important SIGTARP recommendation. SIGTARP will monitor Treasury’s implementation of the recommendation. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 83 Treasury should periodically disclose PPIF trading activity and require PPIF managers to disclose to SIGTARP, within seven days of the close of the quarter, all trading activity, holdings, and valuations so that SIGTARP may disclose such information, subject to reasonable protections, in its quarterly reports. X Implemented X X Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. The conditions that give Treasury “cause” to remove a PPIF manager should be expanded to include a manager’s performance below a certain standard benchmark, or if Treasury concludes that the manager has materially violated compliance or ethical rules. * * 34 Treasury should require the imposition of strict information barriers or “walls” between the PPIF managers making investment decisions on behalf of the PPIF and those employees of the fund management company who manage non-PPIF funds. 36 * 33 In MHA, Treasury should require its agents to keep track of the names and identifying information for each participant in each mortgage modification transaction and to maintain a database of such information. Treasury should define appropriate metrics and an evaluation system should be put in place to monitor the effectiveness of the PPIF managers, both to ensure they are fulfilling the terms of their agreements and to measure performance. * 32 In MHA, Treasury should proactively educate homeowners about the nature of the program, warn them about modification rescue fraudsters, and publicize that no fee is necessary to participate in the program. (CONTINUED) 35 * 31 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X X Not Implemented TBD/NA Continued on next page Treasury has refused to adopt this recommendation, relying solely on Treasury’s right to end the investment period after 12 months. That timeframe has already expired. Treasury’s failure to adopt this recommendation potentially puts significant Government funds at risk. Treasury has stated that it has developed risk and performance metrics. However, more than four years into the program, it is still not clear how Treasury will use these metrics to evaluate the PPIP managers and take appropriate action as recommended by SIGTARP. Treasury has committed to publish on a quarterly basis certain highlevel information about aggregated purchases by the PPIFs, but not within seven days of the close of the quarter. Treasury has not committed to providing full transparency to show where public dollars are invested by requiring periodic disclosure of every trade in the PPIFs. Treasury has refused to adopt this significant anti-fraud measure designed to prevent conflicts of interest. This represents a material deficiency in the program. While Treasury’s program administrator, Fannie Mae, has developed a HAMP system of record that maintains servicers’ names, investor group (private, portfolio, GSE), and participating borrowers’ personally identifiable information, such as names and addresses, the database is not constructed to maintain other information that may assist in detecting insiders who are committing largescale fraud. Comments 84 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM * * * * * 40 41 42 43 44 X X X X X Implemented X Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. Treasury should establish policies to guide decision making in determining whether it is appropriate to defer to another agency when making TARP programming decisions where more than one Federal agency is involved. Treasury should establish policies to guide any similar future decisions to take a substantial ownership position in financial institutions that would require an advance review so that Treasury can be reasonably aware of the obligations and challenges facing such institutions. The Secretary of the Treasury should direct the Special Master to work with FRBNY officials in understanding AIG compensation programs and retention challenges before developing future compensation decisions that may affect both institutions’ ability to get repaid by AIG for Federal assistance provided. Treasury should improve existing control systems to document the occurrence and nature of external phone calls and in-person meetings about actual and potential recipients of funding under the CPP and other similar TARP-assistance programs to which they may be part of the decision making. Treasury should more explicitly document the vote of each Investment Committee member for all decisions related to the investment of TARP funds. Treasury and FRBNY should (1) examine Moody’s assertions that some credit rating agencies are using lower standards to give a potential TALF security the necessary AAA rating and (2) develop mechanisms to ensure that acceptance of collateral in TALF is not unduly influenced by the improper incentives to overrate that exist among the credit agencies. * 39 Treasury should require PPIF managers to disclose to Treasury, as part of the Watch List process, not only information about holdings in eligible assets but also holdings in related assets or exposures to related liabilities. Treasury should require PPIF managers to obtain and maintain information about the beneficial ownership of all of the private equity interests, and Treasury should have the unilateral ability to prohibit participation of private equity investors. * (CONTINUED) 38 37 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X Not Implemented X TBD/NA Continued on next page Treasury has agreed to work closely with other Federal agencies that are involved in TARP. Treasury stated that it does not anticipate taking a substantial percentage ownership position in any other financial institution pursuant to EESA. Treasury and the Federal Reserve have discussed concerns about potential overrating or rating shopping with the rating agencies, and have agreed to continue to develop and enhance risk management tools and processes, where appropriate. Treasury has agreed that it can have access to any information in a fund manager’s possession relating to beneficial owners. However, Treasury is not making an affirmative requirement that managers obtain and maintain beneficial owner information. Treasury will not adopt the recommendation to give itself unilateral ability to deny access to or remove an investor, stating that such a right would deter participation. Comments SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 85 Treasury should develop other performance metrics and publicly report against them to measure over time the implementation and success of HAMP. For example, Treasury could set goals and publicly report against those goals for servicer processing times, modifications as a proportion of a servicer’s loans in default, modifications as a proportion of foreclosures generally, rates of how many borrowers fall out of the program prior to permanent modification, and re-default rates. Treasury should undertake a sustained public service campaign as soon as possible, both to reach additional borrowers who could benefit from the program and to arm the public with complete, accurate information — this will help to avoid confusion and delay, and prevent fraud and abuse. Treasury should reconsider its position that allows servicers to substitute alternative forms of income verification based on subjective determinations by the servicer. Treasury should re-examine HAMP’s structure to ensure that it is adequately minimizing the risk of re-default stemming from non-mortgage debt, second liens, partial interest rate resets after the five-year modifications end, and from many borrowers being underwater. Treasury should institute careful screening before putting additional capital through CDCI into an institution with insufficient capital to ensure that the TARP matching funds are not flowing into an institution that is on the verge of failure. Treasury should develop a robust procedure to audit and verify the bona fides of any purported capital raise in CDCI and to establish adequate controls to verify the source, amount and closing of all claimed private investments. Treasury should revise CDCI terms to clarify that Treasury inspection and copy rights continue until the entire CDCI investment is terminated. Additionally, consistent with recommendations made in connection with other TARP programs, the terms should be revised to provide expressly that SIGTARP shall have access to the CDFI’s records equal to that of Treasury. 46 47 48 49 50 51 52 X X X X Implemented X X Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. Treasury should rectify the confusion that its own statements have caused for HAMP by prominently disclosing its goals and estimates (updated over time, as necessary) of how many homeowners the program will help through permanent modifications and report monthly on its progress toward meeting that goal. (CONTINUED) 45 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X Not Implemented TBD/NA Continued on next page Treasury has adopted some programs to assist underwater mortgages to address concerns of negative equity but has not addressed other factors contained in this recommendation. Although Treasury has increased its reporting of servicer performance, it has not identified goals for each metric and measured performance against those goals. Treasury has not set an acceptable metric for redefaults. Despite SIGTARP’s repeated highlighting of this essential transparency and effectiveness measure, Treasury has refused to disclose clear and relevant goals and estimates for the program. Comments 86 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Treasury should ensure that more detail is captured by the Warrant Committee meeting minutes. At a minimum, the minutes should include the members’ qualitative considerations regarding the reasons bids were accepted or rejected within fair market value ranges. Treasury should document in detail the substance of all communications with recipients concerning warrant repurchases. Treasury should develop and follow guidelines and internal controls concerning how warrant repurchase negotiations will be pursued, including the degree and nature of information to be shared with repurchasing institutions concerning Treasury’s valuation of the warrants. * * * 54 55 56 57 58 X X Not Implemented TBD/NA Although Treasury largely continues to rely on self-reporting, stating that it only plans to conduct testing where they have particular concerns as to a TARP recipient’s compliance procedures or testing results, it has conducted independent testing of compliance obligations during some compliance reviews. Treasury has adopted procedures designed to address this recommendation, including a policy to discuss only warrant valuation inputs and methodologies prior to receiving a bid, generally to limit discussion to valuation ranges after receiving approval from the Warrant Committee, and to note the provision of any added information in the Committee minutes. However, Treasury believes that its existing internal controls are sufficient to ensure adequate consistency in the negotiation process. Treasury has agreed to document the dates, participants, and subject line of calls. It has refused to document the substance of such conversations. Treasury has indicated that it has implemented this recommendation. Although the detail of the minutes has improved, Treasury is still not identifying how each member of the committee casts his or her vote. Comments Continued on next page In Process Note: * Indicates that Treasury considers the recommendation closed and will take no further action. X X Partially Implemented X X Implemented Treasury states that it has developed guidance and provided that guidance to the exceptional assistance participants that were remaining in TARP as of June 30, 2011. Treasury has not addressed other factors contained in this recommendation, citing its belief that materiality should be subject to a fact and circumstances review. Treasury should develop guidelines that apply consistently across TARP participants for when a violation is sufficiently material to merit reporting, or in the alternative require that all violations be reported. Treasury should promptly take steps to verify TARP participants’ conformance to their obligations, not only by ensuring that they have adequate compliance procedures but also by independently testing participants’ compliance. Treasury should consider more frequent surveys of a CDCI participant’s use of TARP funds than annually as currently contemplated. Quarterly surveys would more effectively emphasize the purpose of CDCI. (CONTINUED) 53 Recommendation SIGTARP RECOMMENDATIONS TABLE SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 87 When Treasury considers whether to accept an existing CPP participant into SBLF, because conditions for many of the relevant institutions have changed dramatically since they were approved for CPP, Treasury and the bank regulators should conduct a new analysis of whether the applying institution is sufficiently healthy and viable to warrant participation in SBLF. When Treasury conducts the new analysis of an institution’s health and viability, the existing CPP preferred shares should not be counted as part of the institution’s capital base. 64 65 X X X Implemented X Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. Treasury should launch a broad-based information campaign, including public service announcements in target markets that focus on warnings about potential fraud, and include conspicuous fraud warnings whenever it makes broad public announcements about the HAMP program. 63 Treasury should reconsider the length of the minimum term of HAMP’s unemployment forbearance program. 62 * Treasury should adopt a uniform appraisal process across all HAMP and HAMP-related short-sale and principal reduction programs consistent with FHA’s procedures. 61 Treasury should re-evaluate the voluntary nature of its principal reduction program and, irrespective of whether it is discretionary or mandatory, consider changes to better maximize its effectiveness, ensure to the greatest extent possible the consistent treatment of similarly situated borrowers, and address potential conflict of interest issues. 60 * For each HAMP-related program and subprogram, Treasury should publish the anticipated costs and expected participation in each and that, after each program is launched, it report monthly as to the program’s performance against these expectations. (CONTINUED) 59 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X Not Implemented X TBD/NA Continued on next page Treasury refused to adopt this recommendation, citing its belief that current CPP participants may be unfairly disadvantaged in their SBLF applications if their existing CPP investments are not counted as part of their capital base, and that SBLF “already provides substantial hurdles that CPP recipients must overcome” that don’t apply to other applicants. For more than a year, Treasury refused to adopt this recommendation, even though average U.S. terms of unemployment were lengthening. However, in July 2011, the Administration announced a policy change, and Treasury has extended the minimum term of the unemployment program from three months to 12 months, effective October 1, 2011. Treasury plans to maintain the voluntary nature of the program, providing an explanation that on its face seems unpersuasive to SIGTARP. SIGTARP will continue to monitor performance. Treasury has provided anticipated costs, but not expected participation. Comments 88 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Treasury, as part of its due diligence concerning any proposed restructuring, recapitalization, or sale of its CPP investment to a third party, should provide to SIGTARP the identity of the CPP institution and the details of the proposed transaction. * * * * * 67 68 69 70 71 X X X X Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. OFS should adopt the legal fee bill review standards and procedures contained in the FDIC’s Outside Counsel Deskbook, or establish similarly specific instructions and guidance for OFS COTRs to use when reviewing legal fee bills, and incorporate those instructions and guidance into OFS written policies. OFS should include in its open legal service contracts detailed requirements for law firms on the preparation and submission of legal fee bills, or separately provide the instructions to law firms and modify its open contracts, making application of the instructions mandatory. OFS should adopt the legal fee bill submission standards contained in the FDIC’s Outside Counsel Deskbook, or establish similarly detailed requirements for how law firms should prepare legal fee bills and describe specific work performed in the bills, and which costs and fees are allowable and unallowable. When a CPP participant refinances into SBLF and seeks additional taxpayer funds, Treasury should provide to SIGTARP the identity of the institution and details of the proposed additional SBLF investment. Treasury should take steps to prevent institutions that are refinancing into the SBLF from CPP from securing windfall dividend reductions without any relevant increase in lending. (CONTINUED) 66 Recommendation SIGTARP RECOMMENDATIONS TABLE X In Process X Not Implemented TBD/NA Comments Continued on next page Treasury told SIGTARP that OFS has held training on its newly adopted guidance prescribing how legal fee bills should be prepared with OFS COTRs and other staff involved in the review of legal fee bills, and that the OFS COTRs will begin reviewing invoices in accordance with its new guidance for periods starting with March 2011. OFS also stated that it incorporated relevant portions of its training on the new legal fee bill review standards into written procedures. Treasury told SIGTARP that OFS has distributed its new guidance to all law firms currently under contract to OFS. Treasury further stated that OFS will work with Treasury’s Procurement Services Division to begin modifying base contracts for OFS legal services to include those standards as well. Treasury told SIGTARP that OFS has created new guidance using the FDIC’s Outside Counsel Deskbook and other resources. Treasury refused to adopt this recommendation, suggesting that its adoption would subvert the will of Congress and that SIGTARP’s recommendation “may not be helpful” because “it is unclear that using this statutorily mandated baseline will lead to anomalies.” SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 89 * * * 73 74 75 Treasury should require that MHA servicer communications with homeowners relating to changes in the status or terms of a homeowner’s modification application, trial or permanent modification, HAFA agreement, or any other significant change affecting the homeowner’s participation in the MHA program, be in writing. Treasury should ensure that more detail is captured by the MHA Compliance Committee meeting minutes. At a minimum, the minutes should include MHA-C’s proposed rating for each servicer, the committee members’ qualitative and quantitative considerations regarding each servicer’s ratings, the votes of each committee member, the final rating for each servicer, justification for any difference in that rating with MHA-C’s proposed rating, and any followup including escalation to Treasury’s Office of General Counsel or the Assistant Secretary and the outcomes of that escalation. Treasury should establish detailed guidance and internal controls governing how the MHA Servicer Compliance Assessment will be conducted and how each compliance area will be weighted. OFS should review previously paid legal fee bills to identify unreasonable or unallowable charges, and seek reimbursement for those charges, as appropriate. (CONTINUED) Implemented X X Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. * 72 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X Not Implemented TBD/NA Continued on next page Treasury has refused to adopt this recommendation, saying it already requires a loan servicer to communicate in writing with a borrower an average of 10 times. However, most written requirements apply to a HAMP application and Treasury’s response fails to address homeowners who receive miscommunication from servicers on important milestones or changes. Minutes of recent MHA Compliance Committee meetings contain brief explanations of servicer assessment rating decisions. However, these minutes do not explain the Committee’s deliberations in detail, do not indicate how members voted beyond a tally of the votes, and do not discuss follow-up actions or escalation. Treasury made important changes to its servicer assessments by including metrics for the ratings, including several quantitative metrics. However, qualitative metrics to assess the servicer’s internal controls in the three ratings categories remain, and guidelines or criteria for rating the effectiveness of internal controls are still necessary. Although Treasury previously agreed to implement this recommendation, Treasury only reviewed the legal fee bills for one of the five law firms that SIGTARP had already described as unreasonable. Treasury refuses to seek any reimbursement for those charges. See also Recommendation 81 concerning this issue. Comments 90 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. The Treasury contracting officer should disallow and seek recovery from Simpson Thacher & Bartlett LLP for $91,482 in questioned, ineligible fees and expenses paid that were not allowed under the OFS contract. Specifically, those are $68,936 for labor hours billed at rates in excess of the allowable maximums set in contract TOFS-09-0001, task order 1, and $22,546 in other direct costs not allowed under contract TOFS-09-007, task order 1. Treasury must ensure that all servicers participating in MHA comply with program requirements by vigorously enforcing the terms of the servicer participation agreements, including using all financial remedies such as withholding, permanently reducing, and clawing back incentives for servicers who fail to perform at an acceptable level. Treasury should be transparent and make public all remedial actions taken against any servicer. 80 * 78 Treasury should publicly assess the top 10 MHA servicers’ program performance against acceptable performance benchmarks in the areas of: the length of time it takes for trial modifications to be converted into permanent modifications, the conversion rate for trial modifications into permanent modifications, the length of time it takes to resolve escalated homeowner complaints, and the percentage of required modification status reports that are missing. Treasury should specifically determine the allowability of $7,980,215 in questioned, unsupported legal fees and expenses paid to the following law firms: Simpson Thacher & Bartlett LLP ($5,791,724); Cadwalader Wickersham & Taft LLP ($1,983,685); Locke Lord Bissell & Liddell LLP ($146,867); and Bingham McCutchen LLP (novated from McKee Nelson LLP, $57,939). * 77 Treasury should establish benchmarks and goals for acceptable program performance for all MHA servicers, including the length of time it takes for trial modifications to be converted into permanent modifications, the conversion rate for trial modifications into permanent modifications, the length of time it takes to resolve escalated homeowner complaints, and the percentage of required modification status reports that are missing. (CONTINUED) 79 * 76 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X X X X Not Implemented TBD/NA Comments Continued on next page Treasury neither agreed nor disagreed with the recommendation. Treasury neither agreed nor disagreed with the recommendation. Treasury has rejected this important recommendation, stating that it believes that the remedies enacted have been appropriate and that appropriate transparency exists. Treasury has rejected this recommendation, saying only that it would “continue to develop and improve the process where appropriate.” Treasury told SIGTARP that it already established benchmarks in this area, including that trial periods should last three to four months, and escalated cases should be resolved in 30 days. If these are the benchmarks for acceptable performance, many servicers have missed the mark. Also, Treasury has yet to establish a benchmark for conversion rates from trial modifications to permanent modifications. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 91 Treasury should pre-approve specified labor categories and rates of all contracted legal staff before they are allowed to work on and charge time to OFS projects. Treasury, in consultation with Federal banking regulators, should develop a clear TARP exit path to ensure that as many community banks as possible repay the TARP investment and prepare to deal with the banks that cannot. Treasury should develop criteria pertaining to restructurings, exchanges, and sales of its TARP investments (including any discount of the TARP investment, the treatment of unpaid TARP dividend and interest payments, and warrants). * * 83 84 85 Treasury should protect borrower personally identifiable information (“PII”) and other sensitive borrower information compiled for the Hardest Hit Fund (“HHF”) by: (1) requiring that within 90 days, all Housing Finance Agencies (and their contractors) (“HFAs”) participating in HHF develop and implement effective policies and procedures to ensure protection against unauthorized access, use, and disposition of PII and other sensitive borrower information; (2) Treasury reviewing each HFA’s policies and procedures to determine if they are effective, and taking such action as is required to ensure effectiveness; (3) requiring that all parties granted access to borrower information should be made aware of restrictions on copying and disclosing this information; (4) requiring annual certification by HFAs to Treasury that they are in compliance with all applicable laws, policies and procedures pertaining to borrower information; and (5) requiring that HFAs promptly notify Treasury and SIGTARP within 24 hours, when a breach of security has occurred involving borrower information. Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. 86 Treasury should require in any future solicitation for legal services multiple rate categories within the various partner, counsel, and associate labor categories. The additional labor rate categories should be based on the number of years the attorneys have practiced law. 82 Treasury should assess whether it should renegotiate the terms of its Capital Purchase Program contracts for those community banks that will not be able to exit TARP prior to the dividend rate increase in order to help preserve the value of taxpayers’ investments. Treasury should promptly review all previously paid legal fee bills from all law firms with which it has a closed or open contract to identify unreasonable or unallowable charges and seek reimbursement for those charges, as appropriate. (CONTINUED) 81 Recommendation SIGTARP RECOMMENDATIONS TABLE X X In Process X X X X Not Implemented TBD/NA Continued on next page Treasury has said it will adopt this recommendation in part. Treasury did not agree to review each HFA’s policies and procedures to determine if they are effective. Also, Treasury did not require notification within 24 hours or notification to SIGTARP. SIGTARP will monitor Treasury’s efforts to implement the recommendation. Treasury rejected this recommendation without ever addressing why. Treasury responded that it continues its efforts to wind down CPP through repayments, restructuring, and sales. Treasury has not addressed the criteria for these divestment strategies or consulted with regulators. Treasury neither agreed nor disagreed with the recommendation. Treasury neither agreed nor disagreed with the recommendation. Treasury only reviewed the legal fee bills for one of the five law firms that SIGTARP had already described as unreasonable. Treasury refuses to seek any reimbursements for those charges. Comments 92 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM * * 88 89 The Office of the Special Master should develop more robust policies, procedures, or guidelines to help ensure that its pay determination process and its decisions are evenhanded. These measures will improve transparency and help the Office of the Special Master consistently apply the Interim Final Rule principles of “appropriate allocation,” “performance-based compensation,” and “comparable structures and payments.” The Office of the Special Master should better document its use of market data in its calculations. At a minimum, the Office of the Special Master should prospectively document which companies and employees are used as comparisons in its analysis of the 50th percentile of the market, and it should also maintain records and data so that the relationship between its determinations and benchmarks are clearly understood. To ensure that the Office of the Special Master consistently grants exceptions to the $500,000 cash salary cap, the Office of the Special Master should substantiate each exception requested and whether the requests demonstrate or fail to demonstrate “good cause.” (CONTINUED) X Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. * 87 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X Not Implemented TBD/NA Comments Continued on next page Although Treasury created written policies and procedures in June 2013, OSM’s policy only contains Treasury’s rule and language from the statute, all of which was existing prior to OSM’s creation. Therefore, OSM has not created its own formal policies. OSM’s written procedures are merely a documentation of some of OSM’s existing practices and guidelines, but not others as contained in the pay determination letters, and were not a new development of robust policies, procedures or guidelines. They do not establish meaningful criteria Treasury can follow for approving cash salaries exceeding $500,000, pay exceeding market medians, pay raises, or the use of long term restricted stock. In 2012, Treasury began to preserve the independent market data on which it relied to evaluate the market data submitted by the companies. While Treasury’s documentation of granting these cash salaries has improved in that it includes some additional information beyond the company’s assertions, that information is primarily market data that the company provides. The recommendation was not to document better, but instead to “substantiate” which requires some criteria for granting exceptions as well as independent analysis beyond the company’s assertions. Treasury’s policies and procedures do not contain any criteria for approving cash salaries exceeding $500,000 or any discussion of any analysis by Treasury. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 93 To continue to allow for effective compliance and enforcement in HAMP Tier 2 after the trial modification has started, Treasury should require that, prior to conversion of a trial modification to a permanent modification, the borrower certify under penalty of perjury that none of the occupancy circumstances stated in the RMA have changed. To prevent a property that has received a HAMP Tier 2 modification from remaining vacant for an extended period of time after a lease expires or a tenant vacates, 91 92 Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. (c) Treasury should bar payment of TARP-funded incentives to any participant for a loan modification on a property that has been reported vacant for more than three months, until such time as the property has been re-occupied by a tenant and the borrower has provided third-party verification of occupancy. (b) Treasury should require servicers to provide monthly reports to Treasury of any properties that have remained vacant for more than three months. (a) Treasury should require that borrowers immediately notify their servicer if the property has remained vacant for more than three months. In order to allow for effective compliance and enforcement in HAMP Tier 2, Treasury should require that the borrower prove that the property has been rented and is occupied by a tenant at the time the borrower applies for a loan modification, as opposed to requiring only a certification that the borrower intends to rent the property. As part of the Request for Mortgage Assistance (“RMA”) application for HAMP Tier 2, the borrower should provide the servicer with a signed lease and third-party verified evidence of occupancy in the form of documents showing that a renter lives at the property address, such as a utility bill, driver’s license, or proof of renter’s insurance. In the case of multiple-unit properties under one mortgage Treasury should require that the borrower provide the servicer with evidence that at least one unit is occupied by a tenant as part of the RMA. (CONTINUED) 90 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X X Not Implemented TBD/NA Continued on next page Treasury told SIGTARP that implementing this recommendation would create significant additional procedures and documentation requirements. With no compliance regime to determine that a renter is in place, the program remains vulnerable to TARP funds being paid to modify mortgages that do not fit within the intended expansion of the program. Treasury rejected this recommendation, stating that eligibility is not retested prior to conversion. This does not go far enough. Requiring only a self-certification, without a strong compliance and enforcement regime to ensure that the intent is carried out and the property is actually rented, leaves the program vulnerable to risks that TARP funds will pay investors for modifications for mortgages on vacation homes that are not rented, and may delay, as opposed to prevent, foreclosures and increase HAMP redefault rates. Treasury responded to this recommendation by requiring that borrowers certify that they intend to rent the property for at least five years and that they will make reasonable efforts to rent. This does not go far enough. Requiring only a selfcertification, under penalty of perjury, without a strong compliance and enforcement regime to ensure that the intent is carried out and the property is actually rented, leaves the program vulnerable to risks that TARP funds will pay investors for modifications for mortgages on vacation homes that are not rented, and may delay, as opposed to prevent, foreclosures and increase HAMP redefault rates. Comments 94 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM To ensure servicer compliance with HAMP Tier 2 guidelines and assess servicer performance, 95 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. 97 Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. To allow for assessment of the progress and success of HAMP Tier 2, Treasury should set meaningful and measurable goals, including at a minimum the number of borrowers Treasury estimates will be helped by HAMP Tier 2. Treasury should unambiguously and prominently disclose its goals and report monthly on its progress in meeting these goals. 96 (b) Treasury should develop and publish separate metrics related to HAMP Tier 2 in the compliance results and program results sections of the quarterly Making Home Affordable (“MHA”) servicer assessments of the Top 10 MHA servicers. (a) Treasury should include additional criteria in its servicer compliance assessments that measure compliance with the program guidelines and requirements of HAMP Tier 2. Given the expected increase in the volume of HAMP applications due to the implementation of HAMP Tier 2, Treasury should convene a summit of key stakeholders to discuss program implementation and servicer ramp-up and performance requirements so that the program roll-out is efficient and effective. (b) Treasury should undertake a sustained public service campaign as soon as possible both to reach additional borrowers who could potentially be helped by HAMP Tier 2 and to arm the public with complete, accurate information about the program to avoid confusion and delay, and to prevent fraud and abuse. (a) Treasury should require that servicers provide the SIGTARP/CFPB/Treasury Joint Task Force Consumer Fraud Alert to all HAMP-eligible borrowers as part of their monthly mortgage statement until the expiration of the application period for HAMP Tier 1 and 2. In order to protect against the possibility that the extension and expansion of HAMP will lead to an increase in mortgage modification fraud, (CONTINUED) 94 93 Recommendation SIGTARP RECOMMENDATIONS TABLE X In Process X X X X Not Implemented TBD/NA Comments Continued on next page Treasury has not implemented this recommendation. It is important that Treasury sets meaningful goals and metrics to identify program successes and set-backs, in order to change the program as necessary, and to provide transparency and accountability. Treasury has rejected this recommendation. Treasury’s refusal to provide meaningful and measurable goals leaves it vulnerable to accusations that it is trying to avoid accountability. Treasury said that it will include metrics in the future. SIGTARP will continue to monitor Treasury’s implementation of this recommendation. Treasury has not implemented this recommendation. Treasury has not held a summit of all key stakeholders to make the program roll-out efficient and effective. Treasury has not implemented this recommendation. It is important that Treasury educate as many homeowners as possible with accurate information about HAMP in an effort to prevent mortgage modification fraud. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 95 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. 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. 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, second lien 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. 99 100 101 Implemented X X X Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. 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. (CONTINUED) 98 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X Not Implemented TBD/NA Continued on next page Treasury has rejected this recommendation. It is important that Treasury change the status quo and fulfill its role as steward over TARP programs, make determinations of which programs are successful and which programs are not working, and ensure that HHF funds are reaching homeowners. This may include putting the funds toward programs that are more successful at reaching homeowners. It is unacceptable to delegate all of this responsibility to the states. Treasury has only partially implemented this recommendation. Treasury recently started publishing some aggregated data on its website. However, Treasury does not publish all of the data SIGTARP recommended nor does Treasury publish any data at all concerning the Hardest Hit Fund in the Housing Scorecard. Treasury issued letters to five housing finance agencies requiring those states to provide an action plan with measurable interim and overall goals, including benchmarks, to improve the level of homeowner assistance under the HHF program. Treasury should fully adopt SIGTARP’s recommendation with the remaining 14 housing finance agencies in the HHF program. SIGTARP will continue to monitor implementation of this recommendation. Treasury issued letters to five housing finance agencies requiring those states to provide an action plan with measurable interim and overall goals, including benchmarks, to improve the level of homeowner assistance under the HHF program. Treasury should fully adopt SIGTARP’s recommendation with the remaining 14 housing finance agencies in the HHF program. SIGTARP will continue to monitor implementation of this recommendation. Comments 96 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Treasury should ensure that servicers use accurate information when evaluating net present value test results for homeowners applying to HAMP and should ensure that servicers maintain documentation of all net present value test inputs. To the extent that a servicer does not follow Treasury’s guidelines on input accuracy and documentation maintenance, Treasury should permanently withhold incentives from that servicer. Treasury should require servicers to improve their communication with homeowners regarding denial of a HAMP modification so that homeowners can move forward with other foreclosure alternatives in a timely and fully informed manner. To the extent that a servicer does not follow Treasury’s guidelines on these communications, Treasury should permanently withhold incentives from that servicer. Treasury should ensure that more detail is captured by the Making Home Affordable Compliance Committee meeting minutes regarding the substance of discussions related to compliance efforts on servicers in HAMP. Treasury should make sure that minutes clearly outline the specific problems encountered by servicers, remedial options discussed, and any requisite actions taken to remedy the situation. In order to protect taxpayers who funded TARP against any future threat that might result from LIBOR manipulation, Treasury and the Federal Reserve should immediately change any ongoing TARP programs including, without limitation, PPIP and TALF, to cease reliance on LIBOR. 103 104 105 106 Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. Treasury should stop allowing servicers to add a risk premium to Freddie Mac’s discount rate in HAMP’s net present value test. (CONTINUED) 102 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X X X X Not Implemented TBD/NA Comments Continued on next page Neither Treasury nor the Federal Reserve has agreed to implement this recommendation despite Treasury telling SIGTARP that it “share[s SIGTARP’s] concerns about the integrity” of LIBOR, and the Federal Reserve telling SIGTARP that it agreed that “recent information regarding the way the LIBOR has been calculated has created some uncertainty about the reliability of the rate.” Treasury has not implemented this recommendation. SIGTARP found a lack of detail in Treasury’s meeting minutes and because Treasury failed to document its oversight, SIGTARP was unable to verify Treasury’s role in the oversight of servicers or its compliance agent Freddie Mac. Treasury has not implemented this recommendation. Servicers’ failure to communicate denial in a timely manner can have serious consequences because a delay may prevent homeowners from finding other foreclosure alternatives sooner. Treasury has not implemented this recommendation. Servicer errors using NPV inputs and the lack of properly maintained records on NPV inputs have diminished compliance and placed the protection of homeowner’s rights to challenge servicer error at risk. Treasury has not implemented this recommendation. The addition of a risk premium reduces the number of otherwise qualified homeowners Treasury helps through HAMP. Treasury should implement this recommendation to increase assistance to struggling homeowners. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 97 In order to fulfill Treasury’s responsibility to wind down its TARP investments in a way that promotes financial stability and preserves the strength of our nation’s community banks, Treasury should undertake an analysis in consultation with Federal banking regulators that ensures that it is exiting its Capital Purchase Program investments in a way that satisfies the goals of CPP, which are to promote financial stability, maintain confidence in the financial system and enable lending. This financial stability analysis of a bank’s exit from TARP should determine at a minimum: (1) that the bank will remain healthy and viable in the event of an auction of Treasury’s preferred shares; and (2) that the bank’s exit from TARP does not have a negative impact on the banking industry at a community, state, regional, and national level. Treasury should document that analysis and consultation. Treasury should better document its decision whether or not to auction its preferred shares in a TARP bank to adequately reflect the considerations made for each bank and detailed rationale. Each year, Treasury should reevaluate total compensation for those employees at TARP exceptional assistance companies remaining in the Top 25 from the prior year, including determining whether to reduce total compensation. 109 110 111 X Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. In order to fulfill Treasury’s responsibility to wind down its TARP Capital Purchase Program investments in a way that protects taxpayer interests, before allowing a TARP bank to purchase Treasury’s TARP shares at a discount to the TARP investment (for example as the successful bidder at auction), Treasury should undertake an analysis, in consultation with Federal banking regulators, to determine that allowing the bank to redeem its TARP shares at a discount to the TARP investment outweighs the risk that the bank will not repay the full TARP investment. Treasury should document that analysis and consultation. 108 * In order to protect taxpayers who invested TARP funds into AIG to the fullest extent possible, Treasury and the Federal Reserve should recommend to the Financial Stability Oversight Council that AIG be designated as a systemically important financial institution so that it receives the strongest level of Federal regulation. (CONTINUED) 107 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X X X Not Implemented TBD/NA Continued on next page Treasury’s new procedures state that OSM may reduce pay, however OSM did not address any guidelines or criteria that it would consider in doing so. Treasury has not agreed to implement this important recommendation, but is reviewing its practices in light of SIGTARP’s recommendations. SIGTARP will monitor Treasury’s efforts to implement this recommendation. Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation. On July 8, 2013, the Financial Stability Oversight Council unanimously voted to designate AIG as systemically important. Comments 98 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. As a result of the findings of Treasury’s research and analysis into the causes of HAMP redefaults, and characteristics of redefaults, Treasury should modify aspects of HAMP and the other TARP housing programs in ways to reduce the number of redefaults. To be consistent with Treasury’s Interim Final Rule that the portion of performance-based compensation compared to total compensation should be greater for positions that exercise higher levels of responsibility, Treasury should return to using long-term restricted stock for employees, particularly senior employees such as CEOs. 116 * 114 Treasury should independently analyze whether good cause exists to award a Top 25 employee a pay raise or a cash salary over $500,000. To ensure that the Office of the Special Master has sufficient time to conduct this analysis, Treasury should allow OSM to work on setting Top 25 pay prior to OSM’s receiving the company pay proposals, which starts the 60-day timeline. Treasury should conduct in-depth research and analysis to determine the causes of redefaults of HAMP permanent mortgage modifications and the characteristics of loans or the homeowner that may be more at risk for redefault. Treasury should require servicers to submit any additional information that Treasury needs to conduct this research and analysis. Treasury should make the results of this analysis public and issue findings based on this analysis, so that others can examine, build on, and learn from this research. * 113 To ensure that Treasury effectively applies guidelines aimed at curbing excessive pay and reducing risk taking, Treasury should develop policies, procedures, and criteria for approving pay in excess of Treasury guidelines. (CONTINUED) 115 * 112 Recommendation SIGTARP RECOMMENDATIONS TABLE X In Process X X X Not Implemented X TBD/NA Comments Continued on next page Treasury has agreed to consider this important recommendation, based on the results of research it is conducting. SIGTARP will monitor Treasury’s efforts to implement the recommendation. Treasury has agreed to implement this important recommendation. Treasury told SIGTARP that it is in the process of conducting the recommended research. SIGTARP will monitor Treasury’s efforts to implement the recommendation. In 2013, Treasury allowed some GM employees not to have longterm restricted stock and effectively approved only 5% of all of Ally employees pay in long-term restricted stock and failed to consider positions and levels of authority on an individual basis, as called for by Treasury’s rule. In 2014, Treasury eliminated long-term restricted stock for Ally employees. Treasury has not established criteria for awarding an employee a pay raise or a cash salary exceeding $500,000. Such criteria is important to independently analyzing the basis for awarding pay raises or cash salaries greater than $500,000 and ensuring consistency in decisionmaking. Treasury’s documentation of its justification does not evidence independent analysis, but instead sets forth the company’s assertions and market data supplied by the company. Treasury has not established clear policies, procedures, and criteria for approving pay in excess of Treasury’s guidelines such as the 50th percentile, cash salaries greater than $500,000, or use of long term restricted stock. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 99 In the letter Treasury already requires servicers to send to homeowners who have redefaulted on a HAMP modification about possible options to foreclosure, Treasury should require the servicers to include other available alternative assistance options under TARP such as the Hardest Hit Fund and HAMP Tier 2, so that homeowners can move forward with other alternatives, if appropriate, in a timely and fully informed manner. To the extent that a servicer does not follow Treasury’s rules in this area, Treasury should permanently withhold incentives from that servicer. Treasury and the Federal banking regulators should improve coordination when collaborating on current and future initiatives by (1) defining the roles of all participants at the outset of collaborative efforts by creating precise and directed governing documents (i.e., charters) that clearly address the responsibilities of each entity; and (2) jointly documenting processes and procedures, including flowcharts, risk management tools, and reporting systems to ensure that objectives are met. Each participant should sign off to demonstrate their understanding of, and agreement with, these procedures. To increase small-business lending by former TARP banks participating in SBLF, Treasury should work with the banks to establish new, achievable plans to increase lending going forward. To preserve the amount of capital former TARP banks participating in SBLF have to lend, the primary Federal banking regulators (the Federal Reserve, FDIC, or OCC) should not approve dividend distributions to common shareholders of former TARP banks that have not effectively increased small-business lending while in SBLF. In order to prevent confusion, promote transparency, and present taxpayers who funded TARP with clear and accurate reporting, when Treasury discusses the amount of TARP funds (or CPP funds) recovered or repaid, Treasury should not count the $2.1 billion in TARP investments that Treasury refinanced into the Small Business Lending Fund, which is outside of TARP. 118 119 120 121 122 Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. Treasury should require servicers to develop and use an “early warning system” to identify and reach out to homeowners that may be at risk of redefaulting on a HAMP mortgage modification, including providing or recommending counseling and other assistance and directing them to other TARP housing programs. (CONTINUED) 117 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X X X X X Not Implemented TBD/NA Continued on next page Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation. Treasury has agreed to implement this important recommendation and is considering taking further action. SIGTARP will monitor Treasury’s efforts to implement the recommendation. Treasury has agreed to implement this important recommendation and is considering taking further action. SIGTARP will monitor Treasury’s efforts to implement the recommendation. Comments 100 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Treasury should establish an achievable benchmark for a redefault rate on HAMP permanent mortgage modifications that represents acceptable program performance and publicly report against that benchmark. Treasury should publicly assess and report quarterly on the status of the ten largest HAMP servicers in meeting Treasury’s benchmark for an acceptable homeowner redefault rate on HAMP permanent mortgage modifications, indicate why any servicer fell short of the benchmark, require the servicer to make changes to reduce the number of homeowners who redefault in HAMP, and use enforcement remedies including withholding, permanently reducing, or clawing back incentive payments for any servicer that fails to comply in a timely manner. To protect the investment taxpayers made through TARP in community banks and to ensure that these banks continue to lend in their communities which is a goal of TARP’s Capital Purchase Program, Treasury should enforce its right to appoint directors for CPP institutions that have failed to pay six or more quarterly TARP dividend or interest payments. 124 125 126 Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. To ensure that homeowners in HAMP get sustainable relief from foreclosure, Treasury should research and analyze whether and to what extent the conduct of HAMP mortgage servicers may contribute to homeowners redefaulting on HAMP permanent mortgage modifications. To provide transparency and accountability, Treasury should publish its conclusions and determinations. (CONTINUED) 123 Recommendation SIGTARP RECOMMENDATIONS TABLE X X In Process X X Not Implemented TBD/NA Comments Continued on next page Treasury has made some progress implementing this important recommendation. Treasury has not agreed to implement this important recommendation. Treasury has made progress toward implementing this recommendation. In Treasury’s quarterly “MHA Servicer Assessment,” published in its October 2013 “Making Home Affordable Performance Report,” Treasury included a new servicer performance metric, assessing whether seven HAMP servicers complied with Treasury’s guidelines concerning homeowners’ HAMP modifications that servicers disqualified. SIGTARP looks forward to working with Treasury to fully implement this recommendation. Treasury has not agreed to implement this important recommendation. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 101 To protect the investment taxpayers made in TARP and to ensure that institutions continue to lend in low and moderate income communities which is the goal of TARP’s Community Development Capital Initiative, Treasury should enforce its right to appoint directors to CDCI institutions that have failed to pay eight or more TARP quarterly dividend (or interest) payments. Treasury should increase the amount of the annual incentive payment paid to each homeowner who remains in HAMP. Treasury should require the mortgage servicer to apply the annual incentive payment earned by the homeowner to reduce the amount of money that the homeowner must pay to the servicer for the next month’s mortgage payment (or monthly payments if the incentive exceeds the monthly mortgage payment), rather than to reduce the outstanding principal balance of the mortgage. To educate homeowners and help them avoid becoming victims to mortgage modification fraud, Treasury should prominently display all of the information containing in the Consumer Fraud Alert: “Tips For Avoiding Mortgage Modification Scams” created jointly by SIGTARP, Treasury, and the Consumer Financial Protection Bureau on the home page of websites related to HAMP, including Treasury’s TARP website and the “Making Home Affordable” website along with simple and direct information on SIGTARP’s mission and how to contact SIGTARP’s hotline if they suspect mortgage modification fraud. 128 129 130 X Implemented X Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. In enforcing its right to appoint directors to the board of CPP institutions that have failed to pay six or more quarterly dividend or interest payments, Treasury should prioritize appointing directors to the board of those CPP institutions that meet one or more of the following criteria: (1) rejected Treasury’s request to send officials to observe board meetings; (2) have failed to pay a large number of TARP dividend payments or that owe the largest amount of delinquent TARP dividends; or (3) is currently subject to an order from their Federal banking regulator, particularly orders related to the health or condition of the bank or its board of directors. In addition, Treasury should use information learned from Treasury officials that have observed the bank’s board meetings to assist in prioritizing its determination of banks to which Treasury should appoint directors. (CONTINUED) 127 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X Not Implemented TBD/NA Continued on next page Treasury has agreed to implement this important recommendation. Treasury has agreed to increase homeowner incentives, but has not agreed to pay those incentives directly to homeowners as SIGTARP recommended, instead, continuing to send payments to the servicer for the purpose of reducing the principal balance of the mortgage. See discussion in Section 2. Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation. Comments 102 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Treasury should publicly report for each of the top 10 servicers how many homeowners who completed a HAMP application for which Treasury paid NeighborWorks were denied by the servicer for a HAMP trial modification. Treasury should use the results of SIGTARP-recommended monitoring and reporting on the MHA Outreach and Borrower Intake Project to determine whether there are areas of improvement. Treasury should post the original surveys received from CPP and CDCI institutions on how they used TARP funds for each year to the Treasury website. The original surveys and responses should not be subjected to any manipulations or changes to calculate survey results. Treasury should develop written repeatable operating procedures for submitting and receiving survey responses from CPP and CDCI recipients on how they used TARP funds. The procedures should include the functional roles and responsibilities and automated and manual process steps involved, such as documenting and determining the survey population, compiling and analyzing the responses, verifying and validating the data, resolving discrepancies, and posting the responses on the Treasury website. Treasury should take aggressive action to enforce its requests that all CPP institutions report annually on their use of TARP funds, and its requirement that all CDCI institutions report annually on their use of TARP funds. At a minimum, Treasury should draft a letter to each CPP and CDCI institution that fails to report each year, and follow up on that letter with the institution. Treasury should exercise its rights to compel reporting on use of TARP funds by CDCI institutions. Treasury should fix all errors and/or deficiencies, which SIGTARP previously provided to Treasury, and submit documentation to SIGTARP confirming the correction/ elimination of these errors. 132 133 134 135 136 137 Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. Treasury should determine how many homeowners who completed a HAMP application for which Treasury paid NeighborWorks under the MHA Outreach and Borrower Intake Project are accepted into a HAMP trial modification and whether that homeowner is granted a permanent HAMP modification. Treasury should continue to monitor these results on a monthly basis. Treasury should publicly report all of these results on a quarterly basis. (CONTINUED) 131 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X X X X X X Not Implemented TBD/NA Comments Continued on next page Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 103 Treasury should publicly report on all CPP and CDCI institutions that have not submitted a survey response on their use of TARP funds for prior years and continue that reporting in future years. Treasury should ensure that mortgage servicers who contract with Treasury have sufficient staffing and other resources to review the number of homeowner HAMP applications submitted each month, plus additional applications to decrease any backlog of homeowners who applied in prior months without a decision. The Secretary of the Treasury should require OSM to maintain documentation of the substance of all OSM communications with TARP companies. The Secretary of the Treasury should require all Treasury employees to maintain documentation of all communications with TARP companies regarding compensation. The Secretary of the Treasury should require OSM to maintain documentation of OSM’s communications with Treasury officials regarding compensation at TARP companies. The Secretary of the Treasury should require OSM to use long-term restricted stock as part of each TARP company’s employee’s compensation package to ensure compensation is tied to both the employee’s and the company’s performance, and the full repayment of TARP funds. The Secretary of the Treasury should direct OSM to conduct an analysis, independent of company proposals and assertions, for an employee of a TARP exceptional assistance company to be paid a cash salary exceeding $500,000. The Secretary of the Treasury should direct OSM to document its independent analyses regarding the decision that a TARP exceptional assistance company employee be paid a cash salary exceeding $500,000 The Secretary of the Treasury should direct OSM to conduct an analysis, independent of company proposals and assertions, for an employee of a TARP exceptional assistance company to receive an increase in annual compensation. 139 140 141 142 143 144 145 146 147 Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. Treasury should perform a thorough review of any and all submissions by TARP recipients on their use of TARP funds prior to posting the surveys on the Treasury website, and follow up with the institution for any missing information or information that is inconsistent or has an obvious error. (CONTINUED) 138 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X X X X X X X X X Not Implemented TBD/NA Continued on next page Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation. Treasury has not agreed to implement this important recommendation. Although Treasury agreed servicers should have adequate staffing, Treasury has not agreed to implement this important recommendation. See discussion in Section 2. Treasury has not agreed to implement this important recommendation Treasury has not agreed to implement this important recommendation Comments 104 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM The Secretary of the Treasury should direct OSM to conduct an analysis, independent of company proposals and assertions, for an employee of a TARP exceptional assistance company to be paid a cash salary that exceeds the market median cash salary for similar positions in similar companies. The Secretary of the Treasury should direct OSM to document its independent analyses regarding the decision that a TARP exceptional assistance company employee be paid a cash salary exceeding market medians. The Secretary of the Treasury should direct OSM to include in its written procedures whether it will target, for each Top 25 employee of a TARP exceptional assistance company, median total compensation for similar positions in similar companies. Treasury require mortgage servicers administering HAMP to designate a single point of responsibility at the transferring servicer and the new receiving servicer to ensure that submitted HAMP applications (whether complete or not), HAMP trial modifications, and HAMP permanent modifications transfer to the new mortgage servicer at the time the mortgage servicing is transferred. Treasury should require that a transferring servicer’s single point of responsibility employee be responsible for: (1) transferring all information and documents related to the homeowner and HAMP to the new servicer at the time of service transfer; (2) confirming receipt in writing of the HAMP information and documents from the new servicer; (3) ensuring that the transferring servicer retains all documents and information provided to the new servicer related to HAMP; (4) ensuring that the transferring servicer fully complies with all HAMP rules and Treasury reporting requirements related to mortgage servicing transfers; and (5) promptly informing homeowners in writing that their HAMP information and documents were transferred to the new servicer, the date of the transfer of HAMP information and documents, and the name and contact information of the original transferring servicer’s single point of responsibility. 149 150 151 152 153 Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. The Secretary of the Treasury should direct OSM to document its independent analyses regarding the decision that a TARP exceptional assistance company employee will receive an increase in annual compensation. (CONTINUED) 148 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X X X X X Not Implemented TBD/NA Comments Continued on next page See discussion in Section 2. See discussion in Section 2. Treasury has not agreed to implement this important recommendation Treasury has not agreed to implement this important recommendation Treasury has not agreed to implement this important recommendation Treasury has not agreed to implement this important recommendation SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 105 Treasury should increase its oversight of mortgage servicers to ensure that they are following all HAMP rules and Treasury reporting requirements related to mortgage servicing transfers on a timely basis, that they have designated a single point of responsibility for transfers, and that single point of responsibility is effectively fulfilling its responsibilities. Treasury should publicly report the results of its oversight in this area in its quarterly servicer assessment, and should assess fines and permanently withhold financial incentives for servicers not in compliance. Treasury should ensure that state housing finance agencies and all of their city or county/land bank/non-profit/forprofit partners have the resources, staffing, training, and knowledge, and are ready for, and can effectively handle the increase in contracting, demolition, and other blight elimination activities contemplated under HHF. Treasury should keep itself informed and gain insight of critical activities taking place under HHF blight elimination by knowing the identities of all who will participate in blight elimination activity under HHF or receive TARP funds including city or county/land bank/non-profit/ for profit partners and their subcontractors through required reporting by state HFAs to Treasury on an ongoing basis. Treasury should keep itself informed and gain insight of critical activities taking place under HHF blight elimination by requiring reporting by state HFAs on: (1) the neighborhoods selected for HHF blight elimination and the strategy for choosing that neighborhood; and (2) property address including zip codes for any property demolished or removed under HHF. 155 156 157 158 Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. Treasury should require that a new receiving servicer’s single point of responsibility employee be responsible for: (1) confirming receipt in writing of the HAMP information and documents from the transferring servicer at the time of transfer; (2) ensuring that the receiving servicer fully complies with all HAMP rules and Treasury reporting requirements related to mortgage servicing transfers; and (3) promptly informing homeowners that their HAMP information and documentation has been received, confirming their status in HAMP, and providing the name and contact information of the receiving servicer’s single point of responsibility. (CONTINUED) 154 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X X X X Not Implemented TBD/NA Continued on next page See discussion in Section 2. See discussion in Section 2. See discussion in Section 2. See discussion in Section 2. See discussion in Section 2. Comments 106 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Treasury should engage in comprehensive planning to ensure that blight elimination under HHF progresses in the most effective way by, within 60 days, setting target outcomes for HHF blight elimination of how much Treasury expects blight elimination under TARP to increase home values and decrease foreclosures by city and state. Treasury can consult with the state HFAs as to set realistic target outcomes, but should not defer to state HFAs to define success. Treasury should share its target outcome with each state HFA. Treasury should engage in comprehensive planning to ensure that blight elimination under HHF progresses in the most effective way by, within 60 days, requiring state HFAs participating in blight elimination activities under TARP to develop performance indicators such as decreases in default rates or foreclosure filings, or increases in home values through home sales and annual tax assessments to measure progress towards Treasury’s target reduction in foreclosures and target increase in home values. Treasury should use its expertise and resources to help the state HFAs develop performance indicators. Treasury should require reporting by state HFAs on a periodic basis no less than bi-annually on chosen performance indicators and use that reporting to monitor which cities and states are on track to achieve successfully Treasury’s goal and to identify improvements to increase effectiveness. Treasury should require quarterly detailed accounting by state HFAs of how TARP funds are spent reimbursing local partners for blight elimination activities under HHF that lists actual TARP reimbursed expenditures for each local partner by each category of blight elimination activity, including demolition, acquisition, greening, maintenance, asbestos removal, engineering studies, environmental studies, or any other category of expenditures. Treasury should require state HFAs to develop a system of internal controls targeted specifically at blight elimination. 160 161 162 163 Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. Treasury should increase transparency by publicizing on its website: (1) a list of all city or county/land bank/non-profit/ for-profit partners that will participate in blight elimination activity under HHF on a state by state basis; (2) a list of addresses including zip code where a property has been demolished or removed under HHF on a city and state basis; (3) Treasury’s expected target outcomes by city and state; and (4) performance indicators to measure progress by city and state. (CONTINUED) 159 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X X X X Not Implemented TBD/NA Continued on next page See discussion in Section 2. See discussion in Section 2. See discussion in Section 2. See discussion in Section 2. See discussion in Section 2. Comments SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 107 Treasury should increase the effectiveness of oversight at both the Treasury and state HFA levels by (1) collecting all contracts and subcontracts for HHF blight elimination activities; and (2) requiring the state HFAs to collect all contracts and subcontracts for HHF blight elimination activities. (CONTINUED) Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. 164 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X Not Implemented TBD/NA See discussion in Section 2. Comments 108 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SECT IO N 3 TREASURY’S OPPORTUNITY TO INCREASE HAMP’S EFFECTIVENESS BY REACHING MORE HOMEOWNERS IN STATES UNDERSERVED BY HAMP 110 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 INTRODUCTION TARP’s signature foreclosure prevention program, the Home Affordable Modification Program (“HAMP”), has struggled to reach the expected number of homeowners Treasury envisioned for the program. According to Treasury, TARP’s housing support programs were intended to “help bring relief to responsible homeowners struggling to make their mortgage payments, while preventing neighborhoods and communities from suffering the negative spillover effects of foreclosure.”1 Treasury announced that HAMP itself aimed “to help as many as three to four million financially struggling homeowners avoid foreclosure by modifying loans to a level that is affordable for borrowers now and sustainable over the long term.”2 The only long-term sustainable help provided through HAMP is a permanent mortgage modification, which becomes effective after the homeowner successfully completes a trial period plan. Through December 31, 2014, according to Treasury data, 1,514,687 homeowners have been able to get into a more affordable permanent HAMP modification (of which, 452,322 homeowners, or 29%, subsequently redefaulted on their HAMP modifications), while there have been 6,165,544 foreclosures nationwide over the same period based on CoreLogic data.3 Treasury has made a push to increase the number of homeowners to be helped in HAMP, including extending the deadline by which homeowners must apply for HAMP three times (currently through at least December 2016), providing Treasury with an opportunity to increase the effectiveness of HAMP and homeowners’ ability to participate.4 However, as SIGTARP has repeatedly advised, extending HAMP’s timeframe without eliminating barriers to homeowners getting help from HAMP will not increase HAMP’s effectiveness. To make the most of this opportunity, Treasury must quickly identify those areas where HAMP has underperformed and the barriers that have prevented homeowners in those areas from getting HAMP assistance. Then, Treasury must act to reduce or eliminate those barriers. To increase the effectiveness of HAMP through meaningful change, SIGTARP has consistently reported on barriers homeowners face in getting into HAMP and in staying in HAMP. In its initial audit of HAMP, for example, SIGTARP recommended among other things that Treasury establish clear goals and performance metrics for the program and undertake a sustained public service announcement and publicity campaign to reach additional borrowers that may be helped by HAMP.i SIGTARP has also made numerous recommendations that Treasury should implement to monitor and ensure that mortgage servicers participating in HAMP are meeting their obligations and achieving program objectives, including recommending that Treasury set and enforce clear benchmarks for acceptable servicer performance under HAMP,ii that Treasury i F or more information, see SIGTARP’s audit report, “Factors Affecting Implementation of the Home Affordable Modification Program,” 3/25/2010, www.sigtarp.gov/Audit%20Reports/Factors_Affecting_Implementation_of_the_Home_Affordable_Modification_Program. pdf. ii SIGTARP, Letter to Treasury, 8/31/2011, reprinted in SIGTARP, Quarterly Report to Congress, 10/27/2011, at p. 298, www.sigtarp. gov/Quarterly%20Reports/October2011_Quarterly_Report_to_Congress.pdf; SIGTARP, Letter to Treasury, 2/2/2012, reprinted in SIGTARP, Quarterly Report to Congress, 4/24/2012, at p.319, www.sigtarp.gov/Quarterly%20Reports/April_25_2012_Report_to_ Congress.pdf. 111 112 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM require servicers to improve communications with homeowners about available options,iii and that Treasury adjust the way HAMP incentive payments are made in order to curb problems associated with homeowners redefaulting out of HAMP.iv While Treasury has partially implemented some of these SIGTARP recommendations,v the majority remain unimplemented. There are certain states where HAMP has not been effective in helping homeowners. Treasury could do more to help HAMP-eligible homeowners in those states avoid foreclosure. Comparing Treasury’s HAMP data against CoreLogic’s national mortgage and foreclosure activity shows striking results and impacts on homeowners: foreclosures have outpaced HAMP modifications by significantly greater margins in certain states than in others. The ten states with the most foreclosures for each HAMP modification are Alaska, Arkansas, Indiana, Iowa, Kansas, Michigan, North Dakota, Oklahoma, Tennessee, and Texas.5 There are many factors affecting whether homeowners in certain states have been more underserved by HAMP, relative to need, than others—differences in unemployment rates and in legal protections from foreclosure, among other things. However, those factors are even more of a reason for Treasury to realize that homeowners in these states need additional help and that HAMP may fill a crucial need. Treasury can improve outreach efforts to tell people about HAMP and provide additional support in helping homeowners apply, just as Treasury has done in other states. Treasury’s data on homeowner HAMP participation in states that have suffered the greatest number of foreclosures compared to HAMP modifications show that the biggest barrier is getting homeowners into HAMP in the first place. The rates at which homeowners submitted HAMP applications in these states were significantly lower than in other states.6 Making more homeowners aware of the potential HAMP relief available to them, and helping them complete their HAMP applications, are the first steps Treasury should take to increase the effectiveness of HAMP in these states. The lower rates at which homeowners in these states applied for HAMP may have been affected by the low outreach efforts by Treasury in those specific states. It is incumbent on Treasury to understand all of the factors preventing eligible homeowners from getting into HAMP (particularly in more underserved areas) and to eliminate the unnecessary barriers that it can. This data provides a roadmap to help guide Treasury where and how to focus its efforts to improve HAMP and to help more struggling homeowners going forward. Treasury should seize this opportunity to improve the program and to redouble its efforts to reach struggling homeowners in states that have been underserved by HAMP. iii F or more information, see SIGTARP’s audit report, “The Net Present Value Test’s Impact on the Home Affordable Modification Program,” 6/18/2012, www.sigtarp.gov/Audit%20Reports/NPV_Report.pdf; SIGTARP, Letter to Treasury, 4/1/2013, reprinted in SIGTARP, Quarterly Report to Congress, 7/24/2013, at p. 289, www.sigtarp.gov/Quarterly%20Reports/July_24_2013_Report_to_ Congress.pdf. iv S IGTARP, Letter to Treasury, 4/7/2014, reprinted in SIGTARP, Quarterly Report to Congress, 4/30/2014, at p.505, www.sigtarp.gov/ Quarterly%20Reports/April_30_2014_Report_to_Congress.pdf. v See Section 2, SIGTARP Recommendations, in this Quarterly Report. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 HAMP HAS UNDERSERVED HOMEOWNERS IN CERTAIN STATES Since TARP was created, approximately 1.5 million homeowners have received a permanent modification of their mortgages through HAMP as of December 31, 2014, although more than 452,000 of them have subsequently fallen out of the program by redefaulting.7 During the same period, CoreLogic data shows there have been approximately 6.2 million foreclosures nationwide.8 This means that, nationally, there have been about 4.1 foreclosures for every HAMP modification. However, struggling homeowners in some states have significantly lower participation in HAMP. Given Treasury’s stated goal for HAMP of preventing foreclosures, foreclosure actions can serve as a measure of homeowners’ need for HAMP assistance. Comparing the state-by-state ratios of foreclosures to the number of permanent HAMP modifications since October 1, 2008, can show whether HAMP reached all the parts of the country where it was needed. Figure 3.1 shows how the ratio of foreclosures to HAMP modifications has varied across the country and identifies the parts of the country that have been underserved by HAMP. FIGURE 3.1 FORECLOSURES PER HAMP MODIFICATION 4.2 6.0 0.7 11.9 4.1 3.8 7.3 4.9 1.7 6.4 5.6 2.6 8.1 7.2 4.0 6.1 5.5 3.3 2.9 7.5 13.1 3.9 8.3 6.6 7.8 7.0 1.5 1.6 2.2 1.7 1.9 2.6 2.7 4.2 3.3 5.5 8.0 8.4 1.8 2.3 Foreclosures for each HAMP modification 5.4 2.4 7.4 1.6 8.9 3.0 5.1 More than Twelve Eight to Twelve 6.2 Four to Eight 5.0 4.6 2.5 Four (National Average) Two to Four Fewer than Two Notes: Foreclosures include completed foreclosure sales since October 1, 2008 and active foreclosures in process. HAMP Modifications include permanent HAMP Tier 1, Tier 2, FHA HAMP, and RD HAMP Modifications, but not VA HAMP modifications (fewer than 1,000 in total), which are not included in Treasury’s HAMP data. Sources: SIGTARP analysis of Core Logic foreclosures data and Treasury HAMP data, as of 12/31/2014. As shown in Figure 3.1, Oklahoma homeowners have been the most underserved by HAMP, with more than 13 foreclosures for every HAMP modification. Homeowners in Vermont, by contrast, faired the best according to this measure, with fewer than one foreclosure for every HAMP modification. In general, homeowners in the Midwest, Great Plains, and South tended to get 113 114 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM into HAMP at lower rates than homeowners in the Northeast and West Coast. Struggling homeowners in the most HAMP-underserved states applied for HAMP less frequently than homeowners in other states. HOMEOWNERS IN THE STATES MOST UNDERSERVED BY HAMP HAVE LOW HAMP APPLICATION RATES Submitting a HAMP application is the necessary first step for struggling homeowners seeking HAMP assistance to avoid foreclosure. Based on Treasury’s HAMP data, homeowners in the ten states with the highest ratio of foreclosures per HAMP modification since October 2008 applied for HAMP at significantly lower rates than the national average.9 Table 3.1 compares the rates at which homeowners in those states applied for HAMP against the national average, and shows that homeowners in the states most underserved by HAMP faced greater barriers to getting into HAMP in the first place. Because differing economic conditions across the states are likely to have affected the size of the pool of potentially HAMP-eligible homeowners, Table 3.1 presents the number of applications in comparison to the number of foreclosures in each state. TABLE 3.1 FORECLOSURES PER HAMP APPLICATION – MOST “UNDERSERVED” STATES State HAMP Applications Received Permanent HAMP Modifications Foreclosures Foreclosures Per HAMP Modification Foreclosures per HAMP Application OK 28,158 4,639 60,628 13.1 2.2 ND 1,775 249 2,971 11.9 1.7 MI 202,143 43,734 387,188 8.9 1.9 AR 23,170 4,152 35,001 8.4 1.5 AK 3,615 736 6,133 8.3 1.7 IA 23,913 4,254 34,599 8.1 1.4 TN 85,330 18,981 151,494 8.0 1.8 IN 86,017 17,439 135,719 7.8 1.6 KS 22,742 4,261 31,830 7.5 1.4 TX 286,506 52,572 387,251 7.4 1.4 Other States 5,486,762 1,363,670 4,932,730 3.6 0.9 Total 6,250,131 1,514,687 6,165,544 4.1 1.0 Sources: SIGTARP analysis of CoreLogic foreclosures data and Treasury HAMP data, as of 12/31/2014. Foreclosures include completed foreclosure sales since October 1, 2008 and active foreclosures in process. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Nationwide, homeowners have submitted about one HAMP application for every foreclosure, but the rates were significantly lower in the states most underserved by HAMP. In Oklahoma, for example, two homeowners faced foreclosure for every one submitting a HAMP application–less than half the national rate. If more homeowners in these states had applied, more may have been able to avoid foreclosure. For example, had Michigan homeowners submitted HAMP applications as frequently as the national average, the number of HAMP modifications in the state could have potentially doubled, possibly helping tens of thousands of additional homeowners avoid foreclosure.10 A number of factors, including (but not limited to) differences in foreclosure processes and timelines among the states, local economic and housing market conditions, and the efforts of state and local government and non-profits to prevent foreclosures, may contribute to the differences in application rates by homeowners in different states. However, low application rates may also suggest that not enough eligible homeowners in these states were made aware of potential HAMP relief and of how to apply, and/or that fewer were able to submit a completed HAMP application. The limited scope and effectiveness of Treasury’s outreach efforts in these underserved states may have also played a significant role. TREASURY NEEDS TO DO MUCH MORE TO REACH HAMP-ELIGIBLE HOMEOWNERS IN THE STATES MOST UNDERSERVED BY HAMP The lower rates of homeowner applications in the states that have been underserved by HAMP may have been affected by the limited scope and extent of outreach efforts undertaken by Treasury. Based on information provided by Treasury, the states that have been among the most underserved by HAMP have also received the least outreach about HAMP from Treasury. Regardless of the reason Treasury has not focused on these states to date, going forward these states clearly present opportunities for Treasury to find more struggling homeowners to apply for and enter HAMP, and help them avoid foreclosure. In its March 2010 audit of HAMP, SIGTARP recommended, among other things, that Treasury undertake a sustained public service announcement (“PSA”) and publicity campaign to reach additional borrowers who could benefit from the program, and to arm the public with complete, accurate information about HAMP.vi Since that time, according to Treasury, its efforts to reach homeowners have comprised conducting direct outreach events, establishing the MHA Outreach and Borrower Intake Project, and conducting PSA and paid advertising campaigns about HAMP, as well as internet search engine marketing and the use vi S IGTARP, “Factors Affecting Implementation of the Home Affordable Modification Program,” 3/25/2010, www.sigtarp.gov/Audit%20 Reports/Factors_Affecting_Implementation_of_the_Home_Affordable_Modification_Program.pdf. 115 116 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM of various websites and social media efforts.11 Treasury’s data confirms that the states most underserved by HAMP have also been among those who have received the least direct Treasury outreach. Additional efforts by Treasury in these areas could make a difference. Table 3.2 compiles the information Treasury has provided to SIGTARP about its HAMP outreach efforts to date. TABLE 3.2 SUMMARY OF TREASURY’S HOMEOWNER OUTREACH EFFORTS Treasury’s Homeowner Events Treasury’s Homeowner Event Attendance AL 1 377 $0 10 AK 0 0 $0 0 AZ 6 6,970 $14,900 3 AR 0 0 $0 2 CA 18 17,557 $341,690 8 CO 1 484 $10,650 0 CT 0 0 $38,257 2 DC 2 1,319 $630,294 1 DE 0 0 $44,190 2 FL 17 13,690 $145,776 3 GA 6 9,151 $149,747 12 HI 0 0 $24,267 0 ID 0 0 $16,495 0 IL 3 1,978 $138,605 4 IN 1 327 $94,680 2 IA 0 0 $0 0 KS 0 0 $0 0 KY 0 0 $11,363 1 LA 1 286 $2,500 5 ME 0 0 $9,716 0 MD 4 2,837 $285,089 4 MA 3 1,681 $738,320 3 MI 5 2,122 $156,083 7 MN 1 620 $103,725 1 MS 0 0 $0 10 MO 2 1,174 $14,338 2 MT 0 0 $0 0 NE 0 0 $0 State NeighborWorks Outreach and Paid Radio Counseling Project Advertising Expenditures* Campaigns 0 Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 SUMMARY OF TREASURY’S HOMEOWNER OUTREACH EFFORTS (CONTINUED) Treasury’s Homeowner Events Treasury’s Homeowner Event Attendance NV 6 5,720 $0 2 NH 0 0 $17,650 0 NJ 1 764 $95,376 6 NM 0 0 $0 0 NY 2 2,938 $175,477 6 NC 1 588 $88,954 8 ND 0 0 $0 0 OH 3 1,175 $40,804 8 OK 0 0 $9,485 1 OR 2 882 $0 0 PA 3 1,020 $158,728 5 RI 0 0 $34,809 1 SC 1 372 $56,354 2 SD 0 0 $0 0 TN 1 268 $0 6 TX 3 2,183 $93,857 16 UT 0 0 $7,700 0 VT 0 0 $0 0 VA 2 952 $110,401 4 WA 1 796 $0 2 WV 0 0 $0 4 WI 1 512 $63,145 1 State WY Total NeighborWorks Outreach and Paid Radio Counseling Project Advertising Expenditures* Campaigns 0 0 $0 0 98 78,743 $3,923,423 154 * Reported expenditures for the “MHA Outreach and Borrower Intake Project.” Treasury, response to SIGTARP data call, 4/6/2015. Source: Treasury response to SIGTARP inquiry regarding the Making Home Affordable Program’s homeowner outreach efforts. Shaded states are the ten states with the greatest ratio of foreclosures to HAMP modifications since October 1, 2008. While Treasury posts information that would be helpful for homeowners on the HAMP website, known as the Making Home Affordable website (www. makinghomeaffordable.gov), many struggling homeowners may lack access to the internet, or may not know to look up the website. One barrier in HAMPunderserved states may be that HAMP-eligible homeowners may not even know about HAMP. Even if homeowners in HAMP-underserved states know about HAMP, they may need help to understand how to apply for HAMP. 117 118 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Treasury’s Homeowner Outreach Events Treasury’s primary direct, person-to-person outreach efforts to raise awareness with homeowners that HAMP assistance is available consists of holding local events throughout the country. According to Treasury’s MHA website: “Throughout the country, the Making Home Affordable Program sponsors free Help for Homeowners Community Events where struggling homeowners can meet one-on-one with mortgage servicers, HUD-approved housing counselors, and other local nonprofit organizations to learn about foreclosure prevention options. If you are a homeowner having trouble making your mortgage payments due to unemployment, under employment, medical hardship or other financial issues, don’t miss this opportunity for free help.”12 Treasury has lost an opportunity for homeowners to get free help with HAMP applications where Treasury has not held a homeowner event in certain states, or held only one event. As shown in Table 3.2 and Figure 3.2, Treasury has never held a homeowner event in 6 of 10 states most underserved by HAMP: Alaska, Arkansas, Iowa, Kansas, North Dakota, and Oklahoma. Treasury has only held only one homeowner event in two additional HAMP-underserved states: Indiana and Tennessee.13 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 3.2 TREASURY SPONSORED HOMEOWNER OUTREACH EVENTS BY STATE 1 0 0 0 1 2 0 2 1 0 5 0 6 3 0 18 6 3 0 0 1 2 0 2 0 3 0 0 1 4 2 1 1 0 1 0 3 0 0 0 0 0 3 1 0 1 6 1 0 17 0 Notes: States with red shading are the ten most underserved states in terms of Foreclosures per HAMP Modification. Source: Treasury Response to SIGTARP Inquiry. HAMP has an opportunity to be more effective in reaching more HAMPeligible homeowners if Treasury holds its first-ever HAMP homeowner events in Alaska, Arkansas, Iowa, Kansas, North Dakota, and Oklahoma, and holds its second-ever homeowner events in Indiana and Tennessee. Homeowners have attended the events Treasury did hold in these states. There were 327 homeowners who attended Treasury’s one HAMP event in Indiana and 268 homeowners who attended Treasury’s one HAMP event in Tennessee. HAMP’s effectiveness in getting more homeowners to apply could be significantly increased if Treasury held more than one homeowner event in HAMPunderserved states to reach different areas of that state with high foreclosure rates. Homeowner Counseling to Help Apply for HAMP Treasury has provided counseling to help homeowners apply for HAMP through two avenues, one of which Treasury has ended. First, Treasury provides homeowner HAMP application counseling at its homeowner events. Face-to-face counseling with a HUD-approved counselor, made available to homeowners by Treasury at homeowner events, can be critical to getting homeowners to actually apply for HAMP. This is why it is so important that Treasury hold homeowner events in states like Arkansas, Iowa, Kansas, North Dakota, Oklahoma, Alaska, Indiana, and Tennessee. While free HUD counseling for HAMP is available to all homeowners applying for HAMP, not all homeowners may know that. Homeowner events in 119 120 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM these states that include HUD counselors could make a difference and help more homeowners apply for HAMP. Beginning in February 2013, Treasury also used TARP funds to provide outreach and counseling to homeowners to help them submit HAMP applications through a project with the Neighborhood Reinvestment Corporation, also called NeighborWorks America. However, that program ended in December 2014. Through March 2015, Treasury paid housing counseling agencies in the fifty states more than $3.9 million in TARP funds on this project, which shows the importance that Treasury attaches to getting more people applying for HAMP.14 However, according to Treasury data, as shown in Figure 3.3, 6 of the 10 most HAMPunderserved states received no efforts or TARP money from this project, and one other state received very little. FIGURE 3.3 MHA NEIGHBORWORKS OUTREACH AND COUNSELING PROJECT EXPENDITURES BY STATE $0 $17,650 $0 $0 $0 $0 $103,725 $16,495 $175,477 $63,145 $0 $38,257 $158,728 $0 $0 $0 $138,605 $7,700 $341,690 $738,320 $34,809 $156,083 $0 $9,716 $40,804 $0 $10,650 $0 $14,338 $95,376 $44,190 $94,680 $110,401 $11,363 $285,089 $630,294 $88,954 $0 $14,900 $9,485 $0 $56,354 $0 $0 $0 $149,747 $2,500 $93,857 $0 $145,776 $24,267 Notes: States with red shading are the ten most underserved states in terms of Foreclosures per HAMP Modification. Expenditures reflect Treasury payments to agencies located in the indicated states. Source: Treasury response to SIGTARP data call, 4/6/2015. Treasury’s data shows that Treasury did not use the NeighborWorks outreach and counseling project to target help to homeowners in the most HAMPunderserved states. According to Treasury’s data, it has not made any payments to agencies participating in the project in six of those states: Alaska, Arkansas, Iowa, Kansas, North Dakota, and Tennessee. In one other of those states, Oklahoma, Treasury paid only $9,485 through NeighborWorks. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Treasury’s Media Outreach Efforts Treasury’s efforts to reach homeowners have also benefitted from donated advertisements, such as the Foreclosure Prevention Assistance PSA campaign run with the assistance of The Ad Council.vii Table 3.3 lists the airings and publications of the Foreclosure Prevention Assistance announcements by media type, based on Treasury data. TABLE 3.3 TREASURY’S HAMP PUBLIC SERVICE ANNOUNCEMENT CAMPAIGNS Media Type Advertisement Airings/ Publications Local Broadcast Television Network Cable Television Radio Out of Home* Print Public Relations Total 928,253 16,829 2,443,794 18,683 638 1,377 3,409,574 * Includes advertisements on billboards, street furniture, mass transit, etc. Source: Treasury, Response to SIGTARP inquiry, March 12, 2015, regarding the Making Home Affordable Program’s homeowner outreach efforts. Although Treasury’s PSA efforts appear to have involved more than 3 million advertisements, those advertisements have been distributed across the nation through the Ad Council. It is uncertain whether or not these campaigns increased the number of homeowners able to participate in HAMP overall. But it is clear that these efforts have neither targeted the states most underserved by HAMP nor, based on Treasury’s data, been sufficient to increase the number of homeowners in those states who successfully get into HAMP relative to foreclosure activity. According to Treasury, it also uses paid radio advertising to reach out to homeowners, and reports that it has run 154 paid radio advertisement campaigns for HAMP across the country. vii A ccording to its website, the Ad Council is a private, not for profit organization that “produces, distributes and promotes campaigns that improve everyday lives….” www.adcouncil.org/About-Us, accessed 4/9/2015. 121 122 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 3.4 MHA PAID RADIO AD CAMPAIGNS BY STATE 2 0 0 0 0 0 1 0 0 6 1 0 7 0 2 4 0 8 3 5 0 0 0 2 1 0 4 1 2 6 4 1 8 6 2 2 0 16 1 2 4 0 0 8 2 3 10 12 5 3 0 Notes: States with red shading are the ten most underserved states in terms of Foreclosures per HAMP Modification. The chart assigns ad campaigns to the largest city in the relevant media market; each campaign may thus reach potential homeowners in adjacent or other jurisdictions. Source: Treasury Response to SIGTARP Inquiry. As shown in Table 3.2 and Figure 3.4, however, to date Treasury has not supplemented the PSA effort by using paid advertisements to increase outreach in the most underserved states. Treasury has run no paid radio advertisement campaigns for HAMP in 4 of the 10 states most underserved by HAMP: Alaska, Iowa, Kansas, and North Dakota. Treasury paid to run one campaign in Oklahoma and two in Indiana. In addition, outside of a single paid radio campaign run in Memphis, TN, between May 19, 2014, and June 21, 2014, Treasury has run no paid radio advertisements within the last year in the ten most underserved states. While it may not be possible to know all the reasons why HAMP has not been as effective in preventing foreclosures in Alaska, Arkansas, Indiana, Iowa, Kansas, Michigan, North Dakota, Oklahoma, Tennessee, and Texas, one thing is clear: HAMP applications have been low in these states. Treasury should do all that it can to increase HAMP outreach in these states and provide the counseling needed to help more homeowners apply for HAMP. SECT IO N 4 TARP OVERVIEW 124 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 This section summarizes how the U.S. Department of the Treasury (“Treasury”) has managed the Troubled Asset Relief Program (“TARP”). This section also reviews TARP’s overall finances and provides updates on established TARP component programs. TARP FUNDS UPDATE Initial authorization for $700 billion of TARP funding to “restore liquidity and stability to the financial system of the United States” came through the Emergency Economic Stabilization Act of 2008 (“EESA”), which was signed into law on October 3, 2008.15 The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), which became law (Public Law 111-203) on July 21, 2010, reduced Treasury Secretary’s authority to purchase and guarantee assets under TARP to $475 billion.16 Treasury has obligated $474.8 billion to 14 programs, but subsequently deobligated funds, reducing obligations to $454.6 billion.17 Of that amount, as of March 31, 2015, $427.4 billion had been spent, and taxpayers are owed $35.9 billion.18 According to Treasury, as of March 31, 2015, it had $35.1 billion in writeoffs and realized losses, leaving $0.8 billion in TARP funds outstanding.19 Treasury’s write-offs and realized losses are money that taxpayers will never get back. These amounts do not include $15.7 billion in TARP funds spent on housing support programs, which are designed as a Government subsidy, with no repayments to taxpayers expected.20 Obligated funds remain available to be spent on only TARP’s housing support programs. According to Treasury, in the quarter ended March 31, 2015, $0.8 billion of TARP funds were spent on housing programs, leaving $21.8 billion obligated and available to be spent.21 Table 4.1 provides a breakdown of program obligations, changes in obligations, expenditures, principal repaid, principal refinanced, amounts still owed to taxpayers under TARP, and obligations available to be spent as of March 31, 2015. Table 4.1 lists 10 categories of TARP programs. It excludes the Capital Assistance Program (“CAP”), which was never funded, and summarizes three categories of automotive programs under “Automotive Industry Support Programs” and three categories of housing programs under “Housing Support Programs.” Table 4.2 details write-offs and realized losses in TARP as of March 31, 2015. Obligations: Definite commitments that create a legal liability for the Government to pay funds. Deobligations: An agency’s cancellation or downward adjustment of previously incurred obligations. 125 126 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.1 OBLIGATIONS, EXPENDITURES, PRINCIPAL REPAID, PRINCIPAL REFINANCED, AMOUNTS STILL OWED TO TAXPAYERS, AND OBLIGATIONS AVAILABLE TO BE SPENT ($ BILLIONS) Program Obligation After DoddFrank (As of 10/3/2010) Current Obligation (As of 3/31/2015) Expenditure (As of 3/31/2015) Principal Repaid (As of 3/31/2015) Principal Refinanced into SBLF (As of 3/31/2015) Still Owed to Taxpayers under TARP a (As of 3/31/2015) Available to Be Spent (As of 3/31/2015) Housing Support Programsb $45.6 $37.5c $15.7 NA $0.0 Capital Purchase Program 204.9 204.9 204.9 $197.3d 2.2 $5.4 0.0 0.6 0.6 0.2 0.1 0.0 0.5 0.0 Systemically Significant Failing Institutions 69.8 67.8f 67.8 54.4 0.0 13.5 0.0 Targeted Investment Program 40.0 40.0 40.0 40.0 0.0 0.0 0.0 5.0 5.0 0.0 0.0 0.0 0.0 0.0 81.8g 79.7h 79.7 63.1i 0.0 16.6 0.0 4.3 0.1j 0.1 0.1 0.0 0.0 0.0 Public-Private Investment Program 22.4 18.6 18.6 18.6k 0.0 0.0 0.0l Unlocking Credit for Small Businesses 0.4 0.4 0.4 0.4 0.0 0.0 0.0 $474.8 $454.6 $373.7 $2.2 $35.9 $21.8 Community Development Capital Initiativee Asset Guarantee Program Automotive Industry Support Programs Term Asset-Backed Securities Loan Facility Total $427.4m NA $21.8 Notes: Numbers may not total due to rounding. NA=Not applicable. a Amount taxpayers still owed includes amounts disbursed and still outstanding, plus $35.1 billion in write-offs and realized losses. It does not include $15.7 billion in TARP dollars spent on housing programs. These programs are designed as Government subsidies, with no repayments to taxpayers expected. b Housing support programs were designed as a Government subsidy, with no repayment to taxpayers expected. c On March 29, 2013, Treasury deobligated $7.1 billion of the $8.1 billion that was originally allocated to the FHA Short Refinance Program. On March 31, 2015, Treasury deobligated an additional $900 million under that program. d Includes $363.3 million in non-cash conversions from CPP to CDCI, which is not included in the total of $373.7 billion in TARP principal repaid because it is still owed to TARP from CDCI. Does not include $2.2 billion refinanced from CPP into the Small Business Lending Fund. e CDCI obligation amount of $570.1 million. There are no remaining dollars to be spent on CDCI. Of the total obligation, $363.3 million was related to CPP conversions for which no additional CDCI cash was expended; this is not counted as an expenditure, but it is counted as money still owed to taxpayers. Another $100.7 million was expended for new CDCI expenditures for previous CPP participants. Of the total obligation, only $106 million went to non-CPP institutions. f Treasury deobligated $2 billion of an equity facility for AIG that was never drawn down. g Includes $80.7 billion for Automotive Industry Financing Program, $0.6 billion for Auto Warranty Commitment Program, and $0.4 billion for Auto Supplier Support Program. h Treasury deobligated $2.1 billion of a Chrysler credit facility that was never drawn down. I $63.1 billion includes both payments toward principal and proceeds recovered from common stock sales. j On June 28, 2012, Treasury deobligated $2.9 billion in TALF funding, reducing the total obligation to $1.4 billion. On January 23, 2013, Treasury deobligated $1.3 billion, reducing the total obligation to $0.1 billion. k On April 10, 2012, Treasury changed its reporting methodology to reclassify as repayments of capital to the Government $958 million in receipts previously categorized as PPIP equity distributions. That $958 million is included in this repayment total. l PPIP funds are no longer available to be spent because the three-year investment period ended during the quarter ended December 31, 2012. Total obligation of $22.4 billion and expenditure of $18.6 billion for PPIP includes $356.3 million of the initial obligation to The TCW Group, Inc. (“TCW”) that was funded. TCW subsequently repaid the funds that were invested in its PPIF. Current obligation of $18.8 billion results because Oaktree, Marathon, RJL Western, BlackRock, AG GECC, Invesco and AllianceBernstein did not draw down all the committed equity and debt. All undrawn debt and equity has been deobligated as of March 31, 2015. m The $5 billion reduction in exposure under AGP is not included in the expenditure total because this amount was not an actual cash outlay. Sources: Treasury, Transactions Report, 4/3/2015; Treasury, Monthly TARP Update, 4/1/2015; Treasury, response to SIGTARP data call, 4/6/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 127 TABLE 4.2 TREASURY’S STATEMENT OF REALIZED LOSSES AND WRITE-OFFS IN TARP, AS OF 3/31/2015 TARP Program Institution Total TARP Investment Realized Lossa, Write-Offsb,c ($ MILLIONS) Description Autos Chrysler $1,328a Sold 98,461 shares and equity stake in the UAW Retiree trust for $560,000,000 Chrysler 1,600b Accepted $1.9 billion as full repayment for the debt of $3.5 billion Chrysler Total $10,465 $2,928 GM 3,203a Treasury sold to GM at a loss GM 7,130a Treasury sold to public at a loss GM 826a Loss due to bankruptcy plan of restructuring GM Total $49,500 $11,159 Ally Financial Ally Financial Total Total Investment 2,473a $17,174 $79,693 c Sold 219,079 common shares in a private offering, 95,000,000 common shares, 7,245,670 common shares, 8,890,000 common shares, 11,249,044, common shares, and 43,685,076 common shares in five separate public offerings, all for a loss $2,473 Total Realized Loss, Write-Offs $16,560 CDCI Premier Bancorp, Inc. Total Investment $7a $570 Total Realized Loss, Write-Offs Liquidation of failed bank $7 CPP 192 CPP Banks $1,809a,b 29 CPP Banks in Bankruptcy Anchor Bancorp Wisconsin, Inc. CIT Group Inc. Total Investment Bankruptcy in process, loss written off by Treasury, 4b Bankruptcy process completed, loss written off by Treasury 104a Bankruptcy process completed, loss realized by Treasury 2,330b Bankruptcy process completed, loss written off by Treasury $810 Pacific Coast National Bancorp $204,895 Total Realized Loss, Write-Offs Sales and exchanges b $5,057 SSFI AIGd $13,485a Total Investment Total Realized Loss Total TARP Investment $29,297 $350,439 $67,835 Total Realized Loss, Write-Offs Total Write-Offs Sale of TARP common stock at a loss $13,485 $5,812 Total Realized Loss, Write-Offs $35,110 Notes: Numbers may not total due to rounding. a Includes investments reported by Treasury as realized losses. Treasury changed its reporting methodology in calculating realized losses, effective June 30, 2012. Disposition expenses are no longer included in calculating realized losses. b Includes investments reported by Treasury as write-offs. According to Treasury, in the time since some transactions were classified as write-offs, Treasury has changed its practices and now classifies sales of preferred stock at a loss as realized losses. c Includes $1.5 billion investment in Chrysler Financial, $413 million ASSP investment, and $641 million AWCP investment. d Treasury has sold a total of 1.66 billion AIG common shares at a weighted average price of $31.18 per share, consisting of 1,092,169,866 TARP shares and 562,868,096 non-TARP shares based upon the Treasury’s pro-rata holding of those shares. The non-TARP shares are those received from the trust created by the Federal Reserve Bank of New York for the benefit of the Treasury. Receipts for non-TARP common stock totaled $17.55 billion and are not included in TARP collections. The realized loss reflects the price at which Treasury sold common shares in AIG and TARP’s cost basis of $43.53 per common share. Sources: Treasury, Transactions Report, 4/3/2015; Treasury, Monthly Report to Congress, March 2015; Treasury Press Release, “Treasury Announces Agreement to Exit Remaining Stake in Chrysler Group LLC,” 6/2/2011, www.treasury.gov/press-center/press-releases/Pages/tg1199.aspx, accessed 4/1/2015; Treasury, response to SIGTARP data call, 4/6/2015; Treasury, Monthly TARP Update, 6/3/2013, 6/13/2013, 7/1/2014, 10/1/2014, 1/2/2015, and 4/1/2015. 128 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TARP PROGRAMS UPDATE Some TARP programs are scheduled to last as late as 2023. Other TARP programs have no scheduled ending date; TARP money will remain invested until recipients pay Treasury back or until Treasury sells its investments in the companies. Table 4.3 provides details of exit dates and remaining Treasury investments. TABLE 4.3 STATUS OF CONTINUING TARP PROGRAMS Program Investment status as of 3/31/2015 Home Affordable Modification Program 2023 to pay incentives on modifications* Hardest Hit Fund 2017 for states to use TARP funds FHA Short Refinance Program 2022 for TARP-funded letter of credit Capital Purchase Program Remaining principal investments in 31 banks; warrants for stock in an additional 30 banks Community Development Capital Initiative Remaining principal investments in 64 banks/ credit unions Automotive Industry Financing Program Treasury sold the last remaining investment (Ally) in December 2014. *Note: In November 2014, Treasury extended by one year the period in which certain Home Affordable Modification Program incentives may be paid. Sources: Treasury, Transactions Report, 4/3/2015; Treasury, Monthly TARP Update, 4/1/2015; Treasury, response to SIGTARP data call, 4/6/2015. Common Stock: Equity ownership entitling an individual to share in corporate earnings and voting rights. Preferred Stock: Equity ownership that usually pays a fixed dividend before distributions for common stock owners but only after payments due to debt holders. It typically confers no voting rights. Preferred stock also has priority over common stock in the distribution of assets when a bankrupt company is liquidated. Senior Subordinated Debentures: Debt instrument ranking below senior debt but above equity with regard to investors’ claims on company assets or earnings. As of March 31, 2015, 125 institutions remain in TARP: 31 banks with remaining CPP principal investments; 30 CPP banks for which Treasury now holds only warrants to purchase stock; and 64 banks and credit unions in CDCI.22 Treasury does not consider the 30 CPP institutions in which it holds only warrants to be in TARP, however Treasury applies all proceeds from the sale of warrants in these banks to recovery amounts in TARP’s CPP program.23 Treasury (and therefore the taxpayer) remains a shareholder in companies that have not repaid the Government. Treasury’s equity ownership is largely in two forms—common and preferred stock—although it also has received debt in the form of senior subordinated debentures. According to Treasury, as of March 31, 2015, 232 banks and credit unions have exited CPP or CDCI with less than a full repayment, including institutions whose shares have been sold for less than par value (34), or at a loss at auction (166), and institutions that are in various stages of bankruptcy or receivership (32).24 Nineteen banks have been sold at auction for more than the par amount of taxpayers’ investment.25 Four CPP banks merged with other CPP banks.26 Taxpayers also are entitled to dividend payments, interest, and warrants for taking on the risk of TARP investments. According to Treasury, as of March 31, 2015, Treasury had collected $48.4 billion in interest, dividends, and other income, including $9.5 billion in proceeds from the sale of warrants and stock received as a result of exercised warrants.27 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 COST ESTIMATES Several Government agencies are responsible under EESA for generating cost estimates for TARP, including the Congressional Budget Office (“CBO”), the Office of Management and Budget (“OMB”), and Treasury, whose estimated costs are audited each year by the Government Accountability Office (“GAO”).28 On February 2, 2015, OMB issued the Administration’s fiscal year 2016 budget, which included a TARP lifetime cost estimate of $37.4 billion, based largely on figures from November 30, 2014.29 This was a decrease from its estimate of $39 billion based on November 30, 2013 data.30 According to OMB, this decrease was due to “improved market conditions and significant progress in winding down TARP investments.”31 The estimate also assumes principal repayments and revenue from dividends, warrants, interest, and fees for PPIP of $2.5 billion and for CPP of $8.4 billion. On March 18, 2015, CBO issued a TARP cost estimate based on its evaluation of data as of January 31, 2015. CBO estimated the ultimate cost of TARP would be $28 billion, up $1 billion from its estimate of $27 billion in April 2014.32 According to CBO, the increase is due primarily to an increase in projected mortgage program spending, offset by a decrease in the estimated costs associated with the automotive program. CBO estimates that TARP’s largest loss will come from the mortgage programs. CBO estimated that only $28 billion of obligated funds for housing will be spent. On November 7, 2014, Treasury issued its September 30, 2014, fiscal year audited agency financial statements for TARP, which contained a cost estimate of $37.5 billion.33 According to Treasury, the largest costs from TARP are expected to come from housing programs and from assistance to AIG and the automotive industry.34 This estimate assumes that all of the funds obligated for housing support programs will be spent. The most recent TARP program cost estimates from each agency are listed in Table 4.4. 129 130 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.4 COST (GAIN) OF TARP PROGRAMS ($ BILLIONS) CBO Estimate OMB Estimate Treasury Estimate, TARP Audited Agency Financial Statement 3/18/2015 1/31/2015 2/2/2015 11/30/2014 12/16/2014 9/30/2014 Housing Support Programs $28 $37.4 $37.5a Capital Purchase Program (16) (8.4) (16.1) Systemically Significant Failing Institutions 15 17.4 15.2 Targeted Investment Program and Asset Guarantee Program (8) (7.5) (8.0) Automotive Industry Support Programsb 12 19.4 12.3 Term Asset-Backed Securities Loan Facility (1) (0.5) (0.6) Public-Private Investment Program (3) (2.5) (2.7) * * * $55.6 $37.5e Program Name Report issued: Data as of: Otherc Total Interest on Reestimatesf Adjusted Total $28 d (18.1) $37.4e Notes: Numbers may not total due to rounding. a According to Treasury, “The estimated lifetime cost for Treasury Housing Programs under TARP represent the total commitment except for the FHA Refinance Program, which is accounted for under credit reform. The estimated lifetime cost of the FHA Refinance Program represents the total estimated subsidy cost associated with total obligated amount.” b Includes AIFP, ASSP, and AWCP. c Consists of CDCI and UCSB. UCSB took in about a $9 million gain by the time it ended, while CDCI has less than $500 million in outstanding investments. d The estimate is before administrative costs and interest effects. e The estimate includes interest on reestimates but excludes administrative costs. f Cumulative interest on reestimates is an adjustment for interest effects on changes in TARP subsidy costs from original subsidy estimates; such amounts are a component of the deficit impacts of TARP programs but are not a direct programmatic cost. Sources: OMB Estimate – OMB, “Analytical Perspectives, Budget of the United States Government, Fiscal Year 2016,” 2/2/2015, www.whitehouse.gov/sites/default/files/omb/budget/fy2016/assets/spec.pdf, accessed 4/1/2015; CBO Estimate – CBO, “Report on the Troubled Asset Relief Program—March 2015,” www.cbo.gov/sites/default/files/cbofiles/attachments/50034-TARP.pdf, accessed 4/1/2015; Treasury Estimate – Treasury, “Office of Financial Stability–Troubled Asset Relief Program Citizens’ Report Fiscal Year 2014,” 12/16/2014, www.treasury.gov/initiatives/financial-stability/reports/Documents/Citizens%20Report_FY2014_TARP_ FINAL_%2012172014.pdf, accessed 4/1/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TARP PROGRAMS TARP programs fall into four categories: housing support programs, financial institution support programs, automotive industry support programs, and asset support programs. Housing Support Programs The stated purpose of TARP’s housing support programs is to help homeowners and financial institutions that hold troubled housing-related assets. Treasury obligated only $45.6 billion, then in March 2013, reduced its obligation to $38.5 billion, which has been further reduced in subsequent periods to $37.5 billion.35 As of March 31, 2015, $15.7 billion (42% of obligated funds) has been expended.36 • Making Home Affordable (“MHA”) Program — According to Treasury, this umbrella program for Treasury’s foreclosure mitigation efforts is intended to “help bring relief to responsible homeowners struggling to make their mortgage payments, while preventing neighborhoods and communities from suffering the negative spillover effects of foreclosure, such as lower housing prices, increased crime, and higher taxes.”37 MHA, for which Treasury has obligated $29.8 billion of TARP funds, includes the signature program, the Home Affordable Modification Program (“HAMP”), and other programs. As of March 31, 2015, MHA had expended $10.6 billion of TARP money (36% of $29.8 billion).38 Of that amount, $8.8 billion was expended on HAMP, which includes $1.6 billion expended on homeowners’ HAMP permanent modifications that later redefaulted.39 In addition, $909 million was expended on the Home Affordable Foreclosure Alternatives (“HAFA”) program and $737 million on the Second Lien Modification Program (“2MP”).40 As of March 31, 2015, there were 477,217 active Tier 1 and 83,466 active Tier 2 permanent first-lien modifications under the TARP-funded portion of HAMP and in the past quarter the number of active Tier 1 permanent modifications increased by 1,286, while the number of Tier 2 permanent modifications increased by 10,899.41 For more information, including participation numbers for each of the MHA programs and subprograms, see the “Housing Support Programs” discussion in this section. • Housing Finance Agency (“HFA”) Hardest Hit Fund (“HHF”) — The stated purpose of this program is to provide TARP funding for “innovative measures to help families in the states that have been hit the hardest by the aftermath of the housing bubble.”42 Treasury obligated $7.6 billion for this program.43 As of March 31, 2015, $5.1 billion had been drawn down by the states from HHF.44 However, as of December 31, 2014, the latest data available, only $3.8 billion had been spent assisting 218,450 homeowners, with the remaining $499.1 million funds used for administrative expenses and $748.4 million as unspent 131 132 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM cash-on-hand.45,i For more information, see the “Housing Support Programs” discussion in this section. • FHA Short Refinance Program — Treasury has provided a TARP-funded letter of credit for up to $100 million in loss protection on refinanced first liens. As of March 31, 2015, Treasury has paid $121,508 on claims for five defaults under the program.46 As of March 31, 2015, there have been 5,694 refinancings under the FHA Short Refinance program, an increase of 279 refinancings during the past quarter.47 For more information, see the “Housing Support Programs” discussion in this section. Financial Institution Support Programs Treasury primarily invested capital directly into financial institutions including banks, bank holding companies, and, if deemed by Treasury critical to the financial system, some systemically significant institutions.48 Systemically Significant Institutions: Term referring to any financial institution whose failure would impose significant losses on creditors and counterparties, call into question the financial strength of similar institutions, disrupt financial markets, raise borrowing costs for households and businesses, and reduce household wealth. Community Development Financial Institutions (“CDFIs”): Financial institutions eligible for Treasury funding to serve urban and rural low-income communities through the CDFI Fund. CDFIs were created in 1994 by the Riegle Community Development and Regulatory Improvement Act. • Capital Purchase Program (“CPP”) — Under CPP, Treasury directly purchased $204.9 billion of preferred stock or subordinated debentures in 707 qualifying financial institutions.49 As of March 31, 2015, 61 of those institutions remained in TARP; in 30 of them, Treasury holds only warrants to purchase stock. Treasury does not consider these 30 institutions to be in TARP, however Treasury applies all proceeds from the sale of warrants in these banks to recovery amounts in TARP’s CPP program. As of March 31, 2015, 31 of the 61 institutions had outstanding CPP principal investments.50 As of March 31, 2015, taxpayers were still owed $5.4 billion related to CPP. According to Treasury, it had write-offs and realized losses of $5.1 billion in the program, leaving $329.1 million in TARP funds outstanding.51 According to Treasury, $197.3 billion of the CPP principal (or 96.3%) had been recovered as of March 31, 2015. For more information, see the “Capital Purchase Program” discussion in this section. • Community Development Capital Initiative (“CDCI”) — Under CDCI, Treasury used TARP money to buy preferred stock in or subordinated debt from 84 smaller banks, thrifts, and credit unions, that qualify as Community Development Financial Institutions (“CDFIs”). Treasury intended for CDCI to “improve access to credit for small businesses in the country’s hardest-hit communities.”52 However, 28 of these institutions converted their existing CPP investment into CDCI ($363.3 million of the $570.1 million) and 10 of those that converted received combined additional funding of $100.7 million under CDCI.53 Only $106 million of CDCI money went to institutions that were not already TARP recipients. As of March 31, 2015, 64 institutions remained in CDCI.54 For more information, see the “Community Development Capital Initiative” discussion in this section. i F igures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursements to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 • Systemically Significant Failing Institutions (“SSFI”) Program — SSFI enabled Treasury to invest in systemically significant institutions to prevent them from failing.55 Only one firm received SSFI assistance: American International Group, Inc. (“AIG”). The Government’s rescue of AIG involved several different funding facilities provided by the Federal Reserve Bank of New York (“FRBNY”) and Treasury, disbursing $161 billion, including $67.8 billion in TARP funds. As reflected on Treasury’s books and records, taxpayers recouped $54.4 billion of the $67.8 billion in TARP funds and realized losses from an accounting standpoint of $13.5 billion on Treasury’s sale of AIG stock.56 Due to a January 2011 restructuring of the FRBNY and Treasury investments, Treasury held common stock from both the TARP and FRBNY assistance, and, according to Treasury, the Government overall has made a $4.1 billion gain on the stock sales, and $959 million has been paid in dividends, interest, and other income.57 For more information, see the “Systemically Significant Failing Institutions Program” discussion in this section. • Targeted Investment Program (“TIP”) — Through TIP, Treasury invested $40 billion, including the purchases of $20 billion each of senior preferred stock in Citigroup Inc. (“Citigroup”) and Bank of America Corp. (“Bank of America”).58 Treasury also accepted common stock warrants from each, as required by EESA. Both banks fully repaid Treasury for its TIP investments.59 Treasury auctioned warrants in both companies.60 For more information on these transactions, see the “Targeted Investment Program and Asset Guarantee Program” discussion in this section. • Asset Guarantee Program (“AGP”) — Treasury, the Federal Deposit Insurance Corporation (“FDIC”), and the Federal Reserve offered certain loss protections in connection with $301 billion in troubled Citigroup assets.61 In exchange for providing the loss protection, Treasury received $4 billion of preferred stock that was later converted to trust preferred securities (“TRUPS”), and FDIC received $3 billion.62 Treasury converted the TRUPS it received from FDIC into Citigroup subordinated notes and subsequently sold them for $894 million.63 For more information, see the “Targeted Investment Program and Asset Guarantee Program” discussion in this section. Automotive Industry Support Programs TARP’s automotive industry support through the Automotive Industry Financing Program (“AIFP”) aimed “to prevent the collapse of the U.S. auto industry, which would have posed a significant risk to financial market stability, threatened the overall economy, and resulted in the loss of one million U.S. jobs.”64 On December 19, 2014, Treasury sold its remaining 54.9 million shares of the AIFP’s final participant, Ally Financial (formerly GMAC, Inc.), for total proceeds of $1.3 billion, bringing to an end both its investment in Ally Financial and the sixyear TARP auto bailout.65 As of March 31, 2015, taxpayers had taken a loss of $2.5 billion on TARP’s investment in Ally Financial.66 As of March 31, 2015, taxpayers took a $16.6 billion loss from TARP investments under the AIFP program that will never be repaid, including the $2.5 Senior Preferred Stock: Shares that give the stockholder priority dividend and liquidation claims over junior preferred and common stockholders. Trust Preferred Securities (“TRUPS”): Securities that have both equity and debt characteristics, created by establishing a trust and issuing debt to it. 133 134 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM billion lost on the principal TARP investment in Ally Financial, $11.2 billion lost on the principal TARP investment in GM, and $2.9 billion lost on the principal TARP investment in Chrysler Holding LLC (“Chrysler”). Chrysler Financial Services Americas LLC (“Chrysler Financial”) fully repaid its TARP investment.67 As of March 31, 2015, $79.7 billion had been disbursed through AIFP and its subprograms, and Treasury had recovered $63.1 billion in principal. As of March 31, 2015, Treasury had received $5.6 billion in dividends and interest under AIFP and its two subprograms, the Auto Supplier Support Program (“ASSP”) and the Auto Warranty Commitment Program (“AWCP”).68 On March 19, 2009, Treasury committed $5 billion to ASSP to “help stabilize the automotive supply base and restore credit flows,” with loans to GM ($290 million) and Chrysler ($123.1 million) fully repaid in April 2010.69 The AWCP guaranteed Chrysler and GM vehicle warranties during the companies’ bankruptcy, with Treasury obligating $640.8 million—$360.6 million for GM and $280.1 million for Chrysler, both fully repaid to Treasury.70 Asset Support Programs Asset-Backed Securities (“ABS”): Bonds backed by a portfolio of consumer or corporate loans (e.g., credit card, auto, or small-business loans). Financial companies typically issue ABS backed by existing loans in order to fund new loans for their customers. Non-Recourse Loan: Secured loan in which the borrower is relieved of the obligation to repay the loan upon surrendering the collateral. Servicing Advances: If borrowers’ payments are not made promptly and in full, mortgage servicers are contractually obligated to advance the required monthly payment amount in full to the investor. Once a borrower becomes current or the property is sold or acquired through foreclosure, the servicer is repaid all advanced funds. The stated purpose of these programs was to support the liquidity and market value of assets owned by financial institutions to free capital so that these firms could extend more credit to support the economy. These assets included various classes of asset-backed securities (“ABS”) and several types of loans. • Term Asset-Backed Securities Loan Facility (“TALF”) — TALF provided investors with $71.1 billion in non-recourse Federal Reserve loans secured by certain types of ABS, including credit card receivables, auto loans, equipment loans, student loans, floor plan loans, insurance-premium finance loans, loans guaranteed by the Small Business Administration (“SBA”), residential mortgage servicing advances, and commercial mortgage-backed securities (“CMBS”).71 As of March 31, 2015, no CMBS or ABS loans are outstanding.72 As of early 2013, the TALF program collected fees totaling more than the amount of loans still outstanding.73 As of March 31, 2015, there had been no surrender of collateral related to these loans.74 For more information, see the “TALF” discussion in this section. • Public-Private Investment Program (“PPIP”) — Under PPIP, nine PublicPrivate Investment Funds (“PPIFs”) managed by private asset managers Commercial Mortgage-Backed Securities (“CMBS”): Bonds backed by one or more mortgages on commercial real estate (e.g., office buildings, rental apartments, hotels). Collateral: Asset pledged by a borrower to a lender until a loan is repaid. Generally, if the borrower defaults on the loan, the lender gains ownership of the pledged asset and may sell it to satisfy the debt. In TALF, the ABS or CMBS purchased with the TALF loan is the collateral that is posted with FRBNY. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 invested in non-agency residential mortgage-backed securities (“non-agency RMBS”) and CMBS. Treasury originally obligated $22.4 billion in TARP funds to the program and reduced the amount over time to $18.6 billion as of March 31, 2015. Together, all nine PPIFs drew down $18.6 billion in debt and equity financing from the total obligation, and fully repaid Treasury.75 As of March 31, 2015, the entire PPIP portfolio had been liquidated, and all PPIP funds had been legally dissolved.76 For more information, see the “Public-Private Investment Program” discussion in this section. • Unlocking Credit for Small Businesses (“UCSB”)/Small Business Administration (“SBA”) Loan Support Initiative — Treasury purchased $368.1 million in 31 securities backed by SBA loans under UCSB. Treasury sold the last of its UCSB securities on January 24, 2012, ending the program with a net investment gain of about $9 million.77 For more information, see the “Unlocking Credit for Small Businesses/Small Business Administration Loan Support” discussion in this section. Non-Agency Residential MortgageBacked Securities (“non-agency RMBS”): Financial instrument backed by a group of residential real estate mortgages (i.e., home mortgages for residences with up to four dwelling units) not guaranteed or owned by a Government-sponsored enterprise (“GSE”) or a Government agency. 135 136 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HOUSING SUPPORT PROGRAMS Mortgage Servicers: Companies that perform administrative tasks on monthly mortgage payments until the loan is repaid. These tasks include billing, tracking, and collecting monthly payments; maintaining records of payments and balances; allocating and distributing payment collections to investors in accordance with each mortgage loan’s governing documentation; following up on delinquencies; and initiating foreclosures. Investors: Owners of mortgage loans or bonds backed by mortgage loans who receive interest and principal payments from monthly mortgage payments. Servicers manage the cash flow from homeowners’ monthly payments and distribute them to investors according to Pooling and Servicing Agreements (“PSAs”). Government-Sponsored Enterprises (“GSEs”): Private corporations created and chartered by the Government to reduce borrowing costs and provide liquidity in the market, the liabilities of which are not officially considered direct taxpayer obligations. On September 7, 2008, the two largest GSEs, the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), were placed into Federal conservatorship. They are currently being financially supported by the Government. On February 18, 2009, the Administration announced a foreclosure prevention plan that became the Making Home Affordable (“MHA”) program.78 MHA includes the following programs: • Home Affordable Modification Program (“HAMP”) — MHA’s signature program is HAMP, which uses TARP funds to provide incentives for mortgage servicers and investors to modify eligible first-lien mortgages currently in default or at imminent risk of default into affordable and sustainable loans. The Government-sponsored enterprises (“GSEs”) also participate in the HAMP program, using non-TARP funds to modify the loans they back.79 HAMP itself comprises two levels: Tier I and, since June 1, 2012, Tier 2, the latter of which expanded the pool of homeowners potentially eligible for HAMP assistance to include non-owner-occupied “rental” properties and homeowners with a wider range of debt-to-income ratios.80 As of March 31, 2015, there were 890,783 active permanent HAMP Tier 1 modifications, 477,217 of which were under TARP, with the remainder under the GSE portion of the program (the GSEs do not participate in the Tier 2 program).81 As of March 31, 2015, 98,702 HAMP Tier 2 modifications had become permanent, of which 83,466 remained active.82 Of Tier 2 permanent modifications started, 14,800 were previously HAMP Tier 1 permanent modifications, of which 11,567 remained active. Treasury over time expanded HAMP to include sub-programs, including the Principal Reduction Alternative (“PRA”), Home Affordable Unemployment Program (“UP”), and Home Price Decline Protection (“HPDP”) programs. • Home Affordable Foreclosure Alternatives (“HAFA”) — HAFA provides incentives to servicers, investors, and homeowners to pursue short sales and deeds-in-lieu of foreclosure when the homeowner is unable or unwilling to enter or sustain a modification and the property is worth less than the outstanding amount of the mortgage.83 As of March 31, 2015, there were 190,707 short sales or deeds-in-lieu under HAFA.84 Short Sale: Sale of a home for less than the unpaid mortgage balance. A homeowner sells the home and the investor accepts the proceeds as full or partial satisfaction of the unpaid mortgage balance, thus avoiding the foreclosure process. Deed-in-Lieu of Foreclosure: Instead of going through foreclosure, the homeowner voluntarily surrenders the deed to the home to the investor, as satisfaction of the unpaid mortgage balance. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 • Second-Lien Modification Program (“2MP”) — 2MP is intended to modify second-lien mortgages when a corresponding first lien is modified under HAMP by a participating servicer.85 As of March 31, 2015, there were 84,555 active permanently modified second liens in 2MP.86 • Agency-Insured Programs — These programs are similar in structure to HAMP, but apply to eligible first-lien mortgages insured by FHA or guaranteed by the Department of Agriculture’s Office of Rural Development (“RD”) and the Department of Veterans Affairs (“VA”).87 Treasury provides TARP-funded incentives to encourage modifications under the FHA and RD modification programs, but not for the VA modification program. As of March 31, 2015, there were 122 RD-HAMP active permanent modifications, 59,822 FHAHAMP active permanent modifications, and 491 VA-HAMP active permanent modifications.88 • Treasury/FHA Second-Lien Program (“FHA2LP”) — Treasury intended to use TARP funds for principal reduction or extinguishment of second liens associated with an FHA refinance.89 The program shut down before any second liens were written down or extinguished under the program.90 In addition to MHA, Treasury also allocated TARP funds to support two additional housing support efforts: • Housing Finance Agency Hardest Hit Fund (“HHF”) — A TARP-funded program, HHF is intended to fund foreclosure prevention programs run by housing finance agencies in 18 states and Washington, DC, which were hit hardest by the decrease in home prices and high unemployment rates.91 As of December 31, 2014, the latest data available, 218,450 homeowners had received assistance under HHF.92 • FHA Short Refinance Program — This program, which is partially supported by TARP funds, is intended to provide homeowners who are current on their mortgage an opportunity to refinance existing underwater mortgage loans that are not currently insured by FHA into FHA-insured mortgages with lower principal balances. Treasury has provided a TARP-funded letter of credit that, as of March 31, 2015, provided up to $100 million in loss coverage on these newly originated FHA loans.93 As of March 31, 2015, 5,694 loans had been refinanced under FHA Short Refinance.94 Status of TARP Funds Obligated to Housing Support Programs Treasury initially obligated $45.6 billion to housing support programs, which was reduced to $37.5 billion, of which $15.7 billion, or 42%, has been expended as of March 31, 2015.95 Of that, $0.8 billion was expended in the quarter ended March 31, 2015. However, some of the expended funds remain as cash-on-hand or paid for administrative expenses at state housing finance agencies (“HFAs”) participating in the Hardest Hit Fund program. Treasury has capped the aggregate amount Underwater Mortgage: Mortgage loan on which a homeowner owes more than the home is worth, typically as a result of a decline in the home’s value. Underwater mortgages also are referred to as having negative equity. 137 138 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM available to pay servicer, homeowner, and investor incentives under MHA programs at $29.8 billion, of which $10.6 billion (35%), has been spent as of March 31, 2015.96 Treasury allocated $7.6 billion to the Hardest Hit Fund. As of March 31, 2015, of the $7.6 billion in TARP funds available for HHF, states had drawn down $5.1 billion.97 As of December 31, 2014, the latest date for which spending analysis is available, the states had drawn down $5 billion.98 As of December 31, 2014, states had spent $3.8 billion (50%) of the allocated funds to assist 218,450 homeowners, spent $499.1 million (7%) for administrative expenses, and held $748.4 million (10%) as unspent cash-on-hand.99,i,ii Treasury originally allocated $8.1 billion for FHA Short Refinance, but deobligated $7.1 billion in March 2013 and a further $900 million in March 2015.100 Of the $100 million currently allocated for FHA Short Refinance, $60 million has been spent, which includes $50 million held in a prefunded reserve account to pay future claims, $10 million spent on administrative expenses, and $121,508 spent on five refinanced mortgages that later redefaulted.101 Table 4.5 shows the breakdown in expenditures and estimated funding allocations for these housing support programs. Figure 4.1 also shows these expenditures, as a percentage of allocations. i According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; HFAs [states] vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. ii F igures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 4.5 TARP ALLOCATIONS AND EXPENDITURES BY HOUSING SUPPORT PROGRAMS, AS OF 3/31/2015 ($ BILLIONS) ALLOCATIONS EXPENDITURES MHA HAMPa First Lien Modification $19.1 $7.1 PRA Modification 2.0 1.3 HPDP 1.6 0.4 UP — —b $22.7 $8.8 HAFA HAMP Total 4.2 0.9 2MP 0.1 0.7 Treasury FHA-HAMP 0.2 RD-HAMP —c — —d d FHA2LP 2.7 MHA Total — $29.8 $10.6 HHF (Drawdown by States) $7.6 $5.1 FHA Short Refinance $0.1f $0.1 $37.5 $15.7 e Total Notes: Numbers may not total due to rounding. According to Treasury, these numbers are “approximate.” a Includes HAMP Tier 1 and HAMP Tier 2. b Treasury does not allocate TARP funds to UP. c Treasury has expended $0.1 billion for the Treasury FHA-HAMP program. d Treasury has allocated $0.02 billion to the RD-HAMP program. As of March 31, 2015, $344,393 has been expended for RD-HAMP. e Not all of the funds drawn down by states have been used to assist homeowners. As of December 31, 2014, HFAs had drawn down approximately $5 billion, and, according to the latest data available, only $3.8 billion (50%) of TARP funds allocated for HHF have gone to help 218,450 homeowners. f This amount includes up to $25 million in fees Treasury will incur for the availability and usage of the $100 million letter of credit. Sources: Treasury, responses to SIGTARP data calls, 1/5/2012, and 4/23/2015; Treasury, Transactions Report-Housing Programs, 3/31/2015; Treasury, Monthly TARP Update 4/1/2015. 139 140 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.1 TARP HOUSING SUPPORT FUNDS ALLOCATED AND SPENT, AS OF 3/31/2015 ($ BILLIONS) HAMP $22.7 billion 39% spent ($8.8 billion) 67% spenta ($5.1 billion) Hardest Hit Fund $7.6 billion 22% spent ($0.9 billion) HAFA $4.2 billion FHA2LP $2.7 billion Funds Allocated Funds Spent None spent 2MP $0.1 billion 567% spent ($0.7 billion) Treasury FHA–HAMP $0.2 billion 63% spent ($0.1 billion) FHA Short Refinance $0.1 billionb 60% spent ($0.1 billion) 0 5 10 15 20 25 Notes: Numbers may not total due to rounding. HAMP includes HAMP Tier 1, HAMP Tier 2, HPDP, and PRA. TARP funds are not used to support the UP program, which provides forbearance of a portion of the homeowner’s mortgage payment. RD-HAMP expenditures equal $344,394 as of March 31, 2015. As of December 31, 2013, the FHA2LP program closed without any payments. a In this figure, Hardest Hit Funds “spent” represents the amount of funds states had drawn down as of March 31, 2015. Treasury requires states to return any HHF funds drawn down but unspent after December 31, 2017. According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. b On March 31, 2015, Treasury reduced the maximum amount of the FHA short loss coverage from $1 billion to $100 million by amending its letter of credit. Sources: Treasury, responses to SIGTARP data calls, 1/5/2012, 4/6/2015, and 4/23/2015; Treasury, Transactions Report-Housing Programs, 3/31/2015. As of March 31, 2015, Treasury had active agreements with 79 servicers.102 That compares with 145 servicers that had agreed to participate in MHA as of October 3, 2010.103 According to Treasury, of the $29.8 billion obligated to participating servicers under their Servicer Participation Agreements (“SPAs”), as of March 31, 2015, only $10.6 billion (35%) has been spent, broken down as follows: $8.8 billion had been spent on completing permanent modifications of first liens, including HAMP Tier 1, HAMP Tier 2, PRA, and HPDP (560,683 of which remain active); $736.6 million had been spent under 2MP; and $909.1 million had been spent on incentives for short sales or deeds-in-lieu of foreclosure under HAFA.104 Of the combined amount of incentive payments, according to Treasury, approximately $5.8 billion went to pay investor or lender incentives, $2.7 billion went to pay servicer incentives, and $2.1 billion went to pay homeowner incentives.105 Table 4.6 shows the breakdown of TARP-funded expenditures related to housing support programs (not including the GSE-funded portion of HAMP). SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 4.6 BREAKDOWN OF TARP EXPENDITURES, AS OF 3/31/2015 ($ MILLIONS) MHA TARP Expenditures HAMP HAMP First Lien Modification Incentives Servicer Incentive Payment Servicer Current Borrower Incentive Payment Annual Servicer Incentive Payment Investor Current Borrower Incentive Payment $743.2 $16.9 $1,380.2 $72.1 Investor Monthly Reduction Cost Share $3,113.0 Annual Borrower Incentive Payment $1,542.1 Tier 2 Incentive Payments $207.6 HAMP First Lien Modification Incentives Total $7,075.0 PRA $1,320.4 HPDP UP $374.7 $—a HAMP Program Incentives Total $8,770.1 HAFA Incentives Servicer Incentive Payment $270.1 Investor Reimbursement $203.3 Borrower Relocation $435.6 HAFA Incentives Total $909.1 Second-Lien Modification Program Incentives 2MP Servicer Incentive Payment $71.4 2MP Annual Servicer Incentive Payment $47.6 2MP Annual Borrower Incentive Payment $47.2 2MP Investor Cost Share $247.6 2MP Investor Incentive $322.8 Second-Lien Modification Program Incentives Total $736.6 Treasury/FHA-HAMP Incentives Annual Servicer Incentive Payment $74.4 Annual Borrower Incentive Payment $71.2 Treasury/FHA-HAMP Incentives Total RD-HAMP FHA2LP MHA Incentives Total HHF Disbursements (Drawdowns by State HFAs) FHA Short Refinance (Loss-Coverage) Total Expenditures $145.6 $—b $— $10,561.7 $5,092.5 $60.0 $15,714.2 Notes: Numbers may not total due to rounding. a TARP funds are not used to support the UP program, which provides forbearance of a portion of the homeowner’s mortgage payment. b RD-HAMP expenditures equal $344,394 as of March 31, 2015. Source: Treasury, response to SIGTARP data call, 4/23/2015. 141 142 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HAMP MORTGAGE SERVICING TRANSFERS For more details, see SIGTARP’s report, “Homeowners Can Get Lost in the Shuffle and Suffer Harm When Their Servicer Transfers Their Mortgage But Not the HAMP Application or Modification,” in SIGTARP’s October 2014 Quarterly Report, pages 99-112. In its October 2014 Quarterly Report,iii SIGTARP reported on homeowners in and seeking HAMP getting “lost in the shuffle” when their mortgage servicers transferred their loans to other servicers, but their HAMP application or modification gets lost or delayed in the transfer. Delays, omissions, or miscommunication of information between servicers transferring homeowners’ mortgages have resulted in lost HAMP applications, trial modifications not being honored, misapplication of homeowners’ HAMP payments that can lead to modified mortgages being deemed delinquent or in default, and even resumption of foreclosure proceedings. SIGTARP reported in detail in that October 29, 2014 report how SIGTARP’s investigation of SunTrust Mortgage, the Consumer Finance Protection Bureau’s recent concerns and findings related to other servicers, and homeowner complaints to SIGTARP, demonstrate that the transfer of mortgages without the homeowner’s HAMP application or modification has been, and continues to be, a problem. In SIGTARP’s criminal investigation of TARP recipient SunTrust, that went public in a July 2014 non-prosecution agreement with the Department of Justice, SIGTARP found problems with SunTrust Mortgage’s administration of HAMP related to servicing transfers. That agreement discusses that SunTrust Mortgage harmed hundreds of homeowners in the GSE-version of HAMP by transferring their mortgages to NationStar for servicing in 2010, but not their HAMP modifications. The homeowners were required by their new servicer to reapply for HAMP, sometimes resulting in a new HAMP trial modification with a higher interest rate, denial of HAMP with a non-HAMP modification with a higher interest rate, or denial of any assistance leading to them losing their home.iv In 2011, Treasury made changes to HAMP rules for servicers related to transfers and changed to an automated reporting system. However, despite those rules, SIGTARP has continued to receive homeowner reports of harms they suffered related to HAMP when their mortgage was transferred to another servicer.v Treasury is aware of these reports because it is SIGTARP’s standard practice to share them with Treasury soon after receiving them. SIGTARP is not the only one expressing concern in this area. In 2013, the Consumer Financial Protection Bureau (“CFPB”) also issued a bulletin on heightened concerns about homeowner complaints they received on transfers iii SIGTARP, “Quarterly Report to Congress,” 10/29/2014, www.sigtarp.gov/Quarterly%20Reports/October_29_2014_Report_to_ Congress.pdf, accessed 4/20/2015. iv SIGTARP Press Statement, “$320 Million Non-Prosecution Agreement Reached with TARP Recipient SunTrust Bank,” 7/3/2014, www. sigtarp.gov/Press%20Releases/SunTrust_Nonprosecution_Agreement_Press_Release.pdf, accessed 4/8/2015. v SIGTARP, analysis of complaints received from homeowners participating in or seeking MHA assistance. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 that resulted in lost trial modifications.vi In 2014, CFPB issued a second bulletin based on similar findings made in their examinations of servicers.vii In April 2015, HAMP servicer Green Tree Servicing agreed to pay $63 million and take additional actions to protect homeowners to settle charges by the Federal Trade Commission and CFPB that the servicer harmed homeowners with illegal loan servicing and debt collection practices.viii According to the allegations, Green Tree often did not honor modification agreements in their final stages, required consumers behind on their mortgages to make loan payments in order to be considered for a loan modification even when assistance programs prohibited such up-front payment requirements, and insisted on doing its own due diligence to the detriment of struggling homeowners. Green Tree also allegedly tried to collect the original mortgage payment on loans it knew or had reason to know had been modified by the previous servicer. Homeowners suffer harm when their mortgage is transferred to a new servicer and their application for HAMP or HAMP modification is lost or delayed in the process. Delays, omissions, or miscommunications between transferring servicers and new servicers during the transfer can seriously delay, deny, or decrease relief provided to HAMP-eligible homeowners. Homeowners applying for HAMP may be required to submit new applications months later, requiring all new documentation because the past documentation may become stale. Many struggling homeowners who could not afford their original mortgage payment may fall further behind in their mortgage payments during a new extended application period, which may put their homes at risk or hurt their chances of receiving a HAMP modification. Homeowners already in a HAMP trial or permanent modification are harmed if the new servicer is not timely informed or does not honor the modification. Even when the homeowner makes the modified HAMP payments on time, if the new servicer does not understand that they are in a HAMP modification before the first monthly payment is due, the new servicer will only see the original terms of the mortgage and deem that homeowner as delinquent on the original terms. New servicers also may recalculate income or payments in a way that disadvantages vi Consumer Financial Protection Bureau, “CFPB Bulletin 2013-01,” 2/11/2013, files.consumerfinance.gov/f/201302_cfpb_bulletin-onservicingtransfers.pdf, accessed 4/8/2015. vii Consumer Financial Protection Bureau, “Bulletin 2014-01,” 8/19/2014, files.consumerfinance.gov/f/201408_cfpb_bulletin_ mortgage-servicingtransfer. pdf, accessed 4/8/2015. viii Federal Trade Commission, “National Mortgage Servicing Company Will Pay $63 Million to Settle FTC, CFPB Charges,” 4/21/2015, www.ftc.gov/news-events/press-releases/2015/04/national-mortgage-servicing-company-will-pay-63-million-settle, accessed 4/26/2015. 143 144 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM homeowners. SIGTARP has received homeowner complaints in each of these scenarios as reported in more detail in its October 2014 report to Congress. The complaints to SIGTARP, SIGTARP’s findings in its SunTrust investigation, CFPB’s heightened concerns from consumer complaints, and CFPB’s examination findings confirm that this is an area where Treasury must act to protect homeowners. Treasury’s HAMP rules require that HAMP applications, modifications, and related information be transferred with the mortgages, and that servicers report any transfers of HAMP mortgages to Treasury.ix At the time SIGTARP released its October 2014 report, Treasury was unable to produce even basic information regarding the transfers of HAMP modifications and applications, such as the total number of HAMP permanent modifications transferred, the total number of HAMP trial modifications transferred, and the total number of mortgages with outstanding HAMP applications transferred since the program began. Recently, Treasury has provided some data regarding transfers once the homeowners are in HAMP permanent and trial modifications. However, this does not include information about mortgages transferred while the homeowner’s HAMP application was still pending—a point in the HAMP process at which many of the homeowners who have contacted SIGTARP experienced problems. Thousands of HAMP Homeowners Have Had Their Mortgage Servicing Transferred, With Almost 75% Acquired by a Handful of HAMP Servicers Figure 4.2 shows the number of HAMP modifications (trial and permanent) transferred between mortgage servicers since the program began.x ix T reasury, “Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages, Version 4.4,” 3/3/2014, pp.24-28, www.hmpadmin.com/portal/programs/docs/hamp_servicer/mhahandbook_44.pdf, accessed 4/1/2015. x In this discussion of servicing transfers, the term “HAMP Modification” refers to trial and permanent modifications under HAMP (Tier 1 and Tier 2), FHA HAMP, and RD HAMP. Treasury does not collect detailed information on VA HAMP, as its incentives are not paid using TARP funds. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.2 CUMULATIVE HAMP SERVICING TRANSFERS – TRIAL AND PERMANENT MODIFICATIONS TRANSFERRED 300,000 250,000 237,824 241,072 203,076 200,000 150,000 94,299 100,000 53,570 50,000 29,002 1,526 0 2009 2010 2011 2012 2013 2014 2015* *Includes servicing transfers through the March 2015 servicing transfers reporting cycle. Some servicing transfers that occur during this quarter may not be reported until subsequent reporting periods. Source: SIGTARP analysis of Treasury HAMP Servicing Transfer Data. As shown in Figure 4.2, according to Treasury, through March 2015, 241,072 HAMP mortgages in a trial or permanent modification had been transferred. While only 1,526 HAMP modifications were transferred during 2009, the first year of the program, 29,002 HAMP modifications were transferred by the end of the second year. The number of HAMP modifications transferred increased over the next four years, totaling 237,874 by the end of 2014. Through March 2015, 241,072 HAMP modifications have been transferred. According to Treasury’s data, the firms most active in acquiring HAMP mortgage servicing through transfers have changed over time. In the first two years of the program, large bank servicers were among the most active acquirers of HAMP mortgage servicing. In 2009 and 2010, Wells Fargo Bank, NA and Bank of America, NA, respectively, led all servicers in the acquisition of HAMP mortgage servicing, as shown in Table 4.7. By contrast, in each of the next four years (as well as the first three months of 2015), the servicers most active in receiving HAMP mortgage servicing transfers were non-banks: Ocwen Loan Servicing, LLC (“Ocwen”) in each of 2011, 2012, 2013, and 2014, and Bayview Loan Servicing, LLC in 2015. 145 146 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.7 HAMP MORTGAGE SERVICING TRANSFERS, TOP BUYERS BY YEAR Year Servicer Name 2009 Wells Fargo Bank, N.A. 2010 Bank of America, National Association Number of HAMP Mortgages % of Annual Total 1,486 97% 13,271 48% 2011 Ocwen Loan Servicing, LLC 11,590 47% 2012 Ocwen Loan Servicing, LLC 18,207 45% 2013 Ocwen Loan Servicing, LLC 67,962 62% 2014 Ocwen Loan Servicing, LLC 7,806 22% 2015 Bayview Loan Servicing LLC 2,500 77% Note: Analysis includes servicing transfers through the March 2015 servicing transfers reporting cycle. Some servicing transfers that occur during this quarter may not be reported until subsequent reporting periods. Source: SIGTARP analysis of Treasury HAMP Servicing Transfer Data. TABLE 4.8 HAMP MORTGAGE SERVICING TRANSFERS, TOP SELLERS BY YEAR Number of HAMP Mortgages % of Annual Total Year Servicer Name 2009 Wachovia Mortgage, FSB 1,486 97% 2010 Wilshire Credit Corporation 8,978 33% 2011 Litton Loan Servicing, LP 11,763 48% 2012 Saxon Mortgage Services, Inc. 12,031 30% 2013 American Home Mortgage Servicing, Inc. 27,674 25% 2014 GMAC Mortgage, LLC 8,748 25% 2015 JPMorgan Chase Bank, N.A. 2,494 77% Note: Analysis includes servicing transfers through the March 2015 servicing transfers reporting cycle. Some servicing transfers that occur during this quarter may not be reported until subsequent reporting periods. Source: SIGTARP analysis of Treasury HAMP Servicing Transfer Data. Table 4.9, below, provides further detail on HAMP mortgage servicing transfers, showing the number of transfers between the top ten selling and acquiring servicers. According to Treasury’s data, three firms, Ocwen, Nationstar Mortgage, LLC, and SPS, acquired the servicing for 173,760 HAMP loans, or 70% of the total number transferred. Ocwen, alone, acquired over 117,000 HAMP loans, 47% of the total number transferred. 147 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 4.9 S Se ele LL rv ct C ic Po in r g, t f o l In io c. B As ank so o ci f A at m io e n ri ca Ba ,N Se yv at i rv ew io na ic in Lo l g a LL n JP C M or ga n Ch as e Sp Ba Se ec nk i rv a ,N l ic iz A in ed g, L LL oa C n R M ush an m ag or em e L en oa Fa tS n y er Se vi ce rv ic s in LL g, C LL C Se Fi rv na is nc O ia ne lS ,I er nc O vi . d th ce b er s, a B In SI c. of To ta l Pe To t al rc e nt ag e or t M ta r ns N at io n cw e O BU YE RS Lo an Se rv ic ga ge in g, LL C HAMP SERVICING TRANSFERS – TOP TEN BUYERS AND SELLERS SELLERS Bank of America, National Association 1,066 15,671 10,750 — 1,447 2 3,560 227 23 221 6,250 39,217 16% American Home Mortgage Servicing, Inc. 27,665 — — — 11 — 7 9 11 1 63 27,767 11% GMAC Mortgage, LLC 24,302 — 52 5 138 3 840 3 16 3 2,320 27,682 11% JPMorgan Chase Bank, NA 10,950 69 7,736 — 412 — 93 12 27 77 417 19,793 8% OneWest Bank 18,346 — — — — — 1,162 — — 1 2 19,511 8% Saxon Mortgage Services, Inc. 17,254 — 28 — 29 — 378 — — — 50 17,739 7% Litton Loan Servicing, LP 11,592 — — — — — 100 — — — 78 11,770 5% — 10,818 192 — 11 — — — — — 65 11,086 4% Aurora Loan Services, LLC Wilshire Credit Corporation — 9 — 8,938 — — — — — — 31 8,978 4% CitiMortgage, Inc. 12 1 19 2 3,449 — 29 2,367 609 978 1,105 8,571 3% Other 6,016 4,366 6,846 13,452 4,381 7,349 629 1,472 2,758 796 8,421 56,486 23% Total 117,203 30,934 25,623 22,397 9,878 7,354 6,798 4,090 3,444 2,077 18,802 248,600 47% 12% 10% 9% 4% 3% 3% 2% 1% 1% 8% Percentage of Total Note: Analysis includes servicing transfers through the March 2015 servicing transfers reporting cycle. Some servicing transfers that occur during this quarter may not be reported until subsequent reporting periods. Source: SIGTARP analysis of Treasury HAMP Servicing Transfer Data. 148 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM As described in SIGTARP’s October 2014 report, Treasury conducts quarterly in-depth assessments of the top servicers’ compliance with TARP rules. Treasury began publishing its servicer assessments in 2011. Treasury’s ratings, including its most recent assessment as of December 2014, are reported in Table 4.10, below. Since 2011—a period encompassing the public actions taken by the CFPB and other regulators over servicer misconduct during the loan transfer process, as well as many HAMP-specific anecdotes of homeowner harm that SIGTARP provided to Treasury—the vast majority of Treasury’s published servicer assessment ratings have been that “Moderate Improvement Needed.” TABLE 4.10 SERVICER Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Bank of America, N.A. ● ● ● ● ● ● ● ● ● ● ● ● ● ● JPMorgan Chase Bank, N.A. ● ● ● ● ● ● ● ● ● ● ● ● ● ● Ocwen Loan Servicing, LLC ● ● ● ● ● ● ● ● ● ● ● ● ● ● Nationstar Mortgage LLC ● ● ● ● ● ● ● ● ● ● ● ● ● ● Select Portfolio Servicing, Inc. ● ● ● ● ● ● ● ● ● ● ● ● ● ● Wells Fargo Bank, N.A. ● ● ● ● ● ● ● ● ● ● ● ● ● ● CitiMortgage, Inc. ● ● ● ● ● ● ● ● ● ● ● ● ● ● Notes: Table only includes the servicers currently included in the servicer assessments. Legend: ● Servicer rated as “Minor Improvement Needed” during the quarter. ● Servicer rated as “Moderate Improvement Needed” during the quarter. ● Servicer rated as “Substantial Improvement Needed” during the quarter. ● Servicer not included in the quarter’s assessment. Source: SIGTARP, analysis of “Making Home Affordable Program Performance Reports,” (including Quarterly Servicer Assessments), www.treasury.gov/initiatives/financial-stability/reports/Pages/Making-Home-Affordable-Program-Performance-Report.aspx, accessed 4/10/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 HAMP According to Treasury, HAMP was intended “to help as many as three to four million financially struggling homeowners avoid foreclosure by modifying loans to a level that is affordable for borrowers now and sustainable over the long term.”106 Although HAMP contains several subprograms, the term “HAMP” is most often used to refer to the HAMP First-Lien Modification Program, described below. HAMP First-Lien Modification Program The HAMP First-Lien Modification Program, which went into effect on April 6, 2009, modifies the terms of first-lien mortgages to provide homeowners with lower monthly payments. A HAMP modification consists of two phases: a trial modification that was designed to last three months, followed by a permanent modification. Treasury pays incentives for active TARP (non-GSE) HAMP permanent modifications for six years.107 In designing HAMP, the Administration envisioned a “shared partnership” between the Government and investors to bring distressed homeowners’ first-lien monthly payments down to an “affordable and sustainable” level.108 The program description immediately below refers only to the original HAMP program, which was renamed “HAMP Tier 1” after the launch of HAMP Tier 2. Trial Modification: Under HAMP, a period of at least three months in which a borrower is given a chance to establish that he or she can make lower monthly mortgage payments and qualify for a permanent modification. Also called a Trial Period Plan, or “TPP.” Active Permanent HAMP Modifications Declined for the Third Consecutive Quarter As of March 31, 2015, a total of 890,783 mortgages were in active HAMP Tier 1 (“HAMP”) permanent modifications under both TARP (non-GSE) and GSE HAMP, down from 895,635 as of December 31, 2014. In the most recent quarter, active TARP (non-GSE) HAMP modifications increased by 1,286, offset by a decrease in GSE HAMP active modifications of 6,138. Some 22,723 were in active trial modifications. As of March 31, 2015, for homeowners receiving permanent modifications, 95.9% received an interest rate reduction, 65.6% received a term extension, 35.7% received principal forbearance, and 17.1% received principal forgiveness.109 Table 4.11 shows HAMP modification activity, broken out by TARP and GSE loans. For more detail on redefaulted modifications over the life of HAMP, see Table 4.16 and Figure 4.5. For more detail on HAMP modification activity, broken out by TARP and GSE loans, see Table 4.31 on page 185. For additional information about what happens to HAMP permanent modifications after five years, please see the discussion, “Payment Increases on HAMP-Modified Mortgages.” TABLE 4.11 CUMULATIVE HAMP TIER 1 MODIFICATION ACTIVITY BY TARP/GSE, AS OF 3/31/2015 Trials Started Trials Cancelled Trials Active Trials Converted to Permanent Permanents Redefaulted Permanents Paid Off Permanents Active TARP 1,105,688 353,090 15,817 736,781 245,727 13,685 477,217 GSE 1,079,282 430,302 6,906 642,074 195,735 32,671 413,566 Total 2,184,970 783,392 22,723 1,378,855 441,462 46,356 890,783 Source: Treasury, “HAMP 1MP: Program Volumes - Program Type & Payor by Tier - March 2015,” accessed 4/22/2015. 149 150 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM During the most recent quarter 15,104 homeowners started new trials and 15,387 homeowners were able to convert their trials to permanent modifications. As 13,962 homeowners re-defaulted in HAMP and another 6,027 paid off their modified loan, the number of active HAMP permanent modifications decreased by 4,852.110 As shown in Figure 4.3, which shows permanent modifications started, by quarter, the number of new HAMP modifications continues to decline quarter over quarter. FIGURE 4.3 HAMP TIER 1 PERMANENT MODIFICATIONS STARTED, BY QUARTER, 2009-2015 180000 160000 140000 120000 100000 15,387 HAMP permanent modifications were started in the quarter ended 3/31/2015. 80000 60000 40000 20000 0 Q1 Q2 Q3 2009 Q4 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 2014 Q4 Q1 2015 Note: Includes TARP and GSE permanent modifications. Sources: Treasury, “Making Home Affordable Program Performance Report,” 1/19/2010, 4/20/2010, 7/19/2010, 10/25/2010, 1/31/2011, 5/6/2011, 8/5/2011, 11/3/2011, 2/6/2012, 5/4/2012, 8/3/2012, 11/9/2012, 2/8/2013, 5/10/2013, 8/9/2013, and 11/8/2013; Treasury, responses to SIGTARP data calls, 2/28/2013, 1/23/2014, 1/24/2014, and 7/24/2014; Treasury, “HAMP 1MP: Program Volumes - Program Type & Payor by Tier - March 2015,” accessed 4/22/2015; Fannie Mae, responses to SIGTARP data calls, 1/23/2014, 4/24/2014, and 7/24/2014. During this quarter there were 2,559 fewer loans modified under HAMP than the previous quarter and 151,833 fewer than the second quarter of 2010, the quarter when the most HAMP permanent modifications were started.111 HAMP Applications – Timeliness of Application Processing Remains an Issue The first step for a homeowner seeking HAMP assistance is to request relief from their mortgage servicer, either on the homeowner’s own initiative or in response to a solicitation by the servicer. Under applicable program guidance, the servicer must notify the borrower in writing whether their request was complete or not within five business days after the servicer receives any component of the application and, if incomplete, afford the borrower at least 30 calendar days to provide any identified missing documentation.112 Servicers are then required to review and evaluate the borrower for a HAMP trail modification within 30 calendar days of receiving a completed application.113 However, while Treasury requires that servicers review a SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 completed HAMP application within 30 days, Treasury allows servicers to extend the review time indefinitely if the application is incomplete, even though the homeowner may not be at fault for any delay or incompleteness. Each month, the largest HAMP servicers report their HAMP application activity to Treasury, which publishes monthly and program-to-date statistics on its website.114 According to Treasury, it does not validate the HAMP application activity data it reports on its website, although after SIGTARP raised concerns over servicers’ reported application data, Treasury stated that it had worked with servicers regarding the data they report to correct certain “misimpressions” about the number of HAMP previously reported as received.115 More Homeowners Continue to Apply for HAMP Relief Than Servicers Process Each Month According to the most recent data available on Treasury’s website, servicers received an aggregate 70,302 requests for HAMP assistance in February 2015.116 However, servicers reported only processing (i.e., approving or denying) 49,372 applications in that month.117 This means that HAMP servicers received 20,930 more applications than they processed during the month (30% of the total received). So long as servicers continue to receive more applications than they process each month, increasing numbers of homeowners will face delays in getting action on their requests for HAMP assistance. As shown in Figure 4.4, according to data reported by Treasury as of February 2015, only 4 out of the 10 servicers who reported receiving the most applications in that month—Ocwen Loan Servicing, LLC (“Ocwen”), Nationstar Mortgage LLC, U.S. Bank National Association, and Specialized Loan Servicing, LLC—succeeded in processing more applications than they received. Those servicers collectively processed only 1,362 more applications than they received. The remaining servicers reported they were unable to process substantial numbers of the applications that they received in the month, including 11,777 (64%) for Bank of America, NA (“Bank of America”), 3,147 (60%) for CitiMortgage, Inc. (“Citi”) 2,752 (52%) for JPMorgan Chase Bank, NA (“JPMorgan Chase”), 1,946 (25%) for Wells Fargo Bank, NA, 1,285 (24%) for Select Portfolio Servicing, Inc. (“SPS”), 1,282 (83%) for Bayview Loan Servicing, LLC (“Bayview”). For additional information about the HAMP application and modification process, please see the discussion, “How HAMP Works,” in this section. 151 152 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.4 SERVICERS ABLE OR UNABLE TO PROCESS THE NUMBER OF HAMP APPLICATIONS RECEIVED THAT MONTH (FEBRUARY 2015) Processed More Than Number of Applications Received 2,000 777 286 120 0 (1,282) (1,285) -2,000 (1,946) (2,752) -4,000 Processed Fewer Than Number of Applications Received 179 (3,147) -6,000 -8,000 -10,000 -12,000 (11,777) Bank of America, NA Ocwen Loan Servicing, LLC Wells Fargo Bank, NA Nationstar Mortgage LLC Select Portfolio Servicing, Inc. JPMorgan Chase Bank, NA CitiMortgage Inc Specialized Loan Servicing LLC Bayview Loan Servicing, LLC U.S. Bank National Association Note: According to Treasury, the number of application requests Bank of America reported receiving in February 2015 includes historical corrections to prior period data that should have been recorded as adjustments to program-to-date cumulative activity instead. Source: Treasury, “HAMP Application Activity by Servicer, as of February 2015,” www.treasury.gov/initiatives/financial-stability/reports/Documents/February%20HAMP%20Application%20Activity%20by%20Servicer.pdf, accessed 4/10/2015. On a program-to-date basis, the most recent data reported on Treasury’s website, as of February 2015, shows that servicers had received an aggregate of 7,909,606 applications since June 1, 2010, compared to an aggregate of 7,761,459 previously reported as having been received as of November 2014, an increase of 148,147 applications.118 Of the ten largest servicers in terms of applications received, Ocwen and Bayview reported fewer total program to date applications received than they reported in the previous period. As of February 2015, Ocwen reported receiving 907,984 homeowner applications since the start of the program — 23,156 fewer applications than Ocwen reported having received through November 2014. Bayview reported receiving 45,383 homeowner applications through February 2015 — 3,553 fewer applications than Bayview reported having received through November 2014.119 Treasury’s data shows that 210,401 homeowners had not had their requests processed through February 2015.120 Comparisons to prior periods may be unreliable, however; as the frequent and substantial revisions to previously-reported data suggest, Treasury has not ensured that servicers report timely, accurate and consistent information about the HAMP applications they receive. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Timeliness of HAMP Application Processing by Servicer Table 4.12 presents the latest data published by Treasury on the number of homeowner HAMP applications the top servicers report having processed in February 2015, as well as the total number of applications not yet processed as of that month. At the most recent processing rates reported for February 2015, it would take 9 of the top 10 HAMP servicers longer than one month to process the number of homeowner applications that hadn’t yet received a decision, even were they to receive no additional applications. Of those servicers, seven would take longer than three months to process, and two servicers – JPMorgan Chase and Bank of America – would take over six months. Another two servicers, Bayview and Citi, would take over one year to process their outstanding applications on the same basis. TABLE 4.12 MONTHS TO PROCESS OUTSTANDING APPLICATIONS AT MOST RECENT RATE BY SERVICER, AS OF 2/28/2015 Servicer Name Bayview Loan Servicing, LLC CitiMortgage Inc Applications Processeda Total Applications Unprocessedb Months to Process the Homeowners who have already appliedc 261 4,068 15.6 2,110 29,614 14.0 JPMorgan Chase Bank, NA 2,518 21,292 8.5 Bank of America, NA 6,485 43,004 6.6 Select Portfolio Servicing, Inc. 3,988 16,250 4.1 13,667 54,653 4.0 5,929 23,142 3.9 Ocwen Loan Servicing, LLC Wells Fargo Bank, NA Green Tree Servicing LLC 961 1,801 1.9 Nationstar Mortgage LLC 7,178 10,681 1.5 Specialized Loan Servicing LLC 2,301 1,985 0.9 Other Servicers 3,974 3,911 1.0 49,372 210,401 4.3 TOTAL Notes: a Requests Processed in the most recent month, February 2015. b Program-to-Date Requests Received less Program-to-Date Requests Processed. Data subject to ongoing revision by servicers. c Total Applications Unprocessed divided by most recent month’s Applications Processed. Source: Treasury, “HAMP Application Activity by Servicer,” February 2015. Payment Increases on HAMP–Modified Mortgages Most homeowners who received HAMP permanent mortgage modifications saw the interest rates on their loans cut in order to reduce their monthly payments and make their mortgages more affordable and sustainable over the long term.121 Starting with those who received modifications in 2009, homeowners in HAMP began in 2014 to see their interest rates rise and monthly mortgage payments go up this year, and will continue to see increases for up to another three years. Some homeowners may eventually see their monthly payment increase by as much as $1,724 per month.122 153 154 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Homeowners that received HAMP permanent mortgage modifications had their monthly mortgage payments reduced to 31% of their gross monthly income through a series of steps including extending the term of the mortgage, reducing the principal owed, or cutting the interest rate to as low as 2%.123 The terms of HAMP permanent modifications remain fixed for five years.124 However, after five years, a homeowner’s mortgage interest rate can increase if the modified interest rate had been reduced below where the national average rate was for a 30-year conforming fixed-rate mortgage on the date of the modification.125 The average interest rate over the last five years has generally been between 3.5% and 5.4%, and most modifications cut rates well below that benchmark.126 After five years, the interest rate on the modified loan can step up incrementally by up to 1% per year until it reaches that benchmark.127 Table 4.13 shows before-modification, after-modification, and after all modification increases, median interest rates, interest rate increases, payments, and payment increases for homeowners who face interest rate and payment increases on HAMP mortgage modifications, by year. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 4.13 HAMP TIER 1 PERMANENT MODIFICATIONS WITH SCHEDULED PAYMENT INCREASES BY YEAR, AS OF 2/28/2015 Year Modified 2009 2010 2011 2012 2013 2014 2015 All Years Total Active Permanent Modifications Permanent Modifications with Scheduled Payment Increases 30,643 285,565 219,808 146,773 121,256 76,254 13,377 893,676 28,704 266,656 196,705 119,806 100,642 65,367 11,238 789,118 Interest Ratea Median Increase Monthly Paymenta Modification Status Median Before Modification 6.50% $1,434 After Modification 2.00% $ 757 After All Increases 4.94% Before Modification 6.50% After Modification 2.00% After All Increases 4.98% Before Modification 6.38% 2.78% Median $1,020 $782 2.58% $1,039 2.00% 4.60% Before Modification 6.25% $1,430 After Modification 2.00% $746 After All Increases 3.66% Before Modification 6.10% 2.00% 3.81% Before Modification 6.13% $806 2.41% 1.59% $1,042 $899 $880 2.00% Before Modification 6.13% $1,256 After Modification 2.00% $664 After All Increases 3.80% Before Modification 6.38% 2.00% $706 2.14% 1.80% $894 $811 $176 $136 $1,417 $764 2.21% $980 Notes: a Analysis of HAMP permanent modifications with scheduled interest rate and payment increases excludes 65,678 HAMP permanent modifications with incomplete records. Source: SIGTARP analysis of Treasury HAMP data. $149 $1,293 4.20% 4.40% $141 $716 1.57% After Modification After Modification $220 $1,364 After All Increases After All Increases $240 $1,442 After Modification After Modification $248 $1,453 After All Increases After All Increases Median Increase $197 155 156 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM As shown in Table 4.13, 789,118 of the 893,676 (88%) homeowners who had active HAMP Tier 1 permanent modifications as of February 28, 2015 are scheduled for or have experienced these interest rate and payment increases.128 That means just 104,558 homeowners, or 12%, will not experience payment increases.129 Among homeowners scheduled to have mortgage interest rate and payment increases, the median interest rate for these loans was 6.38% before modification; the median monthly payment was $1,417.130 HAMP permanent modifications reduced the median interest rate for these homeowners’ loans to 2% and their median monthly payment to $764.131 The scheduled payment increases will cause their median interest rate to rise to 4.4% and their median payment to increase to $980.132 Their median rate increase will be 2.21% and their median payment increase will be $197.133 Some homeowners could eventually see their mortgage interest rates increase to as much as 5.4%; for some, payments eventually could increase by $1,724 per month; and after all payment increases, the highest mortgage payment any homeowner would pay per month would be $8,274.134 (SIGTARP’s rate and payment analysis excludes 65,678 HAMP permanent modifications that are scheduled to adjust but for which records are incomplete). Table 4.14 provides additional detail about interest rate and payment increases by year. 30,643 30,643 30,634 2015 2016 2017 HAMP Permanent Modifications Started in 2011 HAMP Permanent Modifications Started in 2012 6,443 21,697 24,763 26,693 4.9% 4.9% 4.0% 3.0% 0.0% 0.8% 1.0% 1.0% 1,021 1,018 945 854 $4 $84 $94 $94 285,357 285,479 285,544 285,563 69,467 187,667 215,261 234,245 5.0% 5.0% 4.0% 3.0% 0.1% 0.8% 1.0% 1.0% 1,039 1,036 972 880 $7 $70 $95 $95 219,365 219,599 219,722 219,783 14 124,364 154,465 171,412 4.6% 4.6% 4.0% 3.0% 0.2% 0.6% 1.0% 1.0% 1,043 1,043 997 905 $24 $52 $98 $96 146,182 146,453 146,610 146,699 HAMP Permanent Modifications Started in 2014 HAMP Permanent Modifications Started in 2015 121,015 120,825 120,572 2019 2020 2021 14 40,692 90,763 100,641 3.8% 3.8% 3.8% 3.0% 0.3% 0.4% 0.8% 1.0% 882 881 867 803 $27 $29 $61 $84 75,513 75,728 75,922 76,063 20 46,185 60,083 65,367 4.2% 4.2% 4.0% 3.0% 0.2% 0.3% 1.0% 1.0% 896 895 876 793 $16 $21 $86 $83 13,316 13,247 13,296 11,238 3 10,284 3.0% 3.8% 3.8% 1.0% 0.7% 0.8% 749 812 811 $80 $81 $65 3.0% 3.7% 3.7% 3.7% 1.0% 0.5% 0.5% 0.7% 839 900 899 899 Source: SIGTARP analysis of Treasury HAMP data. *The sum of median monthly payment increases does not agree to the median monthly payment increases shown on Table 4.13, as a significant portion of the modifications with payment increases do not have all incremental increases. Notes: a Analysis of HAMP permanent modifications with scheduled payment increases excludes 65,678 permanent modifications with incomplete records. 2023 2022 121,144 2018 2017 2016 2015 2014 Permanent Permanent Permanent Modifications Modifications Interest Ratea Monthly Paymenta Modifications Interest Ratea Monthly Paymenta Interest Ratea Monthly Paymenta with with with Total Active Total Active Scheduled Scheduled Scheduled Total Active Median Median Median Median Permanent Permanent Payment Median Payment Payment Permanent Year of Median Increasesa Median Increase Median Increase Modifications Increasesa Median Increase Median Increase Modifications Increasesa Median Increase Median Increase Increase Modifications HAMP Permanent Modifications Started in 2013 1 49 101,007 113,844 $31 $51 $58 $89 Permanent Permanent Permanent Permanent Modifications Interest Ratea Monthly Paymenta Modifications Interest Ratea Monthly Paymenta Modifications Interest Ratea Monthly Paymenta Modifications Interest Ratea Monthly Paymenta with with with with Total Active Total Active Total Active Scheduled Scheduled Scheduled Scheduled Permanent Permanent Permanent Median Median Median Median Median Median Median Median Payment Payment Payment Payment Increasesa Median Increase Median Increase Modifications Increasesa Median Increase Median Increase Modifications Increasesa Median Increase Median Increase Modifications Increasesa Median Increase Median Increase HAMP Permanent Modifications Started in 2010 HAMP PERMANENT MODIFICATIONS WITH SCHEDULED PAYMENT INCREASES, ANNUAL, AS OF 2/28/2015 (CONTINUED) 2023 2022 2021 2020 2019 2018 30,643 2014 Total Active Permanent Year of Increase Modifications HAMP Permanent Modifications Started in 2009 HAMP PERMANENT MODIFICATIONS WITH SCHEDULED PAYMENT INCREASES, ANNUAL, AS OF 2/28/2015 TABLE 4.14 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 157 158 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Homeowners in All States Will Be Affected by Payment Increases Table 4.15 shows, as of February 28, 2015, all active HAMP permanent modifications with scheduled monthly mortgage payment increases, by state. TABLE 4.15 HAMP TIER 1 PERMANENT MODIFICATIONS WITH SCHEDULED PAYMENT INCREASES, AS OF 2/28/2015 Total Active Permanent Modifications Total Active Permanent Modifications With Scheduled Payment Increases Percentage of Active Permanent Modifications With Scheduled Payment Increase Median Payment Increase After All Increasesa Maximum Payment Increase After All Increasesa 4,633 3,517 76% $93 $873 391 315 81% 171 809 32,027 28,411 89% 184 1,208 Arkansas 1,819 1,479 81% 95 789 California 233,095 213,691 92% 299 1,724 Colorado 12,124 10,574 87% 171 1,011 Connecticut 11,786 10,441 89% 188 1,237 2,624 2,224 85% 166 834 Florida 114,063 100,367 88% 162 1,168 Georgia 31,099 26,069 84% 132 1,061 Guam 9 7 78% 53 173 Hawaii 3,639 3,362 92% 360 1,230 Idaho 3,219 2,748 85% 159 894 Illinois 45,867 40,817 89% 171 1,072 Indiana 7,874 6,232 79% 91 1,022 Iowa 1,891 1,557 82% 90 626 Kansas 1,982 1,630 82% 101 1,042 Kentucky 3,143 2,557 81% 91 798 Louisiana 4,748 3,763 79% 99 922 Maine 2,415 2,135 88% 141 709 Maryland 28,282 24,900 88% 241 1,174 Massachusetts 21,126 19,211 91% 231 1,064 Michigan 24,791 21,211 86% 120 1,273 Minnesota 13,002 11,501 88% 170 1,117 Mississippi 2,857 2,133 75% 85 730 Missouri 8,134 6,560 81% 102 878 State Alabama Alaska Arizona Delaware Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 HAMP TIER 1 PERMANENT MODIFICATIONS WITH SCHEDULED PAYMENT INCREASES, AS OF 2/28/2015 (CONTINUED) Total Active Permanent Modifications Total Active Permanent Modifications With Scheduled Payment Increases Percentage of Active Permanent Modifications With Scheduled Payment Increase Median Payment Increase After All Increasesa Maximum Payment Increase After All Increasesa Montana 1,001 851 85% $167 $1,074 Nebraska 1,111 903 81% 87 632 18,781 16,824 90% 211 1,042 3,742 3,310 88% 176 806 New Jersey 29,806 27,090 91% 233 1,100 New Mexico 3,024 2,522 83% 139 913 New York 49,414 45,952 93% 290 1,507 North Carolina 15,409 12,796 83% 113 1,060 131 107 82% 112 560 17,874 14,879 83% 96 886 1,909 1,500 79% 83 784 Oregon 10,016 9,004 90% 191 1,052 Pennsylvania 18,572 15,579 84% 127 953 Puerto Rico 3,174 2,946 93% 93 982 Rhode Island 4,267 3,842 90% 188 905 South Carolina 7,901 6,469 82% 114 1,105 273 228 84% 120 836 8,397 6,622 79% 94 1,075 Texas 23,455 18,700 80% 95 1,169 Utah 7,308 6,375 87% 198 1,023 783 687 88% 150 853 8 6 75% 153 549 Virginia 20,479 17,962 88% 225 1,118 Washington 19,302 17,360 90% 219 1,155 District of Columbia 1,533 1,373 90% 256 1,096 West Virginia 1,127 920 82% 120 626 Wisconsin 7,859 6,598 84% 122 968 380 301 79% 163 829 893,676 789,118 88% $197 $1,724 State Nevada New Hampshire North Dakota Ohio Oklahoma South Dakota Tennessee Vermont Virgin Islands Wyoming Total a Analysis of HAMP permanent modifications with scheduled interest rate and payment increases excludes 65,678 HAMP permanent modifications with incomplete records. Source: SIGTARP analysis of Treasury HAMP data. 159 160 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM As shown in Table 4.15 above, homeowners in four states account for more than half of the HAMP permanent modifications scheduled for interest rate and payment increases: California, Florida, New York, and Illinois.135 Homeowners in 11 jurisdictions face mortgage payment increases that are more than the $197 national median: California, Hawaii, Maryland, Massachusetts, Nevada, New Jersey, New York, Utah, Virginia, Washington, and Washington, DC.136 While 88% of homeowners nationally with HAMP-modified mortgages face scheduled interest rate and payment increases, that percentage is even higher in 17 jurisdictions: Arizona, California, Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, Nevada, New Hampshire, New Jersey, New York, Oregon, Puerto Rico, Rhode Island, Washington, and Washington, DC.137 For more on homeowners who have redefaulted on HAMP permanent mortgages or are at risk of defaulting, see SIGTARP’s July 2013 Quarterly Report, pages 161-184. Cumulative Redefault Rate: The total number of HAMP permanent modifications that have redefaulted (as of a specific date) divided by the total number of HAMP permanent modifications started (as of the same specific date). Homeowners Who Have Redefaulted on HAMP Permanent Modifications or Are at Risk of Redefaultingxi As of March 31, 2015, HAMP has helped more than 890,783 homeowners avoid foreclosure through permanent mortgage modifications, but another 441,462 homeowners (or 32%) fell three months behind in payments and, thus, redefaulted out of the program – often into a less advantageous private sector modification or, even worse, into foreclosure.138,xii This is an increase from the 427,500 of homeowners who had redefaulted through the end of the previous quarter, as this quarter alone 13,962 homeowners redefaulted in HAMP. As of March 31, 2015, taxpayers lost $1.6 billion in TARP funds paid to servicers and investors as incentives for 245,727 homeowners who received TARP (non-GSE) HAMP permanent modifications and later redefaulted, which is an increase of 7,924 from the last quarter.139 Also, 71,779 (8% of active HAMP permanent modifications) had missed one to two monthly mortgage payments and, thus, are at risk of redefaulting out of the program.140 The longer a homeowner remains in HAMP, the more likely he or she is to redefault out of the program, with homeowners redefaulting on the oldest HAMP permanent modifications at a rate of 52.6%.xiii The likelihood of homeowners redefaulting on their HAMP modifications increases as their modifications age. Nearly half of all homeowners who received a HAMP permanent modification received it in 2009 and 2010.141 Homeowners who received HAMP permanent modifications in 2009 redefaulted at rates ranging from 47.5% to 52.6% (a change from 48.6% to 52.5% reported last quarter), homeowners who received HAMP permanent modifications in 2010 redefaulted at rates ranging from 40.5% to 47.3% (an increase from 40% to 46.8% reported last quarter).142,xiv Homeowners who redefaulted fell out of the HAMP program, and their HAMP permanent modification was not sustainable. Once again, they risked losing their homes and some may have lost their homes. Treasury reported that of the homeowners with redefaulted loans reported by 20 servicers that participated in xi In this section, “HAMP” refers to the original HAMP First-Lien Modification Program, which Treasury later named HAMP Tier 1. xii The percentage of homeowners that redefaulted in HAMP (cumulative redefault rate) includes all homeowners who received HAMP permanent modifications since the start of the program. xiii A ccording to Treasury, Treasury’s calculation of redefault rates may exclude some modifications due to missing or invalid data. xiv The most recent HAMP redefault data provided to SIGTARP by Treasury only covers through December 2014 and does not account for modifications that redefaulted after 60 months. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 a survey, as of February 28, 2015, the latest data provided by Treasury, 24% of homeowners moved into the foreclosure process, 12% of homeowners lost their home via a short sale or deed-in-lieu of foreclosure, and 29% of homeowners who redefaulted received an alternative modification, usually a private sector modification.143 Table 4.16 shows the number homeowners that received HAMP modifications and the number and percentage of homeowners who have redefaulted by year for GSE and non-GSE loans. TABLE 4.16 HAMP TIER 1 PERMANENT MODIFICATION REDEFAULT ACTIVITY, AS OF 3/31/2015 Year Modified TARP GSE Total Permanents Started Permanents Redefaulted Annual Cumulative Annual Cumulative Redefault Rate Cumulative 2009 23,633 23,633 129 129 1% 2010 243,262 266,895 29,015 29,144 11% 2011 185,254 452,149 59,080 88,224 20% 2012 114,745 566,894 58,860 147,084 26% 2013 98,423 665,317 49,413 196,497 30% 2014 59,967 725,284 41,306 237,803 33% 2015 11,497 736,781 7,924 245,727 33% Total 736,781 — 245,727 — 2009 43,305 43,305 339 339 1% 2010 269,450 312,755 27,730 28,069 9% 2011 168,423 481,178 51,287 79,356 16% 2012 87,280 568,458 49,229 128,585 23% 2013 43,497 611,955 33,990 162,575 27% 2014 26,229 638,184 27,122 189,697 30% 2015 3,890 642,074 6,038 195,735 30% Total 642,074 — 195,735 — 2009 66,938 66,938 468 468 1% 2010 512,712 579,650 56,745 57,213 10% 2011 353,677 933,327 110,367 167,580 18% 2012 202,025 1,135,352 108,089 275,669 24% 2013 141,920 1,277,272 83,403 359,072 28% 2014 86,196 1,363,468 68,428 427,500 31% 2015 15,387 1,378,855 13,962 441,462 32% Total 1,378,855 — 441,462 — Notes: Data is as of December 31, 2009; December 31, 2010; December 31, 2011; December 31, 2012; December 31, 2013, December 31, 2014, and March 31, 2015. Sources: Treasury responses to SIGTARP data calls, 1/21/2011, 1/20/2012, 1/22/2013, 2/28/2013, 7/19/2013, 10/21/2013, 10/23/2013, 1/23/2014, and 1/24/2014; Fannie Mae, responses to SIGTARP data calls 10/21/2013 and 1/23/2014; Treasury, “HAMP 1MP Program Volumes – Program Type and Payor by Tier – March 2015,” accessed 4/22/2015; SIGTARP Quarterly Report to Congress, 1/30/2010; SIGTARP Quarterly Report to Congress, 1/26/2011; SIGTARP Quarterly Report to Congress, 1/26/2012; SIGTARP Quarterly Report to Congress, 1/30/2013. 161 162 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM As shown in Table 4.16, during the current year there were only 15,387 new modifications, while there were 13,962 redefaults. Redefaults are likely to continue increasing unless Treasury finds a way to increase participation in the program. Figure 4.5 provides detail on the status (active and redefaulted) over time of homeowners’ HAMP permanent modifications by the year they originated. FIGURE 4.5 ACTIVE AND REDEFAULTED HAMP MODIFICATIONS BY YEAR OF MODIFICATION, AS OF 3/31/2015 600,000 500,000 400,000 300,000 200,000 100,000 0 2009 2010 2011 2012 2013 2014 2015 Modifications Redefaulted Modifications Active Source: Fannie Mae, response to SIGTARP data call, 4/23/2015. As illustrated in Figure 4.5, over time the rate at which homeowners redefault on their HAMP modifications increases. More than 40% of the homeowners that obtained permanent modifications in 2009 and 2010 have since redefaulted, compared to only 7% of the homeowners that received HAMP modifications in 2014 and 2015.144 Servicer Redefault Rates As of March 31, 2015, of 1,280,760 homeowners’ HAMP permanent modifications currently serviced by 10 of the largest servicers, 385,340, or 30.1%, subsequently redefaulted. Table 4.17 provides data on homeowners’ HAMP permanent modifications by servicers participating in HAMP and currently servicing the modifications listed. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 4.17 HOMEOWNERS’ HAMP PERMANENT MODIFICATIONS AND REDEFAULTS CURRENTLY WITHIN SERVICERS’ PORTFOLIOS, BY SERVICER, AS OF 3/31/2015 Permanent Modifications Permanent Modifications Redefaulted Percentage of Permanent Modifications Redefaulted Ocwen Loan Servicing, LLCa 306,125 100,465 32.8% Wells Fargo Bank, N.A. 206,090 55,831 27.1% JPMorgan Chase Bank, N.A.c 176,348 46,302 26.3% Nationstar Mortgage LLC 158,413 43,340 27.4% b Select Portfolio Servicing, Inc. Bank of America, N.A.d Seterus Incorporated 90,891 37,454 41.2% 104,711 33,488 32.0% 67,755 23,684 35.0% 101,260 23,136 22.8% CitiMortgage Inc 45,694 14,412 31.5% U.S. Bank National Association 23,473 7,228 30.8% Green Tree Servicing LLC Other 196,797 70,624 35.9% Total 1,477,557 455,964 30.9% Notes: HAMP include HAMP Tier 1 and Tier 2 modifications, including those that received assistance under the Home Price Decline Protection (“HPDP”) and Principal Reduction Alternative (“PRA”) programs. Includes both TARP and GSE modifications. Includes modifications listed by the current servicer of the loan. a Ocwen Loan Servicing, LLC includes the former Litton Loan Servicing, LLC, GMAC Mortgage, LLC, and Homeward Residential. b Wells Fargo Bank, N.A. includes Wachovia Bank, NA and Wachovia Mortgage, FSB. c JPMorgan Chase Bank, N.A. includes EMC Mortgage Corporation. d Bank of America includes the former BAC Home Loans Servicing LP, Home Loan Services, and Wilshire Credit Corporation. Source: Treasury, “HAMP 1MP: Program Volumes - Combined Tier 1/Tier 2: Top 25 HAMP Servicers – March 2015,” accessed 4/22/2015. As shown in Table 4.17, four servicers account for more than half of homeowners’ HAMP permanent modifications that redefaulted: Ocwen Loan Servicing, LLC, with 100,465 homeowners’ permanent modifications redefaulted; Wells Fargo Bank, N.A., with 55,831 homeowners’ permanent modifications redefaulted, JPMorgan Chase Bank, NA, with 46,302 homeowners’ permanent modifications redefaulted and Nationstar Mortgage LLC with 43,340 homeowners’ permanent modifications redefaulted.145 Of the 10 largest servicers participating in HAMP, the three with the highest percentage of homeowners’ HAMP permanent modifications that redefaulted were Select Portfolio Servicing, Inc. with 41.2% of homeowners’ permanent modifications redefaulted; Seterus Incorporated, with 35% of homeowners’ permanent modifications redefaulted; and Ocwen Loan Servicing, LLC, with 32.8% of homeowners’ permanent modifications redefaulted, as compared with the average for the 10 of 30.1%.146 Redefaults: Impact on Taxpayers Funding TARP Taxpayers have lost about $1.6 billion in TARP funds paid to servicers and investors as incentives for 245,727 homeowners’ non-GSE, HAMP (Tier 1) permanent 163 164 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM mortgage modifications that redefaulted.147 As of March 31, 2015, Treasury has distributed $8.4 billion in TARP funds for 736,781 homeowners’ non-GSE, HAMP (Tier 1) permanent modifications.148 According to Treasury, $4.7 billion of that was designated for investor incentives, $2.1 billion for servicer incentives, and $1.5 billion for homeowner incentives.149 (Homeowner incentives are paid to servicers that, in turn, apply the payment to a homeowner’s mortgage). According to Treasury, 23% of those funds were paid for incentives on homeowners’ HAMP permanent modifications that later redefaulted.150 Table 4.18 shows payments for homeowners’ HAMP permanent modifications (active, redefaulted, and paid off mortgages) that are currently within servicers’ portfolios. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 4.18 TARP INCENTIVE PAYMENTS ON HOMEOWNERS’ HAMP PERMANENT MODIFICATIONS CURRENTLY WITHIN SERVICERS’ PORTFOLIOS, AS OF 3/31/2015 Servicer Name TARP Incentive Payments for Permanents Active TARP Incentive Payments for Permanents Redefaulted TARP Incentive Payments for Permanents Paid Off Total TARP Incentive Payments for Permanents All Percentage of Total TARP Incentive Payments for Permanents Redefaulted Ocwen Loan Servicing, LLCa $1,907,777,251 $507,422,602 $33,312,393 $2,448,653,427 21% 499,147,901 233,416,203 7,816,255 740,380,360 32% Wells Fargo Bank, N.A.d Select Portfolio Servicing, Inc. 1,142,037,247 206,819,610 27,817,454 1,376,701,313 15% JPMorgan Chase Bank, NAb 1,132,965,681 155,112,651 19,521,703 1,307,906,319 12% 510,094,737 110,681,972 8,251,455 629,028,164 18% Nationstar Mortgage LLCe Bank of America, N.A. 585,307,968 96,814,742 13,071,003 695,234,198 14% CitiMortgage Inc 226,536,043 44,563,711 7,765,526 278,865,281 16% 66,371,041 40,274,607 1,255,056 107,900,704 37% c Specialized Loan Servicing LLC Bayview Loan Servicing LLC Carrington Mortgage Services, LLC 149,487,675 29,371,473 3,140,450 181,999,598 16% 53,044,637 21,345,220 1,187,694 75,577,551 28% Other 407,129,918 154,212,420 24,422,305 585,764,643 26% Total $6,679,900,100 $1,600,035,212 $147,561,293 $8,428,011,557f 19% Notes: Total incentive payments by the current status of the permanent modification (active, redefaulted, or paid off) is broken out in the table by the current servicer of the loan. The incentive payment totals may not tie to the actual amount paid to the servicer as servicing transfers are not taken into account when the current servicer on the loan is used. Totals shown here exclude payments and/or drafts performed for modifications that are not currently Permanent Modifications. Totals shown here include payments under the HAMP Tier 1, Home Price Decline Protection (“HPDP”) and Principal Reduction Alternative (“PRA”) programs tied to these loans. a Ocwen Loan Servicing, LLC includes the former Litton Loan Servicing, LLC, GMAC Mortgage, LLC, and Homeward Residential. b JPMorgan Chase Bank, NA includes EMC Mortgage Corporation. c Bank of America N.A. includes the former Countrywide Home Loans Servicing, BAC Home Loans Servicing LP, Home Loan Services, and Wilshire Credit Corporation. d Wells Fargo Bank, N.A. includes Wachovia Bank, NA and Wachovia Mortgage, FSB. e Nationstar Mortgage LLC includes MorEquity, Inc and the former Aurora Loan Services LLC. f Totals include $514,953 on modifications that the servicer classified as “withdrawals.” Source: Treasury, response to SIGTARP data call, 4/10/2015. 165 166 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM As shown in Table 4.18, more than half of TARP funds that Treasury spent for HAMP permanent modifications that redefaulted were for mortgages currently serviced by three servicers, Ocwen Loan Servicing, LLC, Select Portfolio Servicing, Inc., and Wells Fargo Bank, N.A. (listed in Table 4.18).151,xv More than 90% of TARP funds Treasury spent for HAMP permanent modifications that redefaulted were for mortgages currently serviced by 10 servicers (listed in Table 4.18).152 Redefaults: Impact on States Homeowners are redefaulting throughout the nation. In most states at least 35% of homeowners in the HAMP program have redefaulted on their modifications.153 Tables 4.19 – 4.25 and Figure 4.6 show regional and state breakdowns of the number of homeowners with HAMP permanent modifications, the number of homeowners with active permanent modifications, the number who have redefaulted on modifications, and the redefault rates. xv Total incentive payments by the current status of the permanent modification (active, redefaulted, or paid off) is broken out in the table by the current servicer of the loan. The incentive payment totals may not tie to the actual amount paid to the servicer as servicing transfers are not taken into account when the current servicer on the loan is used. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 4.19 REDEFAULTED HOMEOWNERS’ HAMP PERMANENT MODIFICATIONS, BY REGION, CUMULATIVE AS OF 3/31/2015 Permanent Modifications Active Modifications Redefaulted Modifications 372,706 265,153 95,488 26% 74,094 46,005 24,183 33% Southwest/South Central 111,398 66,715 39,626 36% Midwest 214,557 130,014 76,950 36% Mid-Atlantic/Northeast 311,337 195,811 106,424 34% West Mountain West/Plains Southeast TOTAL Redefault Rate 294,763 187,085 98,791 34% 1,378,855 890,783 441,462 32% Notes: Includes GSE and non-GSE modifications. Of HAMP permanent modifications, 46,356 loans have been paid off. Source: Treasury, “HAMP 1MP: Program Volumes Supplemental - Tier 1: State – March 2015,” accessed 4/22/2015. FIGURE 4.6 REDEFAULTED HAMP PERMANENT MODIFICATIONS, BY REGION, CUMULATIVE AS OF 3/31/2015 AK MOUNTAIN WEST/ PLAINS 24,183 WA MT OR ID WEST 95,488 CA NV ND WY MN WI SD CO IL KS MO HI AZ GU OK NM AR NY OH IN PA WV VA KY ME MID-ATLANTIC/ NORTHEAST 106,424 NH MA CT RI NJ DE MD DC NC TN MS AL TX VT MI IA NE UT MIDWEST 76,950 SC GA SOUTHEAST 98,791 LA FL PR SOUTHWEST/ SOUTH CENTRAL 39,626 WEST MOUNTAIN WEST/PLAINS SOUTHWEST/SOUTH CENTRAL MIDWEST MID-ATLANTIC/NORTHEAST SOUTHEAST VI 167 168 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM West TABLE 4.20 REDEFAULTED HAMP PERMANENT MODIFICATIONS, BY STATE, CUMULATIVE AS OF 3/31/2015 WA AK OR GU Permanent Modifications Redefaulted Modifications Redefault Rate AK 657 389 207 32% CA 322,404 231,897 80,490 25% GU CA Active Modifications 12 9 2 17% HI 5,230 3,634 1,374 26% OR 15,156 9,980 4,470 29% WA 29,247 19,244 8,945 31% 372,706 265,153 95,488 26% Total Notes: Includes GSE and non-GSE modifications, excludes permanent modifications paid off. HI Source: Treasury, “HAMP 1MP: Program Volumes Supplemental - Tier 1: State - March 2015,” accessed 4/22/2015. WEST Percentage of Redefaults on HAMP Permanent Modifications >27% 25-27% <25% Mountain West/Plains TABLE 4.21 REDEFAULTED HAMP PERMANENT MODIFICATIONS, BY STATE, CUMULATIVE AS OF 3/31/2015 MT ID NV ND WY SD NE UT CO MOUNTAIN WEST/ PLAINS Percentage of Redefaults on HAMP Permanent Modifications KS >27% 25-27% <25% Permanent Modifications Active Modifications Redefaulted Modifications Redefault Rate CO 18,299 12,030 4,930 27% ID 5,036 3,194 1,573 31% KS 3,477 1,966 1,299 37% MT 1,538 991 428 28% ND 224 129 70 31% NE 2,023 1,111 773 38% NV 30,841 18,683 11,295 37% SD 504 274 169 34% UT 11,491 7,252 3,432 30% WY Total 661 375 214 32% 74,094 46,005 24,183 33% Notes: Includes GSE and non-GSE modifications, excludes permanent modifications paid off. Source: Treasury, “HAMP 1MP: Program Volumes Supplemental - Tier 1: State - March 2015,” accessed 4/22/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Southwest/South Central TABLE 4.22 REDEFAULTED HAMP PERMANENT MODIFICATIONS, BY STATE, CUMULATIVE AS OF 3/31/2015 Permanent Modifications AZ OK NM AR LA TX SOUTHWEST/ SOUTH CENTRAL >27% 25-27% <25% Percentage of Redefaults on HAMP Permanent Modifications Active Modifications Redefaulted Modifications Redefault Rate AR 3,223 1,821 1,229 38% AZ 52,048 31,834 18,063 35% LA 8,644 4,751 3,560 41% NM 4,803 3,017 1,585 33% OK 3,514 1,906 1,390 40% TX 39,166 23,386 13,799 35% 111,398 66,715 39,626 36% Total Notes: Includes GSE and non-GSE modifications, excludes permanent modifications paid off. Source: Treasury, “HAMP 1MP: Program Volumes Supplemental - Tier 1: State - March 2015,” accessed 4/22/2015. Midwest TABLE 4.23 REDEFAULTED HAMP PERMANENT MODIFICATIONS, BY STATE, CUMULATIVE AS OF 3/31/2015 Permanent Modifications MN WI MI IA IL IN MO MIDWEST Percentage of Redefaults on HAMP Permanent Modifications OH KY >27% 25-27% <25% Active Modifications Redefaulted Modifications Redefault Rate IA 3,535 1,885 1,409 40% IL 73,338 45,753 26,034 35% IN 13,617 7,864 5,162 38% KY 5,547 3,150 2,129 38% MI 39,360 24,680 12,928 33% MN 21,233 12,955 7,350 35% MO 14,492 8,094 5,754 40% OH 29,729 17,804 10,865 37% WI 13,706 7,829 5,319 39% 214,557 130,014 76,950 36% Total Notes: Includes GSE and non-GSE modifications, excludes permanent modifications paid off. Source: Treasury, “HAMP 1MP: Program Volumes Supplemental - Tier 1: State - March 2015,” accessed 4/22/2015. 169 170 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Mid-Atlantic/Northeast TABLE 4.24 REDEFAULTED HAMP PERMANENT MODIFICATIONS, BY STATE, CUMULATIVE AS OF 3/31/2015 ME VT NH MA NY CT NJ DE MD DC PA WV VA WV MID-ATLANTIC/ NORTHEAST Percentage of Redefaults on HAMP Permanent Modifications RI >27% 25-27% <25% Permanent Modifications Active Modifications Redefaulted Modifications Redefault Rate CT 19,143 11,775 6,909 36% DC 2,423 1,527 782 32% DE 4,529 2,623 1,779 39% MA 33,601 21,066 11,325 34% MD 45,079 28,204 15,621 35% ME 4,188 2,386 1,621 39% NH 6,354 3,729 2,350 37% NJ 49,444 29,837 18,417 37% NY 72,812 49,572 21,659 30% PA 31,983 18,567 12,348 39% RI 6,953 4,231 2,538 37% VA 31,618 20,397 9,929 31% VT 1,288 782 435 34% WV Total 1,922 1,115 711 37% 311,337 195,811 106,424 34% Notes: Includes GSE and non-GSE modifications, excludes permanent modifications paid off. Source: Treasury, “HAMP 1MP: Program Volumes Supplemental - Tier 1: State - March 2015,” accessed 4/22/2015. Southeast TABLE 4.25 REDEFAULTED HAMP PERMANENT MODIFICATIONS, BY STATE, CUMULATIVE AS OF 3/31/2015 NC TN MS AL SC GA PR FL SOUTHEAST Percentage of Redefaults on HAMP Permanent Modifications VI >27% 25-27% <25% Permanent Modifications Active Modifications Redefaulted Modifications Redefault Rate AL 8,489 4,626 3,491 41% FL 171,245 113,900 53,074 31% GA 50,370 30,959 17,860 35% MS 5,364 2,846 2,319 43% NC 26,308 15,329 9,821 37% PR 4,302 3,143 1,066 25% SC 13,426 7,905 4,971 37% TN 15,250 8,369 6,188 41% 9 8 1 11% 294,763 187,085 98,791 34% VI Total Notes: Includes GSE and non-GSE modifications, excludes permanent modifications paid off. Source: Treasury, “HAMP 1MP: Program Volumes Supplemental - Tier 1: State - March 2015,” accessed 4/22/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 As shown in the preceding tables, only 26% of homeowners in the West Coast have redefaulted in HAMP. This redefault rate is driven primarily by California, where only 25% of homeowners have redefaulted (only Guam, Puerto Rico, and the Virgin Islands have lower rates of redefault). Conversely, homeowners in the Midwest and Deep South have fared the worst in HAMP. 36% of participating homeowners in the Midwest have redefaulted on their HAMP modification, the highest of any region. In the Deep South, 43% of Mississippi homeowners participating in HAMP have redefaulted, the highest redefault rate in the nation, while 41% of homeowners in Louisiana, Alabama, and Tennessee have redefaulted. California has the highest number of homeowners who redefaulted on HAMP permanent modifications with 80,490, followed by Florida, Illinois, and New York with 53,074, 26,034, and 21,659, respectively. Homeowners in each of these states have redefaulted at rates lower than their regional average, but these states have significantly more homeowners in HAMP modifications than any others. How HAMP Works Applying for HAMP Homeowners whose servicers participate in HAMP must apply to their servicer for HAMP assistancexvi or, if they fall two payments behind on their mortgage, must be solicited by their servicer for HAMP. Prior to offering HAMP, servicers prescreen for basic eligibility: the mortgage must have been originated no later than January 1, 2009; the outstanding balance of the mortgage cannot exceed $729,750 (more for qualifying multi-unit properties); the property must not be condemned; and the servicer as well as the investor/lienholder must have agreed to participate. Completed homeowner applications are evaluated as provided under program guidelines, and successful applicants are offered a three-month trial modification, or “Trial Period Plan” (“TPP”). Homeowners who successfully complete the TPP have their modifications converted into a permanent modification.154 The process by which servicers solicit and evaluate homeowners is outlined in Figure 4.7. xvi Homeowners may request MHA assistance by contacting their mortgage servicer directly, calling 888-995-HOPE (4673), or visiting www.makinghomeaffordable.gov. 171 172 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.7 HAMP APPLICATION PROCESS AND TIMELINE 30 DAYS 5 BUSINESS DAYS Pre-Screening and Solicitation of Homeowners: When a potentially eligible homeowner falls behind two months on their mortgage or requests assistance, servicers must make “reasonable efforts” to solicit the homeowner for HAMP–at least two letters (one certified), and four phone calls over at least a 30 day period, until the homeowner submits at least 1 component of the Loss Mitigation Application (“LMA”) or indicates they are not interested in participating. Application Acknowledgement: The servicer must send a written acknowledgment within five business days of receiving any component of the LMA, identifying any missing docoumentation via an “Incomplete Information Notification.” 30 DAYS Document Collection: Homeowners must submit any missing documents identified in the Incomplete Information Notification by the specified due date (which must be no less than 30 days from the date of the notice, unless a shorter period is consistent with applicable law and the best interests of the homeowner). 30 DAYS Application Evaluation: Once a homeowner’s LMA is complete, the servicer has 30 days to evaluate and determine whether the homeowner is eligible for HAMP. The servicer will determine whether the HAMP Modification Waterfall can be used to acheive an affordable monthly payment, and performs a Net Present Value (“NPV”) Test to determine whether HAMP is in the investor/lienholder’s interests. Homeowners that do not qualify for HAMP Tier 1 are automatically evaluated for Tier 2. 10 BUSINESS DAYS Notification of Determination: Within 10 business days of completing the evaluation, the servicer must notify the homeowner of the outcome in writing. Homeowners not approved for HAMP are sent a “Non-Approval Notice” with instructions on how to dispute the outcome; homeowners approved for HAMP are sent a “Trial Period Plan (TPP) Notice.” Source: Treasury, “Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages, Version 4.4,” 3/3/2014, www.hmpadmin.com/portal/programs/docs/hamp_servicer/ mhahandbook_44.pdf, accessed 4/1/2015. Loss Mitigation Application (“LMA”): Four-part documentation package that homeowners must submit to servicers to be evaluated for MHA and other loss mitigation options: a completed “request for mortgage assistance” (“RMA”) form; copies of the most recent Federal tax returns (or transcript requests); paystubs or other income verification documentation; and a “Dodd-Frank certification” attesting that the homeowner has not been convicted of a real estaterelated crime within the past 10 years. HAMP Modification “Waterfall”: Steps HAMP servicers apply to reduce homeowners principal and interest payments. The HAMP Tier 1 waterfall uses a series of incremental steps to obtain a targeted post modification payment. The HAMP Tier 2 waterfall is a consistent set of actions that are applied to the loan to get it within a targeted post modification payment range. Net Present Value (“NPV”) Test: Compares the money generated by modifying the terms of the mortgage with the amount an investor can reasonably expect to recover in a foreclosure sale. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 As discussed in Figure 4.7, once a homeowner submits all or any component of a “Loss Mitigation Application,” servicers must notify the homeowner of receipt and, if the LMA is not complete, provide the homeowner up to an additional 30 days to submit a completed package. Once a homeowner’s application is complete, servicers have 30 days to evaluate the mortgage for HAMP. The servicer will first determine whether the property, mortgage, and homeowner are all eligible for HAMP Tier 1. If so, the servicer will follow a prescribed sequence of steps (the HAMP Tier 1 Waterfall) to try to reduce the monthly mortgage payment to less than 31% of the homeowner’s monthly income: 1. Add any unpaid interest and fees to the outstanding mortgage balance; 2. Reduce the interest rate in incremental steps to as low as 2%; 3. Extend the term of the mortgage to a maximum of 40 years from the modification date; 4. At the servicer’s option, defer the due date and cease charging interest on a portion of the outstanding balance (principal forbearance).155 If these steps sufficiently reduce the homeowner’s payment and the modification passes the NPV test, the homeowner must be offered a HAMP Tier 1 Trial Period Plan.xvii Homeowners that meet basic eligibility criteria, but are not eligible for a HAMP Tier 1 modification, are evaluated for HAMP Tier 2 if their servicer and investor/lienholder participates. Tier 2 expanded the pool of homeowners potentially eligible for HAMP 1st Lien Modification to include nonowner occupied “rental” properties and homeowners whose monthly payments are less than 31% of their income, whose payments could not be sufficiently reduced with a HAMP Tier 1 Modification, who received a negative HAMP Tier 1 NPV test result, or who were previously unsuccessful in HAMP Tier 1. When considering a mortgage for HAMP Tier 2, the servicer will apply the following actions (the HAMP Tier 2 Waterfall) to determine whether the modification will result in a payment that is between 25–42% of the homeowner’s monthly income and is no greater than the homeowner’s payment before the modification: 1. Add any unpaid interest and fees to the outstanding balance; 2. Change the interest rate to the prevailing rate for a 30-year conforming fixed interest rate mortgage less 50 basis points;xviii 3. Extend the term to up to 40 years; 4. At the servicer’s option, defer the due date and cease charging interest on a portion of the outstanding balance (principal forbearance) so that the xvii Servicers may use principal forgiveness (PRA or otherwise) to reduce the homeowner’s payment, at any point during the HAMP Tier 1 or HAMP Tier 2 Waterfall, but are not required to do so. xviii P rior to July 1, 2014 the post modification interest rate used on HAMP Tier 2 modifications was the 30-year conforming fixed interest rate mortgage plus 50 basis points, effective July 1, 2014 Treasury reduced this by 50 basis points, effective January 1, 2015 the rate was further reduced by 50 basis points. As a result, the post modification interest rate for Tier 2 modifications is now the 30-year conforming fixed interest rate mortgage less 50 basis points. Treasury, “Supplemental Directive 12-04: MHA Dodd-Frank Certification, Borrower Identity and Owner-Occupancy Verification,” 7/13/2012, www.hmpadmin.com/portal/news/docs/2012/ hampupdate071312.pdf, accessed 4/1/2015; Treasury, “Supplemental Directive 12-02, MHA Extension and Expansion,” 3/9/2013, www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd1202.pdf, accessed 4/1/2015; Treasury, “Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages, Version 4.4,” 3/3/2014, www.hmpadmin.com/portal/programs/docs/ hamp_servicer/mhahandbook_44.pdf, accessed 4/1/2015. 173 174 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM interest bearing portion of the mortgage is no more than 115% of market value of the property at the time of the evaluation. If these steps sufficiently reduce the homeowner’s payment and the modification passes the NPV test, the homeowner would be offered a HAMP Tier 2 Trial Period Plan.156 For more on the HAMP application process, eligibility criteria, HAMP Waterfall, and basic differences between HAMP Tier 1 and HAMP Tier 2, see SIGTARP’s January 28, 2015 Quarterly Report, page 143-145 and 149-151. For more about the HAMP NPV test, see the June 18, 2012, SIGTARP audit report “The NPV Test’s Impact on HAMP.” For more information on HAMP servicer obligations and homeowner rights, see SIGTARP’s April 2011 Quarterly Report, pages 67-76. What Happens When a HAMP Modification Is Denied: Servicer Obligations and Homeowner Rights As noted in Figure 4.7, servicers must provide homeowners with a “Non-Approval Notice” within 10 business days of rejecting them for a HAMP modification. This notification must specify the reason the homeowner was rejected and provide instructions for the homeowner to dispute the outcome (for example, if they believe one or more NPV test inputs is incorrect). Homeowners can also request reconsideration for HAMP if they experience a change in circumstances. Servicers must provide homeowners with 30 days to respond, and evaluate any documentation submitted by the homeowner that could overturn their denial decision, prior to conducting a foreclosure sale.157 Homeowners denied HAMP due to the NPV test result can double check their servicer’s calculation using Treasury’s web-based NPV calculator at www.CheckMyNPV.com. What Happens During a HAMP Trial Figure 4.8 provides a detailed description of what happens during the HAMP trial modification period and how a trial converts to a permanent HAMP modification. Homeowners who are offered and accept a TPP, and then make all of the modified mortgage payments on time during the trial period, will have their modifications converted into permanent status. Homeowners who fail to make any TPP payment on time are disqualified out of the HAMP trial and their mortgage reverts to its prior terms, with any past due balances deferred by HAMP due again. A homeowner who fails a HAMP Tier 1 trial may be offered a HAMP Tier 2 trial, if eligible.158 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.8 HAMP TRIAL MODIFICATION AND CONVERSION TIMELINE 15-45 DAYS 30 DAYS x3 0-30 DAYS Trial Start: The homeowner receives a TPP Notice offering a TPP and specifying the trial monthly payment, which will be due on the first day of the next month if the TPP Notice was sent before the 15th day of a month (or on the first day of the month after next if the TPP Notice was sent on or after the 16th). Trial Acceptance and Performance: The homeowner “accepts” the HAMP TPP by making the first trial payment by the last day of the month in which it is due. After accepting the TPP, the homeowner must make each of the two remaining payments on time to successfully complete the TPP. Conversion to Permanent Modification: Homeowners successfully completing a TPP are converted to a permanent modification, for which servicers are to prepare in advance. If the homeowner does not make their final payment by the due date, but does make it by the end of the month the final payment is due, the servicer may delay the conversion by one month, but the homeowner will not be required to make the additional trial payment. Source: Treasury, “Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages, Version 4.4,” 3/3/2014, www.hmpadmin.com/portal/programs/docs/hamp_servicer/ mhahandbook_44.pdf, accessed 4/1/2015. As described in Figure 4.8, HAMP Trial modifications are supposed to last for three months. According to Treasury, however, 9,308 homeowners (22%) in active trials have been in an extended trial period of more than three months. Additionally, as shown on page 149, 783,392 of 2,184,970 (36%) of HAMP Tier 1 Trial Starts were unsuccessful, and as shown on page 180, 8,490 of 127,098 (7%) of HAMP Tier 2 Trial Starts were unsuccessful. Overall 791,882 of 2,312,068 trial starts 34% were unsuccessful.159 175 176 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM What Happens Once a Homeowner is in a Permanent Modification Figure 4.9 provides a detailed description of what homeowners can expect once they are in a HAMP permanent modification. HAMP modifications have fixed terms (other than escrow payments) for the first five years, then most have annual payment increases and other adjustments over a 2-3 year period until their interest rates reach the level prevailing at the time their HAMP trial began. If at any time the homeowner falls three payments behind, they redefault out of HAMP and their mortgage reverts to its pre-modification terms.160 FIGURE 4.9 HAMP POST-MODIFICATION TIMELINE YEAR 1-5 Initial Permanent Modification Period: During their first 5 years, homeowners in permanent HAMP modifications will see no change in the principal and interest portion of their monthly mortgage payment (though many may see their payments go up during this period due to escrow adjustments). YEAR 6-8 Rate Adjustment Period: After the 5th year, most HAMP Tier 1 modifications have scheduled annual interest rate increases of up to 1% per year for 2-3 years, and will see their payments increase by a median of $197 during that time (HAMP Tier 2 modifications are not subject to these payment increases). On the 6th anniversary of the trial start date, homeowners may be able to obtain a loan recast to reduce the their monthly payment. YEAR 8-40 Post-Adjustment Period: After 8 years, most of the incremental payment increases will be complete and homeowners may continue to reap the benefits of HAMP for up to 40 years after modifying their loan. Source: Treasury, “Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages, Version 4.4,” 3/3/2014, www.hmpadmin.com/portal/programs/docs/hamp_servicer/ mhahandbook_44.pdf, accessed 4/1/2015. SIGTARP analysis of Treasury HAMP data. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Modification Incentives For new HAMP trials on or after October 1, 2011, Treasury changed the onetime flat $1,000 incentive payment to a sliding scale based on the length of time the loan was delinquent as of the effective date of the TPP. For loans less than or equal to 120 days delinquent, servicers receive $1,600.161 For loans 121-210 days delinquent, servicers receive $1,200. For loans more than 210 days delinquent, servicers receive only $400. Starting on March 1, 2014, each of these incentive payments for servicers increased by $400.162 For homeowners whose monthly mortgage payment was reduced through HAMP by 6% or more, servicers also receive incentive payments of up to $1,000 annually for three years if the homeowner remains in good standing (defined as less than three full monthly payments delinquent).163 For HAMP Tier 1, homeowners whose monthly mortgage payment is reduced through HAMP by 6% or more and who make monthly payments on time earn an annual principal reduction of up to $1,000.164 The principal reduction accrues monthly and is payable for each of the first five years as long as the homeowner remains in good standing.165 In addition, homeowners still active in HAMP on the sixth anniversary of their trial start date will receive a one time principal reduction of $5,000, after which servicers will be required to offer a loan recast, unless prohibited by investor guidelines.166 Under both HAMP Tier 1 and HAMP Tier 2, the investor is entitled to five years of incentives that make up part of the difference between the homeowner’s new monthly payment and the old one. HAMP Tier 2 incentives are the same as those for HAMP Tier 1, with some exceptions, notably that HAMP Tier 2 modifications do not pay annual homeowner or servicer incentives, with the exception of a $5,000 principal reduction payment paid on the 6th anniversary of the trial start date for homeowners that remain active in the program.167 As of March 31, 2015, of the $29.8 billion in TARP funds allocated to the 79 servicers participating in MHA, 91% was allocated to 10 servicers.168 Table 4.26 shows incentive payments made to these servicers. Loan Recast: Re-amortization of the loan using the existing interest rates and remaining term, but reduced unpaid principal balance. This results in excess principal payments made prior to or concurrent with the recast being used to reduce the minimum monthly payment rather than to pay the loan off early. 177 178 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.26 TARP INCENTIVE PAYMENTS BY 10 SERVICERS, ALL MHA PROGRAMS, AS OF 3/31/2015 SPA Cap Limit Incentive Payments to Borrowers Incentive Payments to Investors Incentive Payments to Servicers Total Incentive Payments $6,712,945,480 $420,601,632 $1,436,869,277 $585,474,623 $2,442,945,533 JPMorgan Chase Bank, NAb 3,822,000,630 385,870,082 1,114,736,484 479,118,104 1,979,724,669 Wells Fargo Bank, N.A.d 4,832,707,816 353,026,098 929,491,077 448,209,597 1,730,726,771 Bank of America, N.A.c 5,932,362,744 374,718,903 789,337,815 437,218,515 1,601,275,233 Select Portfolio Servicing, Inc. 1,537,149,713 128,961,414 272,887,035 157,208,982 559,057,431 989,880,066 91,819,782 301,322,477 129,147,946 522,290,205 Nationstar Mortgage LLCe 1,510,957,489 101,012,091 281,447,870 136,754,943 519,214,904 OneWest Bank 1,266,060,328 64,933,004 223,237,867 88,782,111 376,952,983 Bayview Loan Servicing LLC 409,624,966 23,541,329 51,963,392 26,524,056 102,028,777 Saxon Mortgage Services Inc 100,807,086 19,655,075 41,738,413 39,413,598 100,807,086 2,678,293,877 132,004,277 311,771,688 182,896,924 626,672,889 $29,792,790,195 $2,096,143,687 $5,754,803,396 $2,710,749,399 $10,561,696,482 Ocwen Loan Servicing, LLCa CitiMortgage Inc Other Servicers Total Notes: Numbers may not total due to rounding. On July 1, 2012, Saxon Mortgage Services, Inc. ceased servicing operations by selling its mortgage servicing rights and transferring the subservicing relationships to third-party servicers. The remaining SPA Cap Limit stated above represents the amount previously paid to Saxon Mortgage Services, Inc. prior to ceasing servicing operations. a Ocwen Loan Servicing, LLC includes the former Litton Loan Servicing, LLC, GMAC Mortgage, LLC, and Homeward Residential. b JPMorgan Chase Bank, NA includes EMC Mortgage Corporation. c Bank of America N.A. includes the former Countrywide Home Loans Servicing, BAC Home Loans Servicing LP, Home Loan Services, and Wilshire Credit Corporation. d Wells Fargo Bank, N.A. includes Wachovia Bank, NA and Wachovia Mortgage, FSB. e Nationstar Mortgage LLC includes MorEquity, Inc and the former Aurora Loan Services LLC. Source: Treasury, Transactions Report-Housing Programs, 3/31/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 As shown in Table 4.26, Ocwen Loan Servicing, LLC, received $2,442,945,533 in total incentive payments, the most of any servicer. The four largest HAMP servicers (Ocwen Loan Servicing, LLC; JPMorgan Chase Bank, NA; Wells Fargo Bank, N.A; and Bank of America, N.A.) received 78% of all incentives paid out. Only 17% of the incentives paid to Ocwen Loan Servicing, LLC went to homeowners, least among the four largest servicers. Conversely, 23% of incentives paid to Bank of America, N.A. went to homeowners, the highest among the four largest servicers. Of the $10.6 billion in total incentives paid to all servicers, 20% went to homeowners, 54% went to investors, and the remaining 26% went to the servicers. Table 4.27 below shows similar incentives information, but limited to HAMP incentives. Of the $8.8 billion in total HAMP incentives paid, 18% went to homeowners, 57% went to investors, and the remaining 26% went to the servicers. TABLE 4.27 TARP INCENTIVE PAYMENTS BY 10 SERVICERS, HAMP ONLY, AS OF 3/31/2015 Incentive Payments to Borrowers Incentive Payments to Investors Incentive Payments to Servicers Total Incentive Payments Ocwen Loan Servicing, LLCa $366,571,851 $1,401,131,338 $545,127,531 $2,312,830,720 JPMorgan Chase Bank, NAb 273,038,344 909,676,185 382,854,535 1,565,569,064 Wells Fargo Bank, N.A. 246,871,173 825,776,921 359,151,497 1,431,799,591 Bank of America, N.A. d 211,473,788 580,247,452 313,722,240 1,105,443,480 Select Portfolio Servicing, Inc. 97,238,941 251,423,764 134,197,344 482,860,049 Nationstar Mortgage LLCe 88,892,860 267,633,315 123,473,198 479,999,374 c CitiMortgage Inc 82,333,815 204,079,797 112,030,514 398,444,126 OneWest Bank 49,441,941 190,755,408 76,936,111 317,133,461 Saxon Mortgage Services Inc 19,331,075 41,733,526 39,251,598 100,316,199 Bayview Loan Servicing LLC 15,656,153 46,590,123 18,311,748 80,558,024 Other Servicers 91,204,202 262,009,928 141,949,599 495,163,728 $1,542,054,143 $4,981,057,757 $2,247,005,913 $8,770,117,814 Total Notes: Numbers may not total due to rounding. Includes HAMP Tier 1, HAMP Tier 2, HPDP, and PRA Incentives. a Ocwen Loan Servicing, LLC includes the former Litton Loan Servicing, LLC, GMAC Mortgage, LLC, and Homeward Residential. b JPMorgan Chase Bank, NA includes EMC Mortgage Corporation. c Bank of America N.A. includes the former Countrywide Home Loans Servicing, BAC Home Loans Servicing LP, Home Loan Services, and Wilshire Credit Corporation. d Wells Fargo Bank, N.A. includes Wachovia Bank, NA and Wachovia Mortgage, FSB. e Nationstar Mortgage LLC includes MorEquity, Inc and the former Aurora Loan Services LLC. Source: Treasury, Program to Date Cash Disbursement Summary Report, March 2015. 179 180 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM For SIGTARP’s recommendations for the improvement of HAMP Tier 2, see SIGTARP’s April 2012 Quarterly Report, pages 185-189. HAMP Tier 2 Effective June 1, 2012, HAMP Tier 2 expanded HAMP to allow for modifications on mortgages of non-owner-occupied “rental” properties that are tenant-occupied or vacant.169 HAMP Tier 2 also allows homeowners with a wider range of debt-toincome situations to receive modifications.170 Treasury’s stated policy objectives for HAMP Tier 2 are that it “will provide critical relief to both renters and those who rent their homes, while further stabilizing communities from the blight of vacant and foreclosed properties.”171 A homeowner may have up to five loans with HAMP Tier 2 modifications, as well as a single HAMP Tier 1 modification on the mortgage for his or her primary residence.172 If a homeowner loses “good standing” on a HAMP Tier 1 modification, or it has either been at least one year since the effective date of that modification, or there has been a “change in circumstance,” he or she is eligible for a HAMP Tier 2 remodification.173 Approximately 11,567 of homeowners in active HAMP Tier 2 permanent modifications were previously in HAMP Tier 1 permanent modifications.174 According to Treasury, as of March 31, 2015, a total of 61 of the 79 servicers with active MHA servicer agreements had fully implemented HAMP Tier 2, including all of the 10 largest servicers.175 According to Treasury, as of March 31, 2015, it had paid $342 million in incentives in connection with 98,702 HAMP Tier 2 permanent modifications, 83,466 of which remain active.176 HAMP Tier 2 mortgage modification activity and property occupancy status is shown in Table 4.28. TABLE 4.28 HAMP TIER 2 FIRST LIEN MODIFICATION ACTIVITY AND OCCUPANCY STATUS, AS OF 3/31/2015 Property Type Borrower Occupied Tenant Occupied Vacant Total Trials Started Trials Cancelled Trials Active Trials Converted Permanent Permanents Disqualified Permanents Paid-Off Permanents Active 119,181 8,013 18,416 92,752 13,708 685 78,357 6,937 414 1,269 5,254 700 43 4,511 980 63 221 696 94 4 598 127,098 8,490 19,906 98,702 14,502 732 83,466 Source: Treasury, “HAMP 1MP Program Volumes – Tier 2 Property Type – March 2015,” accessed 4/22/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 As shown in Table 4.28, of the 127,098 HAMP Tier 2 trial mortgage modifications started, 119,181 (94%), were for owner-occupied properties; 6,937 (5%), were for tenant-occupied properties, and 980 (1%) were for vacant properties. Of the 119,181 owner-occupied HAMP Tier 2 trials started, 18,416 (15%) remained active, 8,013 (7%) were cancelled, and 92,752 (78%) were converted to permanent. Of the 92,752 owner-occupied HAMP Tier 2 permanent modifications started, 78,357 (84%) remained active and 13,708 (15%) redefaulted. Of the 6,937 tenant-occupied HAMP Tier 2 trials started, 1,269 (18%) remained active, 414 (6%) were cancelled, and 5,254 (76%) were converted to permanent. Of the 5,254 tenant-occupied HAMP Tier 2 permanent modifications started, 4,511 (86%) remained active and 700 (13%) redefaulted. Of the 980 HAMP Tier 2 trials started for vacant properties, 221 (23%) remained active, 63 (6%) were cancelled, and 696 (71%) were converted to permanent. Of the 696 HAMP Tier 2 permanent modifications started for vacant properties, 598 (86%) remained active and 94 (14%) redefaulted.177 In the quarter ending March 31, 2015, 17,557 Tier 2 trials were started (up from 15,555 in the preceding quarter), 13,714 trials converted to permanent modifications (down from 13,805 in the preceding quarter), and 2,679 Tier 2 modifications redefaulted (down from 3,074 in the preceding quarter). As of March 31, 2015 there were 83,466 homeowners active in HAMP Tier 2 trial modifications, compared to 72,567 at the previous quarter end. Of the 98,702 homeowners that received a permanent HAMP Tier 2 modification, 32,690 (33.1%) received principal reduction through PRA, and another 688 (0.7%) received non PRA principal reduction. Among the largest servicers, Ocwen was the most likely to provide principal forgiveness, providing forgiveness on about 59% of its HAMP Tier 2 modifications, while Bank of America only provided forgiveness on less than 1% on its Tier 2 modifications.178 MHA Outreach and Borrower Intake Project On February 14, 2013, Treasury entered into an agreement with the Neighborhood Reinvestment Corporation, also called NeighborWorks America (“NeighborWorks”), to launch a nationwide MHA initiative with housing counselors “in an effort to increase the number of homeowners that successfully request assistance under MHA.”179 NeighborWorks is a Congressionally chartered corporation that through a national network of non-profit organizations administers housing programs, including housing counseling.180 The initiative, called the MHA Outreach and Borrower Intake Project, pays $450 to housing counseling agencies for each homeowner they worked with to submit complete applications for HAMP to servicers.181 Treasury allocated $18.3 million in TARP funds for the project, which according to Treasury ended on September 30, 2014; however counseling agencies and servicers could complete work through November 14, 2014, and December 15, 2014, respectively.182 As of March 31, 2015, housing counselors have initiated HAMP application work for 12,592 homeowners, of whom 3,936 have had their completed applications submitted to an MHA servicer and accepted by that MHA 181 182 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM servicer, whether or not the homeowner eventually receives a HAMP mortgage modification.183 However, Treasury told SIGTARP that Treasury does not know how many of the completed HAMP applications for which NeighborWorks was paid actually resulted in a homeowner getting into HAMP.184 According to Treasury, housing counseling agencies are due $1,771,200 for those accepted applications.185 NeighborWorks has, as of March 31, 2015, requested $7.4 million in total funds, mostly for outreach, oversight, and administration, as well as for the counseling agency payments. Of the $7.4 million in total funds committed to this program only 24% of the committed funds are used for agency counseling payments. The remaining 76% are designated for administration, marketing and outreach.186 TABLE 4.29 FIGURE 4.10 MHA OUTREACH AND BORROWER INTAKE PROJECT, AS OF 3/31/2015 Agency Counseling Fees $1,771,200 MHA OUTREACH AND BORROWER INTAKE PROJECT, AS OF 3/31/2015 Administrative Expenses Intermediary Oversight Fees $268,889 Administration (NWA) 1,690,361 Quality Control & Compliance 474,593 Technology Build 539,021 Counselor Training 265,187 Outreach Expenses Agency Outreach Fees Supplemental Outreach Fees $1,571,524 475,106 Virtual Outreach Events Traditional Outreach Events Total Expenses 58,380 308,563 $7,422,824 Source: Treasury, response to SIGTARP data call, 4/10/2015. For more information on these additional housing programs, see SIGTARP’s October 2013 Quarterly Report, pages 93-99. 24% 76% Administration, Marketing, and Outreach Fees Agency Counseling Fees Note: Administrative Expenses includes intermediary oversight fees, agency outreach fees, supplemental outreach fees, administration (nwa), quality control & compliance, technology build, and counselor training. Source: Treasury, response to SIGTARP data call, 4/10/2015. Additional TARP-Funded MHA Housing Support Programs From April 2009 until September 2010, Treasury announced a number of additional MHA support programs for homeowners with non-GSE mortgages. TARP funds have been allocated to most but not all of these additional programs. Three of these programs fall under the umbrella of the HAMP program: the Home Price Decline Protection (“HPDP”) program, the Home Affordable Unemployment Program (“UP”), and the Principal Reduction Alternative (“PRA”). The remaining additional MHA programs include collaborations with other Federal agencies, programs that aim to extinguish homeowners’ second mortgages (“second liens”), and programs that offer alternatives to foreclosure. Table 4.30 provides more detail on these programs. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 183 TABLE 4.30 ADDITIONAL MAKING HOME AFFORDABLE (“MHA”) HOUSING SUPPORT PROGRAMS, AS OF 3/31/2015 Program Principal Reduction Alternative (“PRA”)b Home Price Decline Protection (“HPDP”)b Home Affordable Unemployment Program (“UP”)b Home Affordable Foreclosure Alternatives (“HAFA”) Second Lien Modification Program (“2MP”) Treasury/ Federal Housing AdministrationHome Affordable Modification Program (“Treasury/FHAHAMP”) Date Announced 6/3/2010 Date Started To provide incentives to investors to modify homeowners’ mortgages under HAMP by reducing the principal amount owed. Estimated TARP Allocation (In Billions)a TARP Expenditures (In Billions) — 181,977c 141,432c $2.00 $1.3 7/31/2009 To provide additional TARP-funded incentives to investors to modify mortgages 9/1/2009 through HAMP by partially offsetting possible losses from home price declines. — 221,170c 141,265c 1.55 0.37 3/26/2010d 7/1/2010e To temporarily -- fully or partially -- suspend mortgage payments for unemployed homeowners. — 42,714 3,525f —g —g 4/5/2010h To provide TARP-funded incentives to servicers, investors, and homeowners to complete short sales and deeds-in-lieu to avoid foreclosure and relocate homeowners unable to sustain a modified mortgage. — 190,707 — 4.15 0.91 To provide incentives to servicers, investors, and borrowers to modify second mortgages (second liens) -- with a partial or full extinguish8/13/2009 ment of the loan balance -- for homeowners with a corresponding first mortgage (first lien) that was modified under HAMP. “A Second Lien Program to Reach up to 1 to 1.5 Million Homeowners,” according to Treasury, “Making Home Affordable, Program Update, Fact Sheet,” 4/28/2009. 146,626 84,555 0.13 0.74 To provide TARP-funded, HAMP-like incentives to 8/15/2009 servicers and homeowners to modify mortgages insured by the FHA. “Tens of thousands of FHA borrowers will now be able to modify their mortgages in the same manner as so many others who are taking advantage of the Administration’s Making Home Affordable program,” according to HUD Secretary Shaun Donovan, HUD Press Release, “HUD Secretary Donovan Announces New FHA-Making Home Affordable Loan Modification Guidelines,” 7/30/2009. 77,944 59,822 0.23 0.15 11/30/2009 4/28/2009 7/30/2009i 10/1/2010 Purpose Homeowners Assistedm Estimated Number of Homeowners to be Permanents Permanents Assisted Started Active Continued on next page 184 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM ADDITIONAL MAKING HOME AFFORDABLE (“MHA”) HOUSING SUPPORT PROGRAMS, AS OF 3/31/2015 Program Department of Agriculture Rural DevelopmentHome Affordable Modification Program (“RDHAMP”) Treasury/ Federal Housing Administration Second Lien Program (“Treasury/FHA2LP”) l Department of Veterans Affairs-Home Affordable Modification Program (“VA HAMP”) Date Announced Date Started Purpose (CONTINUED) Homeowners Assistedm Estimated Number of Homeowners to be Permanents Permanents Assisted Started Active Estimated TARP Allocation (In Billions)a TARP Expenditures (In Billions) 9/17/2010i To provide TARP-funded, HAMP-like incentives to servicers and borrow9/24/2010 ers for modifications of mortgages insured by RD. — 173 122 0.02 —j 3/26/2010i To provide TARP-funded incentives to servicers and investors to partially or fully extinguish sec8/6/2010 ond mortgages (second liens) for mortgages modified and insured by the FHA. — 0 0 2.69 0.00 1/8/2010i To provide non-TARPfunded, HAMP-like incentives to servicers 2/1/2010 and borrowers for modifications of mortgages insured by the VA. — 658 491 —k —k Notes: a Estimated TARP allocations are as of January 5, 2012. b Program is a subprogram of the Home Affordable Modification Program (“HAMP”). c Includes HAMP Tier 1 and Tier 2 modifications. d In a 3/26/2010 press release, Treasury announced the concept of what was later named the “UP” program in Treasury’s May 11, 2010 Supplemental Directive. e Treasury announced that servicers could implement UP before July 1, 2010. f As of 2/28/2015, 4,835 homeowners who received UP assistance subsequently received HAMP modifications. g Treasury does not allocate TARP funds to UP. h Treasury announced that some servicers could implement HAFA before April 5, 2010. i In its April 6, 2009 Supplemental Directive, Treasury announced that “Mortgage loans insured, guaranteed or held by a Federal Government agency (e.g., FHA, HUD, VA and Rural Development) may be eligible for the HAMP, subject to guidance issued by the relevant agency. Further details regarding inclusion of these loans in the HAMP will be provided in a subsequent Supplemental Directive.” j As of March 31, 2015, $344,394 has been expended for RD-HAMP. k Treasury does not provide incentive compensation related to VA-HAMP. l As of December 31, 2013, the FHA2LP program had expired. m Number of homeowners assisted via UP presented as of 2/28/2015, the most recent data provided by Treasury. Sources: Treasury, responses to SIGTARP data calls, 1/5/2012, 1/8/2014, 1/24/2014, 4/9/2014, 4/25/2014, 7/8/2014, 7/24/2014, 10/6/2014, 10/10/2014, 1/5/2015, 1/23/2015 and 4/23/2015; Treasury, “Home Affordable Unemployment Program NON GSE Forbearance Plans Worksheet – February 2015,” accessed 4/22/2015; Treasury, “HAFA Program Inventory – Program Type – March 2015,“ accessed 4/22/2015; Treasury, “2MP Program Inventory – Program Type by Payor – March 2015,“ accessed 4/22/2015; Treasury, “FHA & RD HAMP Trial Starts – Program Summary – March 2015,” accessed 4/22/2015; VA, responses to SIGTARP data calls, 1/8/2014, 4/3/2014, 7/7/2014, 10/23/2014. 1/2/2015 and 4/1/2015; Treasury, Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages, Version 4.4, 3/3/2014; Treasury, Press Releases, 4/28/2013, 7/31/2009, 11/30/2009, and 3/26/2010; Treasury, “Supplemental Directive 09-01: Introduction of the Home Affordable Modification Program,” 4/6/2009; Treasury, “Supplemental Directive 09-04: Home Affordable Modification Program -- Home Price Decline Protection Incentives,” 7/31/2009; Treasury, “Supplemental Directive 09-09: Introduction of Home Affordable Foreclosure Alternatives -- Short Sale and Deed in Lieu of Foreclosure,” 11/30/2009; Treasury, “Supplemental Directive 09-09 Revised: Introduction of Home Affordable Foreclosure Alternatives -- Short Sale and Deed in Lieu of Foreclosure Update,” 3/26/2010; Treasury, “Supplemental Directive 09-05 Revised: Update to the Second Lien Modification Program (2MP),” 3/26/2010; Treasury, “Fact Sheet: FHA Program Adjustments to Support Refinancings for Underwater Homeowners,” 3/26/2010; Treasury, “HAMP Improvements Fact Sheet: Making Home Affordable Program Enhancements to Offer More Help for Homeowners,” 3/26/2010; Treasury, “Supplemental Directive 10-04: Home Affordable Unemployment Program,” 5/11/2010; Treasury, “Supplemental Directive 10-05: Home Affordable Modification Program - Modification of Loans with Principal Reduction Alternative,” 6/3/2010; Treasury, Supplemental Directive 10-10: Home Affordable Modification Program – Modifications of Loans Guaranteed by the Rural Housing Service,” 9/17/2010; HUD, press release, 7/30/2009; VA, Circular 26-10-2, 1/8/2010; and VA, Circular 26-10-6, 5/24/2010. 308,147 195,705 126,657 72,909 15,104 2,184,970 2011 2012 2013 2014 2015 Total Total 563,828 3,569 1,079,282 2015 902,620 22,114 2014 2010 35,719 2009 81,478 2013 1,105,688 Total 2012 11,535 2015 138,072 50,795 2014 287,839 90,938 2013 2011 114,227 2012 2010 170,075 2011 510,491 275,989 2009 392,129 2009 2010 2,184,970 2,169,866 2,096,957 1,970,300 1,774,595 1,466,448 902,620 1,079,282 1,075,713 1,053,599 1,017,880 936,402 798,330 510,491 1,105,688 1,094,153 1,043,358 952,420 838,193 668,118 392,129 Cumulative 783,392 276 3,624 6,655 10,876 27,452 686,058 48,451 430,302 467 1,742 4,446 4,814 10,654 383,448 24,731 353,090 (191) 1,882 2,209 6,062 16,798 302,610 23,720 Annual 783,392 783,116 779,492 772,837 761,961 734,509 48,451 430,302 429,835 428,093 423,647 418,833 408,179 24,731 353,090 353,281 351,399 349,190 343,128 326,330 23,720 Cumulative Trials Cancelled 22,723 23,282 40,193 62,111 79,307 152,289 787,231 6,906 7,694 13,551 25,775 36,391 77,396 442,455 15,817 15,588 26,642 36,336 42,916 74,893 344,776 Annual Trials Active 1,378,855 15,387 86,196 141,920 202,025 353,677 512,712 66,938 642,074 3,890 26,229 43,497 87,280 168,423 269,450 43,305 736,781 11,497 59,967 98,423 114,745 185,254 243,262 23,633 Annual 1,378,855 1,363,468 1,277,272 1,135,352 933,327 579,650 66,938 642,074 638,184 611,955 568,458 481,178 312,755 43,305 736,781 725,284 665,317 566,894 452,149 266,895 23,633 Cumulative Trials Converted to Permanent 7,924 41,306 49,413 58,860 59,080 29,015 129 Annual 441,462 13,962 68,428 83,403 108,089 110,367 56,745 468 195,735 6,038 27,122 33,990 49,229 51,287 27,730 339 46,356 6,027 16,539 14,113 6,769 2,101 802 5 32,671 3,889 10,905 10,592 5,271 1,442 569 3 13,685 2,138 5,634 3,521 1,498 659 233 2 Annual 46,356 40,329 23,790 9,677 2,908 807 5 32,671 28,782 17,877 7,285 2,014 572 3 13,685 11,547 5,913 2,392 894 235 2 Cumulative Permanents Paid Off 890,783 (4,852) 1,225 44,403 87,168 241,209 455,165 66,465 413,566 (6,138) (11,799) (1,085) 32,780 115,694 241,151 42,963 477,217 1,286 13,024 45,488 54,388 125,515 214,014 23,502 Annual 890,783 895,635 894,410 850,007 762,839 521,630 66,465 413,566 419,704 431,503 432,588 399,808 284,114 42,963 477,217 475,931 462,907 417,419 363,031 237,516 23,502 Cumulative Permanents Active Sources: Treasury, responses to SIGTARP data calls, 7/24/2014, 4/25/2014, 1/23/2014, 10/23/2013, 10/21/2013, 7/19/2013, 2/28/2013, 1/22/2013, 1/20/2012, and 1/21/2011; Treasury, “HAMP 1MP: Program Volumes - Program Type & Payor by Tier - March 2015,” accessed 4/22/2015; Fannie Mae, responses to SIGTARP data calls, 7/24/2014, 4/24/2014, 1/23/2014, 10/21/2013; SIGTARP Quarterly Report to Congress, 1/29/2014; SIGTARP Quarterly Report to Congress, 1/30/2013; SIGTARP Quarterly Report to Congress, 1/26/2012; SIGTARP Quarterly Report to Congress, 1/26/2011; SIGTARP Quarterly Report to Congress, 1/30/2010. 441,462 427,500 359,072 275,669 167,580 57,213 468 195,735 189,697 162,575 128,585 79,356 28,069 339 245,727 237,803 196,497 147,084 88,224 29,144 129 Cumulative Permanents Redefaulted 245,727 Notes: Data is as of December 31, 2009; December 31, 2010; December 31, 2012; December 31, 2013; December 31, 2014; and March 31, 2015. Total GSE TARP Annual Trials Started ANNUAL AND CUMULATIVE HAMP TIER 1 MODIFICATION ACTIVITY, AS OF 3/31/2015 TABLE 4.31 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 185 186 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Housing Finance Agency Hardest Hit Fund (“HHF”) Over five years ago, in February 2010, in an attempt to help families in places hurt the most by the housing crisis, the Administration launched the TARP-funded Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (“Hardest Hit Fund” or “HHF”).187 The Administration announced that TARP funds would be used for “innovative measures to help families in the states that have been hit the hardest by the aftermath of the housing bubble.”188 This TARPfunded housing support program was to be developed and administered by state housing finance agencies (“HFAs”) with Treasury’s approval and oversight.189,xix Treasury allocated $7.6 billion in TARP funds for the HHF program and, through four rounds of funding in 2010, obligated these TARP funds to 18 states and the District of Columbia (“states”) – those states that Treasury deemed to have significant home price declines and high unemployment rates.190 Treasury approved each of the 19 states’ initial program proposals and approves any proposed changes to programs.191 These proposals and program changes include estimates of the number of homeowners to be helped through each program (some states have more than one program).192 The first round of HHF allocated $1.5 billion of the amount initially allocated for MHA initiatives. According to Treasury, these funds were designated for five states where the average home price had decreased more than 20% from its peak. The five states were Arizona, California, Florida, Michigan, and Nevada.193 Plans to use these funds were approved by Treasury on June 23, 2010.194 On March 29, 2010, Treasury expanded HHF to include five additional states and increased the program’s potential funding by $600 million, bringing total funding to $2.1 billion. The additional $600 million was designated for North Carolina, Ohio, Oregon, Rhode Island, and South Carolina. Treasury indicated that these states were selected because of their high concentrations of people living in economically distressed areas, defined as counties in which the unemployment rate exceeded 12%, on average, in 2009.195 Plans to use these funds were approved by Treasury on August 3, 2010.196 On August 11, 2010, Treasury pledged a third round of HHF funding of $2 billion to states with unemployment rates at or above the national average.197 The states designated to receive funding were Alabama, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, and Washington, DC.198 Treasury approved third round proposals on September 23, 2010.199 On September 29, 2010, a fourth round of HHF funding of an additional $3.5 billion was made available to existing HHF participants.200 xix Participating HFAs in HHF are from: Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, and Washington, DC. As of March 31, 2015, there were 73 active HHF programs run by the 19 state HFAs. According to Treasury, seven states: Illinois, New Jersey, Rhode Island, Washington, DC, Ohio, Tennessee and Oregon are no longer accepting applications for assistance from homeowners because they determined that their allocated HHF funds would be spent on homeowners who already have been approved for HHF assistance. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Treasury allocated the $7.6 billion in TARP funds to 18 states and the District of Columbia and has over time approved HHF programs in several categories:201 • • • • • • Unemployment assistance Past-due payment assistance Mortgage modification, including principal reduction assistance Second-lien reduction assistance Transition assistance, including short sale and deed-in-lieu of foreclosure Blight elimination. According to Treasury, states can reallocate funds between programs and modify existing programs as needed, with Treasury approval, until December 31, 2017.202 According to Treasury, as of March 31, 2015, there were 73 active HHF programs in 18 states and Washington, DC, unchanged from the previous quarter. According to Treasury, five states reallocated funds, modified or eliminated existing programs or oversight structures, or established new HHF programs with Treasury approval in the quarter ended March 31, 2015: Alabama, California, Florida, Michigan and Nevada. In January 2015, Treasury approved Alabama’s request to change its Loan Modification Assistance Program to expand its reach and pool of potential applicants. Treasury approved Florida’s changes to two HHF programs: its Unemployment Mortgage Assistance Program and its Reinstatement Program, with the same goal of expanding the applicant pool. Also during January, Treasury approved a change to the oversight structure of Nevada’s HHF program, replacing an Executive Committee with a new three-member HHF Fund Committee to provide guidance and oversight. In March 2015, Treasury approved changes to four California HHF programs, expanding the reach and applicant pool for its Mortgage Reinstatement and Transition Assistance programs, and reallocating funds between the Principal Reduction and Community 2nd Mortgage Principal Reduction Programs. Also in March, Michigan reallocated funds between programs.203 For states that have committed approximately 80% or more of their allocated HHF funds, Treasury has established a “streamlined reallocation process,” which allows those states that Treasury has authorized to use it to reallocate funds among its HHF programs, subject only to getting Treasury’s written approval rather than formally amending their HHF participation agreements with Treasury. As of December 31, 2014, four states—Rhode Island, Illinois, Oregon, and Ohio—have been approved to use this streamlined process.204 States’ TARP Allocations and Spending for HHF Of the $7.6 billion in TARP funds available for HHF, states collectively had drawn down $5.1 billion (67%) as of March 31, 2015.205 As of December 31 2014, the latest date for which spending analysis is available, states had drawn down $5 billion (66%).206 However, not all of that has been spent on direct assistance to homeowners. States had spent $3.8 billion (50% of the $7.6 billion) to assist 218,450 individual homeowners; and two states had spent another $27.6 million on blight elimination (which does not directly assist individual homeowners). States For more information on HHF, see: SIGTARP’s April 12, 2012, audit report, “Factors Affecting Implementation of the Hardest Hit Fund Program,” and SIGTARP’s July 2014 Quarterly Report, “Treasury Should Use HAMP and HHF Together to Help as Many Homeowners as Possible Avoid Foreclosure,” pages 277-290. 187 188 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM have spent the rest of the funds on administrative expenses or hold the money as cash-on-hand. States have spent $499.1 million (7%) on administrative expenses; and held $748.4 million (10%) as unspent cash-on-hand, as of December 31, 2014, the latest data available.207,xx There remains $2.6 billion (34%) in undrawn funds available for HHF, as of December 31, 2014.208 As of December 31, 2014, the latest data available, in aggregate, after more than four years, states had spent 50% ($3.8 billion) of the $7.6 billion in TARP funds that Treasury allocated for the HHF program to provide assistance to 259,285 program participants (which translates to 218,450 individual homeowners), or 47% of the number of homeowners the states anticipated helping with HHF in 2011.209,xxi As of December 31, 2014, 79.5% of the HHF funds spent by states was for unemployment assistance, including past-due payment assistance.210 As SIGTARP found in its April 2012 audit, these were the only types of assistance for which the Government sponsored enterprises (“GSE”s) previously directed servicers to participate. The remaining assistance can be broken down to 19.9% for mortgage modification, including principal reduction assistance, 0.4% for second-lien reduction assistance, and 0.2% for transition assistance. As of December 31, 2014, two states (Michigan and Ohio, the only states to report demolition activity under the Blight Elimination Program) had spent $27.6 million to eliminate 2,315 properties, representing 0.4% of all HHF funds.211 According to information reported to Treasury by those states as of December 31, 2014, Michigan has spent $22,795,284 million in removing and greening 1,887 properties, while Ohio spent $4,833,691 million removing 428 properties; Indiana reported that it had not removed any properties as of that date.212 Figure 4.11 shows state uses of TARP funds obligated for HHF by percent, as of December 31, 2014, the most recent figures available. xx F igures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursements to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. xxi According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.11 STATE USES OF $7.6 BILLION OF TARP FUNDS AVAILABLE FOR HHF, BY PERCENT, AS OF 12/31/2014 Alabama $162.5 million allocated Arizona $267.8 million allocated California $1,975.3 million allocated Florida $1,057.8 million allocated Georgia $339.3 million allocated Illinois $445.6 million allocated Indiana $221.7 million allocated Kentucky $148.9 million allocated Michigan $498.6 million allocated Mississippi $101.9 million allocated Nevada $194.0 million allocated New Jersey $300.5 million allocated North Carolina $482.8 million allocated Ohio $570.4 million allocated Oregona $220.0 million allocated Rhode Island $79.4 million allocated South Carolina $295.4 million allocated Tennessee $217.3 million allocated Washington, DC $20.7 million allocated TOTAL $7.6 billion 0 20 40 Homeowner Assistance Cash-on-Hand Administrative Expenses Undrawn Funds 60 80 Blight Assistance Notes: According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. Figures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursements to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. State spending figures as of December 31, 2014, are the most recent available; Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, states have drawn down $5.1 billion. a Oregon’s cash-on-hand excludes $19.1 million received from lien satisfaction recoveries and other sources. Sources: Treasury, Transactions Report-Housing Programs, 3/31/2015; Treasury, responses to SIGTARP data calls, 7/5/2013, 10/3/2013, 10/7/2013, 10/17/2013, 1/17/2014, 1/22/2014, 1/23/2014, 4/9/2014, 7/8/2014, 10/6/2014, 1/5/2015, and 4/6/2015. 100 189 190 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM State Estimates of Homeowner Participation in HHF According to Treasury, as of December 31, 2014, states had spent $3.8 billion to help 218,450 homeowners. For the quarter ended December 31, 2014 alone, states spent $289.5 million to help 10,950 homeowners.213 Each state estimates the number of homeowners to be helped in its programs. In the beginning of 2011, states collectively estimated that they would help 546,562 homeowners with HHF.214 Since then, with Treasury’s approval, states have changed their programs (including reducing the estimated number of homeowners to be helped), cancelled programs, and started new programs.215 As of December 31, 2014, the states estimated helping 301,493 homeowners with HHF, which is 245,069 fewer homeowners than the states estimated helping with HHF in 2011, a reduction of 45%. Importantly, the states collectively estimate that HHF will help 301,493 homeowners but fail to take into account that when states report program participation numbers, homeowners may be counted more than once when they receive assistance from multiple HHF programs offered in their state. As of December 31, 2014, 14 states have more than one program. For example, a homeowner may have lost his or her job, missed three months of mortgage payments, and then sought help from his or her state. This homeowner might be qualified to receive assistance from two HHF programs offered by the state, one that could help make up missed mortgage payments, and a second that could help pay future mortgage payments while the homeowner seeks new employment. Treasury requires states to estimate the number of people who will participate in each of their programs, and then report the number who actually participate in each program.216 It also requires them to report the total number of individual homeowners assisted, which is lower than the reported program participation numbers when homeowners have participated in more than one program offered by their state.217 As of December 31, 2014, the states reported that 259,285 homeowners participated in HHF programs.218 However, because homeowners may participate in more than one program, the reported program participation numbers are higher than the total number of individual homeowners assisted. According to Treasury, 218,450 individual homeowners participated in HHF programs.219 Table 4.32 provides each state’s estimate of the number of homeowners it projects it will help and the actual number of homeowners helped as of December 31, 2014.xxii xxii P rogram participation and homeowners assisted data does not take into account the status of the mortgage (i.e., active, delinquent, in foreclosure, foreclosed, or sold) of homeowners who received TARP-funded HHF assistance. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 4.32 HHF ESTIMATED AND ACTUAL NUMBER OF BORROWERS ASSISTED AND ASSISTANCE PROVIDED BY STATE AS OF 12/31/2014 Estimated Number of Participating Households to be Assisted by 12/31/2017* Actual Borrowers Receiving Assistance as of 12/31/2014** Assistance Provided as of 12/31/2014** Alabama 6,600 3,789 $30,076,453 Arizona 7,606 3,533 113,905,156 California 67,970 46,018 883,892,322 Florida 39,000 21,300 462,745,870 Georgia 13,500 5,909 102,222,539 Illinois 13,500 13,722 317,075,342 Indiana 10,184 4,682 57,180,969 Kentucky 7,700 6,369 77,759,751 Michigan 9,444 24,568 189,051,984 Mississippi 3,500 2,984 43,746,075 Nevada 7,565 5,539 85,773,306 New Jersey 6,500 5,993 205,740,714 North Carolina 21,310 18,277 290,886,352 Ohio 41,201 24,214 388,133,464 Oregon 15,150 11,620 175,361,877 3,413 3,075 62,683,383 18,350 8,808 127,678,758 Tennessee 7,700 7,355 137,882,181 Washington, DC 1,300 695 13,423,877 301,493 218,450 $3,765,220,371 Recipient Rhode Island South Carolina Total Notes: Estimated includes highest estimate of a range. Program expenses obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. *Source: Estimates are from the latest HFA Participation Agreements as of 12/31/2014. Later amendments are not included for consistency with Quarterly Performance reporting. States report the Estimated Number of Participating Households individually for each HHF program they operate. This column shows the totals of the individual program estimates for each state. Therefore, according to Treasury, these totals do not necessarily translate into the number of unique households that the states expect to assist because some households may participate in more than one HHF program. **Sources: Treasury, response to SIGTARP data call, 4/6/2015; Fourth Quarter 2014 HFA Performance Data quarterly reports and Fourth Quarter 2014 HFA Aggregate Quarterly Report; Assistance provided excludes money spent on Blight Elimination. 191 192 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM State by State Updates Of the 19 states participating in HHF, over time all states have reduced their estimates of how many homeowners will participate in HHF, most of them significantly since their peak estimates. Collectively, since the peak in early 2011, the 19 states have reduced their estimates of how many people they would help by 45%. Six states have reduced their estimates by more than 50%: Alabama (51% reduction), Florida (63% reduction), Illinois (53% reduction), Michigan (81% reduction), Nevada (68% reduction), and Rhode Island (74% reduction). During the fourth quarter of 2014, two states—Georgia and Michigan—reduced their aggregate estimates of homeowners they would assist compared to the last quarter, while one state, Kentucky, increased its estimate. Collectively, as of December 31, 2014, the states have spent $3.8 billion on direct assistance to homeowners, or 50% of the $7.6 billion in TARP funds obligated to HHF.220,xxiii Of the 19 HHF states, Oregon has spent the highest percentage, 80%, of its obligated funds on homeowner assistance. Alabama has spent the lowest percentage, 19%. In addition to Alabama, two other states have spent 30% or less of their obligated funds on assistance to homeowners: Indiana and Georgia. For each of the states, the following pages review estimates of program participation and reported numbers of homeowners who have been assisted, as well as expenditures compared with obligated funds. According to Treasury, seven states are no longer accepting applications for assistance from homeowners because they determined that their allocated HHF funds would be spent on homeowners who already have been approved for HHF assistance.221 They include Tennessee, Rhode Island, Illinois, New Jersey, Oregon, Ohio, and Washington, DC. Rhode Island stopped accepting applications after January 31, 2013.222 Illinois stopped accepting applications after September 30, 2013.223 New Jersey stopped accepting applications after November 30, 2013.224 Washington, DC stopped accepting applications after November 22, 2013. Ohio stopped accepting new applications after April 30, 2014 and Oregon’s Homeownership Stabilization Initiative stopped accepting new applications after June 30, 2014. Tennessee stopped accepting applications as of September 30, 2014.225 Table 4.33 below provides a snapshot of states’ HHF activity by program type. xxiii According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 4.33 HHF ACTIVE PROGRAMS BY STATE, AS OF 12/31/2014 State Unemploymenta Transitionb Modificationc X X X ALABAMA Second Lien Reductiond ARIZONA X X X X CALIFORNIA X X X X Past-Due Paymente Blight Eliminationf Total Programs X 4 4 XX 6 FLORIDA X XX XX 5 GEORGIA X X X 3 ILLINOIS X XX X X X INDIANA X KENTUCKY X MICHIGAN X MISSISSIPPI X NEVADA XX NEW JERSEY X NORTH CAROLINA XX OHIO X OREGON X X 4 4 1 XX X X 5 1 X XXX X 7 1 X X X 4 XXX XXg XX X RHODE ISLAND X X XX X SOUTH CAROLINA X X X X X 8 4 5 X 5 TENNESSEE X 1 WASHINGTON, DC X 1 Total Programs Legend: X: XX: XXX: XXXX: 21 8 23 4 11 6 73 One program Two programs Three programs Four programs Notes: a Monthly subsidy that reduces the unemployment homeowner’s mortgage payment, in some cases paying it in full. b One-time benefit to help eligible homeowners relocate to new housing following a short sale or deed-in-lieu of foreclosure program. c One-time benefit that reduces the principal and/or improves the terms of the mortgage to reduce the homeowner’s payment to an affordable level. d One-time payment to incent servicers to extinguish 2nd mortgages or provide more affordable payments. e One-time benefit that pays off past due balances. f Programs that demolish vacant or condemned properties in order to stabilize home values and improve neighborhoods. g Previously classified as a modification program, The Homeownership Retention Assistance program was reclassified as a Past-Due Payment program in Treasury’s response to SIGTARP’s January 2015 data call. Source: Treasury, response to SIGTARP data call, 1/6/2015. 193 194 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM UPDATE ON THE HARDEST HIT FUND’S BLIGHT ELIMINATION PROGRAM TARP’s Hardest Hit Fund (“HHF”) was created by Treasury to help those states hardest hit by the financial crisis including states suffering high and sustained unemployment and significant home price declines.226 Treasury approved five categories of HHF assistance: (i) principal reduction; (ii) second-lien reduction or payoff; (iii) reinstatement through payment of past due amounts; (iv) unemployment or underemployment assistance; and (v) transition assistance such as a short sale, deed-in-lieu of foreclosure, or relocation assistance. As reported by SIGTARP, since 2010, the state-level programs approved by Treasury under HHF have primarily assisted homeowners in the two categories of unemployment assistance and reinstatement of past due amounts.xxiv HHF was slow in getting HHF assistance to homeowners, as reported in April 2012 in SIGTARP’s in-depth audit report.xxv Beginning in mid-2013, Treasury approved a sixth HHF category, the “Blight Elimination Program,” described by Treasury as the demolition and greening of certain vacant and abandoned singlefamily and multi-family structures.xxvi For more information on the Hardest Hit Fund’s Blight Elimination Program, see SIGTARP’s April 21, 2015, audit, “Treasury Should Do More to Increase the Effectiveness of the TARP Hardest Hit Fund Blight Elimination Program.” As of March 31, 2015, Treasury has approved the HHF Blight Elimination Program in six states: Michigan, Ohio, Indiana, Illinois, South Carolina, and Alabama. Treasury did not authorize new TARP funds for these states, but instead reallocated funds from the states’ other HHF programs. As highlighted in the table below, the Blight Elimination Program differs across states in terms of program eligibility (including definition of “blighted property”), activities covered (e.g. acquisition, demolition, greening, and maintenance), and per-property assistance amounts. A Shift in Approach Entailing New Risks Treasury’s Blight Elimination Program represents a significant shift in Treasury’s approach to the use of HHF and HHF funds. Previously, Treasury used HHF to make payments to homeowners or to mortgage servicers to help keep homeowners in their homes. Treasury’s Blight Elimination Program now allows for substantial payments of TARP funds to cities, counties, land banks, non-profit and for-profit partners, and other parties, including demolition contractors, in cash and mortgages that can be forgiven over time. For example, the HHF Blight Elimination Program provides up to $25,000 per property in Michigan, and up to $35,000 in Illinois and South Carolina. xxiv According to Treasury data, 79.5% of HHF assistance is distributed through unemployment and reinstatement programs. xxv SIGTARP, “Factors Affecting Implementation of the Hardest Hit Fund Program,” 4/12/2012, www.sigtarp.gov/Audit%20Reports/ SIGTARP_HHF_Audit.pdf. xxvi Treasury, Action Memorandum for Assistant Secretary Massad, Approval for HFA Hardest-Hit Fund Program Change Requests, 6/5/2013. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Given the nature of this TARP program, the limited performance history, and the very different set of risks involved in making large payments of taxpayer dollars to individual contractors and other parties not previously participating in a TARP program, Treasury cannot conduct the same type of oversight that it has used for programs that provide assistance to homeowners and mortgage servicers. Treasury must develop and implement new and appropriate oversight tools for the HHF Blight Elimination Program. States’ Reported Blight Elimination Program Activity Treasury requires states to report limited information on demolitions under the HHF Blight Elimination Program on a quarterly basis. These reports do not appear on Treasury’s website, but are instead hyperlinked to the states’ websites. These reports are one quarter behind. As of December 31, 2014, only Michigan, Ohio, and Indiana have reported Blight Elimination Program activity to Treasury. The other three states—Alabama, Illinois, and South Carolina—have not yet filed any Blight Elimination Program reports with Treasury. As of December 31, 2014, the HHF Blight Elimination Program already represented approximately 35% of the total HHF allocation in Michigan, 34% in Indiana, 15% in Alabama, 12% in South Carolina, 11% in Ohio, and 0.4% in Illinois. Treasury needs to identify, understand, and mitigate the new and different risks posed by using TARP taxpayer funds for the Blight Elimination program, especially as this program is likely to represent a growing portion of HHF. Taxpayers are entitled to transparency regarding how states are using these TARP funds. The information currently available to the public through Treasury on the use of these funds is scarce. SIGTARP is publishing on the following pages the limited, basic information made available on HHF state websites that the states reported to Treasury. Because these reports are one quarter behind (as of December 31, 2014), and given how quickly the states are committing HHF Blight Elimination Program funds, the reported information is supplemented with more recent data and reports gleaned from other public sources. 195 196 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM MICHIGAN Approved by Treasury: Q2 2013 Program Description:* “decreasing foreclosures and stabilizing neighborhoods through the demolition and greening of vacant and abandoned single-family and multi-family structures in designated areas across Michigan.” Initial Allocation: $100 Million (20% of total HHF allocation) (6/6/2013) Current Allocation: $175 Million (35% of total HHF allocation) Eligibility: Single-family (1-4 units) and multi-family (4+ units) Structure of Assistance: 0% 5-year loan secured by the property, forgiven at 20% per year Per Property Cap: $25,000; includes payoff of existing lien (if applicable); demolition costs, a $500 one-time project management fee, and a $750 maintenance fee Initial MI Estimate: 4,000 properties (6/6/2013) Current MI Estimate: 7,000 properties Cumulative Program Activity Reported by Michigan (as of 12/31/2014):** Applications Received: 6,828 Denied: 0 (0%); Approved: 1,887 (28%); In Process: 4,565 (67%); Withdrawn: 376 (6%) Total Assistance Provided: $22,795,284 Median Assistance Spent on Acquisition: $0 Median Assistance Spent on Demolition: $9,440 Median Assistance Spent on Greening: $1,250 Through December 31, 2014, the latest data available, Michigan reported to Treasury that it had spent $22,795,284 (13% of the $175 million allocated for blight elimination as of that date) to remove 1,887 properties—more than double the 816 reported removed as of the third quarter of 2014—yielding an average cost of demolition of $12,080 per property. Obtaining more current data is difficult, as there is no other statewide source of comprehensive data, and most participating cities and counties do not publish separate data. However, based on information available directly from the Detroit and Genesee County (Flint) land banks, which are designated partners for the HHF Blight Elimination Program in Michigan, actual demolitions to date have accelerated since the data available through the Treasury reports: those two cities, alone, report that at least 4,702 properties had been removed as of February 26, 2015xxvii—more than double the amount shown on the Treasury report for the entire state as of December 31, 2014. According to a third-party website, another city, Pontiac, reports having demolished 50 properties as of March 10, 2015.xxviii Treasury approved Michigan’s request to increase its Blight Elimination Program allocation from $100 million to $175 million on October 10, 2014, at which time Michigan also added 11 additional cities to the program: Ecorse, Highland Park, River Rouge, Ironwood, Muskegon Heights, Inkster, Jackson, Hamtramck, Port Huron, Adrian and Lansing. As of December 31, 2014, these additional jurisdictions had not yet been added to the state’s quarterly report to Treasury. xxvii The Detroit Land Bank reports 3,268 properties removed as of February 26, 2015 (www.buildingdetroit.org/wp-content/ uploads/2014/07/demolished-2_26_15.pdf, accessed 4/7/2015); the Genesee County Land Bank (Flint, MI) reports 1,434 properties removed as of January 27, 2015 (thelandbank.org/downloads/hhf_list_01272015.pdf, accessed 3/13/2015). xxviii ADR Consultants, LLC, “Hardest Hit Funds,” www.mlbdemo.us/Hardest_Hit_Funds.php, accessed 4/7/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 MICHIGAN HHF BLIGHT ELIMINATION PROGRAM PARTNERS AND DEMOLITION ACTIVITY AS OF 12/31/2014** Most Recent Quarter Cumulative Applications Submitted 5,631 6,828 Properties Demolished/Removed 1,019 1,887a Demolished in Most Recent Quarter Demolished, Cumulative City/County Partnerb Detroit Detroit Land Bank Authority 548 776 Flint Genesee County Land Bank Authority 405 684 Grand Rapids Kent County Land Bank Authority 8 59 Pontiac Michigan Land Bank Authority 0 0 Saginaw Saginaw Land Bank Authority 58 368 ichigan reports that the cumulative number of structures demolished/removed varies from the previous quarter because 52 structures reported demolished/removed in the 3rd M quarter 2014 were not included in that quarter’s summary (27 in Detroit, 13 in Flint, and 12 in Saginaw). b Michigan Homeowner Assistance Nonprofit Housing Corporation (MHA). a MICHIGAN HARDEST HIT FUND: HOMEOWNERS HELPED AND BLIGHTED PROPERTIES REMOVED AS REPORTED BY QUARTER 12,000 10,000 8,000 6,000 4,000 2,000 2,154 1,879 1,655 124 0 Q1'14 1,721 Q2'14 Blight Elimination Program, Properties Removed Other HHF Programs, Unique Homeowners Assisted 1,019 501 190 Q3'14 Q4'14 State Estimated Homeowner Program Participation Note: Estimated program participation shows the estimated number of program participants over the life of the program. However, unique homeowners assisted are displayed on a quarter to date basis. States report estimated participation individually for each HHF program they operate. Estimated program participation shows the aggregate estimate for each state. Therefore, these totals do not necessarily translate into the number of unique households that the states expect to assist because some households may participate in more than one HHF program. Source: Michigan Homeowner Assistance Nonprofit Housing Corporation, Hardest Hit U.S. Treasury Reports, Quarterly Performance Report Q4 2014, no date; Michigan Homeowner Assistance Nonprofit Housing Corporation, Eighth and Ninth Amendments to Agreements, 12/12/2013 and 10/10/2014. * Michigan Homeowner Assistance Nonprofit Housing Corporation, Seventh and Tenth Amendments to Agreements, 6/6/2013 and 3/6/2015. ** M ichigan Homeowner Assistance Nonprofit Housing Corporation, Hardest Hit U.S. Treasury Reports, Quarterly Performance Report Q4 2014, no date. 197 198 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM OHIO Approved by Treasury: Q3 2013 Program Description:* “stabilize property values by removing and greening vacant and abandoned properties in targeted areas to prevent future foreclosures for existing homeowners.” Allocation: $60 Million (11% of total HHF allocation)xxix Eligibility: 1-4 unit residential properties, as well as “mixed use” propertiesxxx Structure of Assistance: 0% 3-year loan secured by the property, forgiven at end of term OH Estimate: 5,000 properties Per Property Cap: $25,000; includes acquisition (if applicable), payoff of existing loan, approved demolition, remediation and greening of the site, maintenance and administration for up to 3 years Cumulative Program Activity Reported by Ohio (as of 12/31/2014):** Applications Received: 534 Denied: 0 (0%); Approved: 428 (80%); In Process: 103 (19%); Withdrawn: 3 (1%) Total Assistance Provided: $4,833,691 Median Assistance Spent on Acquisition: $0 Median Assistance Spent on Demolition: $8,195 Median Assistance Spent on Greening: $0xxxi As of the fourth quarter of 2014, besides Michigan, Ohio is the only other state to have reported completed demolitions to Treasury on their HHF Blight Elimination Program activities. As of December 31, 2014, Ohio reported that it had spent $4,833,691 (8% of the $60 million allocated for blight elimination as of that date) and removed 428 properties, nearly triple the 144 properties reported demolished as of the third quarter of 2014, for an average cost of $11,294 per property. As in Michigan, there is no other statewide source of comprehensive data on properties removed, and limited or no public reporting at the local level. In a departure from other states, Ohio allows “mixed use” properties to be demolished in their program, in addition to 1-4 unit residential properties. After having awarded $49.5 million to 11 HHF Blight Elimination Program partners across the state in February 2014, Ohio awarded its remaining blight allocation to 15 partners, including seven counties that had not previously received funding: Ashtabula, Belmont, Butler, Clark, Columbiana, Erie, and Fairfield.xxxii As of December 31, 2014, these additional jurisdictions had not yet been added to the state’s quarterly report to Treasury. xxix Treasury, response to SIGTARP data call, 4/6/2015. xxx Neighborhood Initiative Guidelines, 2/6/2015, ohiohome.org/savethedream/NeighborhoodInitiative-Guidelines.pdf, accessed 4/7/2015. xxxi Ohio reported a Median Assistance Spent on Greening of $0 in its Q4 2014 Quarterly Performance Report, but reported an average greening expense in a footnote disclosure of $84.40 for that quarter and $56.00 overall. According to Ohio, it changed its greening cost reporting as of 12/1/2014. xxxii O hio Housing Finance Agency, “OFHA Continues Efforts to Tackle Blighted Communities, Awards $10.4 Million to 15 Counties,” 8/21/2014, ohiohome.org/newsreleases/rlsNIPannouncement2.aspx, accessed 3/25/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 OHIO HHF BLIGHT ELIMINATION PROGRAM PARTNERS AND DEMOLITION ACTIVITY AS OF 12/31/2014** Most Recent Quarter Cumulative Applications Submitted 389 534 Properties Demolished/Removed 284 428 Demolished in Most Recent Quarter Demolished, Cumulative City/County Partnera Cuyahoga Cuyahoga County Land Reutilization Corp. 272 416 Franklin Central Ohio Community Improvement Corp. 0 0 Hamilton Port of Greater Cincinnati Development Authority 0 0 Jefferson Jefferson County Regional Planning Commission 0 0 Lake Lake County Land Reutilization Corp. 0 0 Lorain Lorain County Port Authority 0 0 Lucas Lucas County Land Reutilization Corp. 0 0 Mahoning Mahoning County Land Reutilization Corp. 0 0 Montgomery Montgomery County Land Reutilization Corp. 0 0 Richland Richland County Land Reutilization Corp. 0 0 Stark City of Canton 0 0 Summit Summit County Land Reutilization Corp. 0 0 Trumbull Trumbull County Land Reutilization Corp. 12 12 a hio Housing Finance Agency, “OFHA Awards 11 Counties a Portion of $49.5 Million to Tackle Blighted Communities,” 2/28/2014; ohiohome.org/newsreleases/ O rlsNIPannouncement.aspx, accessed 3/25/2015. OHIO HARDEST HIT FUND: HOMEOWNERS HELPED AND BLIGHTED PROPERTIES REMOVED AS REPORTED BY QUARTER 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 2,315 2,354 2,604 0 0 Q1'14 14 Q2'14 Blight Elimination Program, Properties Removed Other HHF Programs, Unique Homeowners Assisted 130 Q3'14 1,294 284 Q4'14 State Estimated Homeowner Program Participation Note: Estimated program participation shows the estimated number of program participants over the life of the program. However, unique homeowners assisted are displayed on a quarter to date basis. States report estimated participation individually for each HHF program they operate. Estimated program participation shows the aggregate estimate for each state. Therefore, these totals do not necessarily translate into the number of unique households that the states expect to assist because some households may participate in more than one HHF program. Source: Ohio Homeowner Assistance LLC, Save the Dream Ohio: Quarterly Reports, Quarterly Performance Report, Q4 2014, no date; Ohio Homeowner Assistance LLC, ninth through eleventh Amendment to Agreement, 12/12/2013, 2/27/2014, and 12/18/2014. * Ohio Homeowner Assistance LLC, Eleventh Amendment to Agreement, 12/18/2014. ** Ohio Homeowner Assistance LLC, Save the Dream Ohio: Quarterly Reports, Quarterly Performance Report, Q4 2014, no date. 199 200 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM INDIANA Approved by Treasury: Q4 2013 Program Description:* “decrease foreclosures, stabilize homeowner property values and increase neighborhood safety in communities across the state of Indiana through the demolition and greening of vacant, abandoned and blighted residential properties.” Allocation: $75 Million (34% of total HHF allocation) Eligibility: Single-family (1-4 units) and multi-family (4+ units) Structure of Assistance: 0% 3-year loan secured by the property, forgiven 33.3% per year Per Property Cap: $25,000; includes the costs of acquisition (if necessary), demolition and up to $1,000/year for property stabilization for a period of 3 years IN Estimate: 3,000-5,000 properties Cumulative Program Activity Reported by Indiana (as of 12/31/2014):** Applications Received: 2,755 Denied: 0 (0%); Approved: 0 (0%); In Process: 872 (32%); Withdrawn: 0 (0 %) Total Assistance Provided: $0 Median Assistance Spent on Acquisition: $0 Median Assistance Spent on Demolition: $0 Median Assistance Spent on Greening: $0 As of December 31, 2014, Indiana reports it had not expended any of the $75 million blight elimination allocation approved by Treasury, and had not removed any properties as of that date. While Indiana’s Blight Elimination report to Treasury reveals no actual demolitions as of the end of 2014, state HHF reports to Treasury are one quarter behind. According to an Indiana state press release, Fort Wayne demolished its first property under the Blight Elimination Program in early March 2015, among the first in the state.xxxiii xxxiii Press Release, “Lt. Governor Joins City and State Officials for Blight Elimination Program Demolition in Fort Wayne, 3/13/2015, www.in.gov/activecalendar/EventList.aspx?view=EventDetails&eventidn=213222&information_id=212197&type=&syndicate=syn dicate, accessed 3/27/2015. 201 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 INDIANA HHF BLIGHT ELIMINATION PROGRAM AND DEMOLITION ACTIVITY AS OF 12/31/2014** Applications Submitted Properties Demolished/Removed Most Recent Quarter Cumulative 872 2,755 0 0 Demolished in Most Recent Quarter Demolished, Cumulative City/County Partner City of Alexandria Unavailable 0 0 City of Anderson Unavailable 0 0 City of Arcadia Unavailable 0 0 City of Auburn Unavailable 0 0 City of Bicknell Unavailable 0 0 City of Brazil Unavailable 0 0 City of Coatesville Unavailable 0 0 City of Columbus Unavailable 0 0 City of Connersville Unavailable 0 0 City of Delphi Unavailable 0 0 City of Dunkirk Unavailable 0 0 City of East Chicago Unavailable 0 0 City of Elwood Unavailable 0 0 City of Evansville Unavailable 0 0 City of Fort Wayne Unavailable 0 0 City of Garrett Unavailable 0 0 City of Gary Unavailable 0 0 City of Hammond Unavailable 0 0 City of Hartford City Unavailable 0 0 City of Indianapolis Unavailable 0 0 City of Knox Unavailable 0 0 City of Kokomo Unavailable 0 0 City of Lawrence Unavailable 0 0 City of Logansport Unavailable 0 0 City of Marion Unavailable 0 0 City of Montpelier Unavailable 0 0 City of Muncie Unavailable 0 0 City of New Castle Unavailable 0 0 City of Peru Unavailable 0 0 City of Richmond Unavailable 0 0 City of Rising Sun Unavailable 0 0 City of Rushville Unavailable 0 0 City of Seymour Unavailable 0 0 Continued on next page 202 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM INDIANA HHF BLIGHT ELIMINATION PROGRAM PARTNERS AND DEMOLITION ACTIVITY AS OF 12/31/2014 (CONTINUED) Demolished in Most Recent Quarter Demolished, Cumulative City/County Partner City of South Bend Unavailable 0 0 City of Terre Haute Unavailable 0 0 City of Vincennes Unavailable 0 0 City of Washington Unavailable 0 0 County of Dearborn Unavailable 0 0 County of Elkhart Unavailable 0 0 County of Gibson Unavailable 0 0 County of Greene Unavailable 0 0 County of Posey Unavailable 0 0 County of Pulaski Unavailable 0 0 County of Sullivan Unavailable 0 0 County of Vigo Unavailable 0 0 County of Warrick Unavailable 0 0 Noble County /Kendallville Unavailable 0 0 Shelby County/City of Shelbyville Unavailable 0 0 Town of Cambridge City Unavailable 0 0 Town of Daleville Unavailable 0 0 Town of Richland City Unavailable 0 0 Town of Silver Lake Unavailable 0 0 Town of St. Joe Unavailable 0 0 Town of Waterloo Unavailable 0 0 *Indiana Housing and Community Development Authority, Ninth Amendment to Agreement, 7/31/2014. **Indiana Housing and Community Development Authority, Indiana’s Hardest Hit Fund, Quarterly Reports to the U.S. Treasury, Quarterly Performance Report, Q4 2014, no date. Sum of applications reported denied, approved, withdrawn and in process does not total the aggregate number of applications received reported by Indiana. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 ILLINOIS Approved by Treasury: Q2 2014 Program Description:* “to decrease preventable foreclosures through neighborhood stabilization achieved through the demolition and greening of vacant, abandoned and blighted residential properties throughout Illinois. Such vacant, abandoned and blighted residential properties will be returned to use through a process overseen by approved units of government and their not-for-profit partner(s).” Allocation: $1.9 Million (0.4% of total HHF allocation) Eligibility: 1-4 unit residential structures Structure of Assistance: 0% 3-year loan secured by the property, forgiven one-third per year Per Property Cap: $35,000, which may include the following on a per unit basis (if applicable): acquisition, closing costs, demolition, lot treatment/greening, $3,000 flat fee for maintenance, and up to $1,750 for administrative expenses. IL Estimate: 50 properties Cumulative Program Activity Reported by Illinois (as of 12/31/2014):** Illinois has not filed a Blight Elimination program activity report with Treasury. * Treasury, response to SIGTARP data call, 4/6/2015; Illinois Housing Development Authority, Tenth Amendment to Agreement, 4/11/2014. **Illinois Housing Development Authority, Illinois Hardest Hit Program, Reporting, Quarterly Performance Report, Q4 2014, no date. ALABAMA Approved by Treasury: Q3 2014 Program Description:* “reduce foreclosures, promote neighborhood stabilization and maintain property values through the removal of unsafe condemned single family structures and subsequent greening in areas across the State of Alabama.” Allocation: $25 Million (15% of total HHF allocation) Eligibility: 1-4 unit residential properties, owned by an Affiliate of Alabama Assoc. of Habitat for Humanity Affiliates Structure of Assistance: 0% loan secured by the property, forgiven at 33.3% per year Per Property Cap: $25,000; including demolition, greening and maintenance (not to exceed $3,000) for 3-years AL Estimate: 1,000 properties Partners: The Alabama Association of Habitat for Humanity Affiliates will administer the program, working in partnership with its members (Affiliates) Cumulative Program Activity Reported by Alabama (as of 12/31/2014):** Alabama has not filed a Blight Elimination program activity report with Treasury. * Alabama Housing Finance Authority, Ninth Amendment to Agreement, 1/31/2015. ** Alabama Housing Finance Authority, Treasury Reports, Quarterly Performance Report, Q4 2014, no date. 203 204 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SOUTH CAROLINA Approved by Treasury: Q3 2014 Program Description:* “decrease foreclosures and stabilize homeowner property values in communities across South Carolina through the demolition of vacant, abandoned, and blighted residential structures, and subsequent greening/improvement.” Allocation: $35 Million (12% of total HHF allocation) Eligibility: Single-family (1-4 units) and multi-family (4+ units) Structure of Assistance: 0% 3-year loan secured by the property, forgiven at one-third per year Per Property Cap: $35,000; includes acquisition costs (if applicable); demolition and greening/ improvement costs; and a $2,000 one-time project management and maintenance fee to cover management and maintenance expenses for a period of three (3) years. SC Estimate: 1,000-1,300 properties Cumulative Program Activity Reported by South Carolina (as of 12/31/2014):** South Carolina has not filed a Blight Elimination program activity report with Treasury. *SC Housing Corp., Seventh Amendment to Agreement, 7/31/2014. **SC Housing Corp., SC HELP, Reports, Quarterly Performance Reports, Q4 2014, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Alabama’s HHF Programs Treasury obligated $162,521,345 in HHF funds to Alabama.227 At the end of 2010, Alabama estimated that it would help as many as 13,500 with HHF but, as of December 31, 2014, had reduced that peak estimate 51% to 6,600 homeowners. As of December 31, 2014, Alabama has four active HHF programs, one to provide unemployment assistance to homeowners, a second to modify homeowners’ mortgages, a third to provide HHF transition assistance to homeowners, and a fourth for blight elimination. As of December 31, 2014, Alabama has helped 3,789 individual homeowners with HHF programs, almost all of them with the Unemployed Homeowners Program.228 Alabama’s Short Sale program, launched in March 2013 has not helped a single homeowner during its nearly two-year history. Its Loan Modification Program has helped just 11 homeowners since it began in March 2013. In addition to decreasing the number of homeowners it estimated helping with HHF, Alabama has shifted $25 million of its HHF funds (15%) away from existing HHF programs to blight elimination. This represents a shift from making payments directly to homeowners or their mortgage servicers to help keep homeowners in their homes. Treasury’s Blight Elimination Program allows for substantial payment of TARP funds to land banks, non-profits and other parties, including demolition contractors, in cash and mortgages that can be forgiven over time. As of December 31, 2014, Alabama has only spent 19% of its HHF funds to help homeowners, the lowest amount of any state in the HHF program.229 The state had drawn down $40 million (25%) of those funds as of December 31, 2014, the most recent data available, and spent $30.1 million (19% of its obligated funds).230,xxxiv,xxxv The remaining $7.4 million (5%) was spent on administrative expenses, and $3 million (2%) is held as cash-on-hand.231,xxxvi No HHF funds have yet been spent on the Blight Elimination Program. Figure 4.13 shows, in aggregate, the number of homeowners estimated to participate in Alabama’s programs (estimated program participation), the reported number of homeowners who participated in one or more programs (program participation), and the total number of individual homeowners assisted, as of December 31, 2014. Because homeowners may participate in more than one program, the reported program participation numbers can be higher than the total number of individual homeowners assisted. Figure 4.14 shows the number of homeowners estimated to participate in each of Alabama’s programs (estimated program participation) and the reported number of homeowners who participated in each of Alabama’s programs (program participation), as of December 31, 2014. xxxiv Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, Alabama had drawn down $40 million. xxxv A ccording to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. xxxvi Figures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. FIGURE 4.12 AL HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 0.2% 99.8% Unemployment ($26,333,869) Transition ($0) Modification ($40,413) Blight ($0) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: Alabama Housing Finance Authority, Treasury Reports, Quarterly Performance Report Q4 2014, no date. 205 206 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.13 ALABAMA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 12/31/2014 15,000 Peak estimate: 13,500 12/31/2014 estimate: 6,600 12/31/2014 program participation: 3,791 Homeowners assisted: 3,789 12,000 9,000 6,000 3,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 State Estimated Program Participation Q3 2012 Q4 Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Homeowners Assisted Program Participation Notes: Estimated includes highest estimate of a range. For its “Blight Elimination Program” (Blight), Alabama estimated a number of blighted properties proposed to be eliminated. This number is not included in the aggregate estimate of all programs because it refers to properties and not homeowners. Sources: States provide estimates for program participation and report program participation and homeowners assisted numbers. Alabama Housing Finance Authority, Proposal, 8/31/2010; Treasury and Alabama Housing Finance Authority, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 9/23/2010; Alabama Housing Finance Authority, first through eighth Amendment[s] to Agreement[s], 9/29/2010, 12/16/2010, 1/26/2011, 3/31/2011, 5/25/2011, 6/28/2012, 3/8/2013, and 9/3/2014; Alabama Housing Finance Authority, Treasury Reports, Quarterly Performance Reports Q1 2011 - Q4 2014, no date. 207 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.14 ALABAMA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 12/31/2014 HARDEST HIT FOR ALABAMA'S UNEMPLOYED HOMEOWNERS (UNEMPLOYMENT) SHORT SALE ASSISTANCE PROGRAM (TRANSITION) Program approved: September 2010 Peak estimate: 13,500 12/31/14 estimate: 5,000 12/31/14 program participation: 3,780 15,000 12,000 9,000 1,600 Program approved: March 2013 Peak estimate: 1,500 12/31/14 estimate: 400 12/31/14 program participation: 0 1,200 800 6,000 400 3,000 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation Q2 Q3 Q4 2014 Program Participation BLIGHT ELIMINATION PROGRAM (BLIGHT) 1,000 Program approved: March 2013 Peak estimate: 1,200 12/31/14 estimate: 1,200 12/31/14 program participation: 11 1,200 Q2 2010 LOAN MODIFICATION ASSISTANCE PROGRAM (MODIFICATION) 1,600 Q1 2014 800 Program approved: September 2014 12/31/14 blighted homes proposed to be eliminated: 1,000 12/31/14 actual blighted homes eliminated: 0 600 800 400 400 200 0 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 2014 Program Participation Q4 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Notes: Programs may have been started or ended at different times. Estimated includes highest estimate of a range. For its “Blight Elimination Program” (Blight), Alabama estimated a number of blighted properties proposed to be eliminated. This number is not included in the aggregate estimate of all programs because it refers to properties and not homeowners. Sources: States provide estimates for program participation and report program participation numbers. Alabama Housing Finance Authority, Proposal, 8/31/2010; Treasury and Alabama Housing Finance Authority, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 9/23/2010; Alabama Housing Finance Authority, first through eighth Amendment[s] to Agreement[s], 9/29/2010, 12/16/2010, 1/26/2011, 3/31/2011, 5/25/2011, 6/28/2012, 3/8/2013, and 9/3/2014; Alabama Housing Finance Authority, Treasury Reports, Quarterly Performance Reports Q1 2011 - Q4 2014, no date. 208 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Arizona’s HHF Programs FIGURE 4.15 AZ HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 1% 56% 36% 7% Modification ($48,424,045) Second-Lien Reduction ($6,257,793) Unemployment ($31,695,896) Transition ($643,881) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: Arizona (Home) Foreclosure Prevention Funding Corporation, Hardest Hit Fund Reporting (quarterly performance reports), Quarterly Performance Report Q4 2014, no date. Treasury obligated $267,766,006 in HHF funds to Arizona.232 At the end of 2010, Arizona estimated that it would help as many as 11,959 homeowners with HHF but, as of December 31, 2014, had reduced that peak estimate by 36%, to 7,606. As of December 31, 2014, Arizona had four active HHF programs: one to modify homeowners’ mortgages with principal reduction assistance, a second to provide HHF second-lien reduction assistance, a third to provide unemployment assistance, and a fourth to provide transition assistance to homeowners. As of December 31, 2014, Arizona has helped 3,533 homeowners with its HHF programs, with the largest numbers in the unemployment/underemployment and the principal reduction assistance programs.233 As of December 31, 2014, the state had drawn down $155.8 million (58%) of its HHF funds.234,xxxvii As of December 31, 2014, the most recent data available, Arizona had spent $113.9 million (43% of its obligated funds) to help individual homeowners with its HHF programs.235,xxxviii The remaining $15.9 million (6%) was spent on administrative expenses, and $26.5 million (10%) is held as cash-on-hand.236,xxxix Figure 4.16 shows, in aggregate, the number of homeowners estimated to participate in Arizona’s programs (estimated program participation), the reported number of homeowners who participated in one or more programs (program participation), and the total number of individual homeowners assisted, as of December 31, 2014. Because homeowners may participate in more than one program, the reported program participation numbers are higher than the total number of individual homeowners assisted. Figure 4.17 shows the number of homeowners estimated to participate in each of Arizona’s programs (estimated program participation) and the reported number of homeowners who participated in each of Arizona’s programs (program participation), as of December 31, 2014. xxxvii Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, Arizona had drawn down $155.8 million. xxxviii According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. xxxix F igures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.16 ARIZONA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 12/31/2014 12,000 10,000 8,000 6,000 Peak estimate: 11,959 12/31/2014 estimate: 7,606 12/31/2014 program participation: 3,814 Homeowners assisted: 3,533 4,000 2,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 State Estimated Program Participation Q3 2012 Q4 Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Homeowners Assisted Program Participation Notes: Estimated includes highest estimate of a range. Program participation numbers may have double-counted individual homeowners who received assistance from more than one program in states that have more than one program. Sources: States provide estimates for program participation and report program participation and homeowners assisted numbers. Arizona (Home) Foreclosure Prevention Funding Corporation, Proposal, no date; Treasury and Arizona (Home) Foreclosure Prevention Funding Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 6/23/2010; Arizona (Home) Foreclosure Prevention Funding Corporation, first through fourteenth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 1/26/2011, 3/31/2011, 5/25/2011, 8/31/2011, 3/29/2012, 7/17/2012, 8/24/2012, 6/6/2013, 10/30/2013, 2/27/2014, and 10/10/2014; Arizona (Home) Foreclosure Prevention Funding Corporation, Hardest Hit Fund Reporting (quarterly performance reports), Quarterly Performance Reports Q3 2010 - Q4 2014, no date; Treasury, responses to SIGTARP data calls, 10/3/2013 and 10/7/2013. 209 210 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.17 ARIZONA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 12/31/2014 PRINCIPAL REDUCTION ASSISTANCE (MODIFICATION) SECOND MORTGAGE ASSISTANCE COMPONENT (SECOND-LIEN REDUCTION) Program approved: June 2010 Peak estimate: 7,227 12/31/14 estimate: 1,849 12/31/14 program participation: 914 8,000 6,000 1,500 4,000 1,000 2,000 500 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 4,000 3,000 Q1 2014 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation UNEMPLOYMENT/UNDEREMPLOYMENT/ REINSTATEMENT MORTGAGE ASSISTANCE COMPONENT (UNEMPLOYMENT) 5,000 Program approved: June 2010 Peak estimate: 1,875 12/31/14 estimate: 1,279 12/31/14 program participation: 218 2,000 Q2 Q3 Q4 2014 Program Participation SHORT SALE ASSISTANCE COMPONENT (TRANSITION) Program approved: June 2010 Peak estimate: 4,140 12/31/14 estimate: 4,140 12/31/14 program participation: 2,569 1,200 Program approved: May 2011 Peak estimate: 1,200 12/31/14 estimate: 338 12/31/14 program participation: 113 900 600 2,000 300 1,000 0 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 Q1 2014 Program Participation Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Notes: Programs may have been started or ended at different times. Estimated includes highest estimate of a range. Sources: States provide estimates for program participation and report program participation numbers. Arizona (Home) Foreclosure Prevention Funding Corporation, Proposal, no date; Treasury and Arizona (Home) Foreclosure Prevention Funding Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 6/23/2010; Arizona (Home) Foreclosure Prevention Funding Corporation, first through fourteenth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 1/26/2011, 3/31/2011, 5/25/2011, 8/31/2011, 3/29/2012, 7/17/2012, 8/24/2012, 6/6/2013, 10/30/2013, 2/27/2014, and 10/10/2014; Arizona (Home) Foreclosure Prevention Funding Corporation, Hardest Hit Fund Reporting (quarterly performance reports), Quarterly Performance Reports Q3 2010 - Q4 2014, no date; Treasury, responses to SIGTARP data calls, 10/3/2013 and 10/7/2013. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 California’s HHF Programs Treasury obligated $1,975,334,096 in HHF funds to California.237 At the end of 2010, California estimated that it would help as many as 101,337 homeowners with HHF but, as of December 31, 2014, had reduced that peak estimate by 33%, to 67,970. As of December 31, 2014, California had six active HHF programs: one to provide unemployment assistance to homeowners, a second to modify homeowners’ mortgages with principal reduction assistance, a third to provide HHF transition assistance to homeowners, a fourth and a fifth to provide pastdue payment assistance to homeowners, and a sixth to provide HHF second-lien assistance to homeowners. As of December 31, 2014, California has defunded two HHF programs: the NeighborWorks Sacramento Short Sale Gateway Program (September 2013) and the Los Angeles Housing Department Principal Reduction Program (February 2014).238 Both programs ended without helping a single homeowner. As of December 31, 2014, California has helped 46,018 individual homeowners, with the largest number in unemployment and past due payment assistance.239 As of December 31, 2014, California had drawn down $1,217.5 million (62%) of its HHF funds.240,xl As of December 31, 2014, California had spent $883.9 million (45% of its obligated funds) to help individual homeowners with its HHF programs.241,xli The remaining $97.6 million (5%) was spent on administrative expenses, and $256.5 million (13%) is held as cash-on-hand.242,xlii Figure 4.19 shows, in aggregate, the number of homeowners estimated to participate in California’s programs (estimated program participation), the reported number of homeowners who participated in one or more programs (program participation), and the total number of individual homeowners assisted, as of December 31, 2014. Because homeowners may participate in more than one program, the reported program participation numbers are higher than the total number of individual homeowners assisted. Figure 4.20 shows the number of homeowners estimated to participate in each of California’s programs (estimated program participation) and the reported number of homeowners who participated in each of California’s programs (program participation), as of December 31, 2014. xl Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, California had drawn down $1,217.5 million. xli According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. xlii Figures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. FIGURE 4.18 CA HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 0.1% 0.3% 12% 54.3% 33.3% Unemployment ($480,238,149) Modification ($294,382,284) Past-Due Payment ($106,052,341) Transition ($2,827,169) Second-Lien Reduction ($589,210) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: CalHFA Mortgage Assistance Corporation, “Keep Your Home California, Reports & Statistics, Quarterly Reports,” Quarterly Performance Reports Q4 2014, no date. 211 212 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.19 CALIFORNIA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 12/31/2014 120,000 100,000 80,000 60,000 Peak estimate: 101,337 12/31/2014 estimate: 67,970 12/31/2014 program participation: 50,006 Homeowners assisted: 46,018 40,000 20,000 0 Q1 Q2 Q3 Q4 Q1 Q2 2010 Q3 Q4 Q1 2011 State Estimated Program Participation Q2 Q3 2012 Q4 Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Homeowners Assisted Program Participation Notes: Estimated includes highest estimate of a range. Program participation numbers may have double-counted individual homeowners who received assistance from more than one program in states that have more than one program. Sources: States provide estimates for program participation and report program participation and homeowners assisted numbers. CalHFA Mortgage Assistance Corporation, Proposal, no date; Treasury and CalHFA Mortgage Assistance Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 6/23/2010; CalHFA Mortgage Assistance Corporation, first through fifteenth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 3/31/2011, 8/3/2011, 10/28/2011, 5/3/2012, 7/17/2012, 12/14/2012, 6/6/2013, 9/20/2013, 2/27/2014, 4/11/2014, 9/3/2014, and 11/13/2014; CalHFA Mortgage Assistance Corporation, “Keep Your Home California, Reports & Statistics, Quarterly Reports,” Quarterly Performance Reports Q4 2010 Q4 2014, no date. 213 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.20 CALIFORNIA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 12/31/2014 UNEMPLOYMENT MORTGAGE ASSISTANCE PROGRAM (UNEMPLOYMENT) Program approved: June 2010 Peak estimate: 60,531 12/31/14 estimate: 42,000 12/31/14 program participation: 36,326 75,000 60,000 MORTGAGE REINSTATEMENT ASSISTANCE PROGRAM (PAST-DUE PAYMENT) Program approved: June 2010 Peak estimate: 17,293 12/31/14 estimate: 9,200 12/31/14 program participation: 7,918 20,000 15,000 45,000 10,000 30,000 5,000 15,000 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 Q2 2011 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 20,000 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation Q2 Q3 Q4 2014 Program Participation TRANSITION ASSISTANCE PROGRAM (TRANSITION) Program approved: June 2010 Peak estimate: 6,471 12/31/14 estimate: 1,500 12/31/14 program participation: 793 10,000 Program approved: June 2010 Peak estimate: 25,135 12/31/14 estimate: 13,500 12/31/14 program participation: 4,935 25,000 Q2 2010 PRINCIPAL REDUCTION PROGRAM (MODIFICATION) 30,000 Q1 2014 8,000 6,000 15,000 4,000 10,000 2,000 5,000 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 Q2 2011 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q1 2014 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation Q2 Q3 Q4 2014 Program Participation LOS ANGELES HOUSING DEPARTMENT PRINCIPAL REDUCTION PROGRAM (MODIFICATION) 500 200 375 150 Program ended: February 2014 Peak estimate: 166 12/31/14 estimate: 0 12/31/14 program participation: 0 100 Program approved: August 2011 Peak estimate: 370 12/31/14 estimate: 370 12/31/14 program participation: 34 125 Q3 2010 COMMUNITY SECOND MORTGAGE PRINCIPAL REDUCTION PROGRAM (SECOND-LIEN REDUCTION) 250 Q2 50 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 Q2 2011 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q1 2014 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation Q2 Q3 Q4 2014 Program Participation REVERSE MORTGAGE ASSISTANCE PILOT PROGRAM (PAST-DUE PAYMENT) 100 2,000 75 1,500 Program ended: September 2013 Peak estimate: 91 12/31/14 estimate: 0 12/31/14 program participation: 0 25 Q3 2010 NEIGHBORWORKS SACRAMENTO SHORT SALE GATEWAY PROGRAM (TRANSITION) 50 Q2 Program approved: September 2014 Peak estimate: 1,400 12/31/14 estimate: 1,400 12/31/14 program participation: 0 1,000 500 0 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 Q1 2014 Program Participation Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Notes: Programs may have been started or ended at different times. Estimated includes highest estimate of a range. Sources: States provide estimates for program participation and report program participation numbers. CalHFA Mortgage Assistance Corporation, Proposal, no date; Treasury and CalHFA Mortgage Assistance Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 6/23/2010; CalHFA Mortgage Assistance Corporation, first through fifteenth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 3/31/2011, 8/3/2011, 10/28/2011, 5/3/2012, 7/17/2012, 12/14/2012, 6/6/2013, 9/20/2013, 2/27/2014, 4/11/2014, 9/3/2014, and 11/13/2014; CalHFA Mortgage Assistance Corporation, “Keep Your Home California, Reports & Statistics, Quarterly Reports,” Quarterly Performance Reports Q4 2010 - Q4 2014, no date; Treasury, response to SIGTARP data call, 10/3/2013. 214 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Florida’s HHF Programs FIGURE 4.21 FL HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 27% 41% 32% Past-Due Payment ($126,363,014) Unemployment ($147,483,162) Modification ($188,919,555) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: Housing Finance Corporation, Florida Hardest Hit Fund (HHF) Information, Quarterly Reports, Quarterly Performance Report Q4 2014, no date. Treasury obligated $1,057,839,136 of HHF funds to Florida.243 At the start of 2011, Florida estimated that it would help as many as 106,000 homeowners with HHF but, as of December 31, 2014, had reduced that peak estimate by 63%, to 39,000. As of December 31, 2014, Florida had five active HHF programs: one to provide unemployment assistance to homeowners, a second and third to provide past-due payment assistance to homeowners, and a fourth and fifth to modify homeowners’ mortgages. As of December 31, 2014, Florida has helped 21,300 individual homeowners with its HHF programs, with the largest numbers in the unemployment and reinstatement programs.244 The state’s Modification Enabling Program, approved in April 2013, had only assisted 71 homeowners as of December 31, 2014, in the year and a half of its existence. As of December 31, 2014, the state had drawn down $596.3 million (56%) of its HHF funds.245,xliii As of December 31, 2014, the most recent data available, Florida had spent $462.7 million (44% of its obligated funds) to help individual homeowners with its HHF programs.246,xliv The remaining $49.6 million (5%) was spent on administrative expenses, and $86.1 million (8%) is held as cash-on-hand.247,xlv Figure 4.22 shows, in aggregate, the number of homeowners estimated to participate in Florida’s programs (estimated program participation), the reported number of homeowners who participated in one or more programs (program participation), and the total number of individual homeowners assisted, as of December 31, 2014. Because homeowners may participate in more than one program, the reported program participation numbers are higher than the total number of individual homeowners assisted. Figure 4.23 shows the number of homeowners estimated to participate in each of Florida’s programs (estimated program participation) and the reported number of homeowners who participated in each of Florida’s programs (program participation), as of December 31, 2014. xliii Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, Florida had drawn down $596.3 million. xliv A ccording to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. xlv Figures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.22 FLORIDA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 12/31/2014 120,000 100,000 80,000 Peak estimate: 106,000 12/31/2014 estimate: 39,000 12/31/2014 program participation: 33,283 Homeowners assisted: 21,300 60,000 40,000 20,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 State Estimated Program Participation Q3 2012 Q4 Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Homeowners Assisted Program Participation Notes: Estimated includes highest estimate of a range. Program participation numbers may have double-counted individual homeowners who received assistance from more than one program in states that have more than one program. Sources: States provide estimates for program participation and report program participation and homeowners assisted numbers. Florida Housing Finance Corporation, Proposal, no date; Treasury and Florida Housing Finance Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 6/23/2010; Florida Housing Finance Corporation, first through ninth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 3/31/2011, 5/30/2012, 9/28/2012, 5/25/2013, 9/20/2013, and 7/11/2014; Florida Housing Finance Corporation, Florida Hardest Hit Fund (HHF) Information, Quarterly Reports, Quarterly Performance Reports Q3 2010 - Q4 2014, no date; Treasury, response to SIGTARP data call, 10/3/2013. 215 216 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.23 FLORIDA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 12/31/2014 UNEMPLOYMENT MORTGAGE ASSISTANCE PROGRAM (UNEMPLOYMENT) Program approved: June 2010 Peak estimate: 53,000 12/31/14 estimate: 25,000* 12/31/14 program participation: 14,530 60,000 50,000 MORTGAGE LOAN REINSTATEMENT PROGRAM (PAST-DUE PAYMENT) 60,000 50,000 40,000 40,000 30,000 30,000 20,000 20,000 10,000 10,000 0 Program approved: December 2010 Peak estimate: 53,000 12/31/14 estimate: 25,000* 12/31/14 program participation: 13,773 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q1 2014 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 MODIFICATION ENABLING PILOT PROGRAM (MODIFICATION) Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation Q2 Q2 Q3 Q4 2014 Program Participation PRINCIPAL REDUCTION PROGRAM (MODIFICATION) 2,000 10,000 8,000 Program approved: April 2013 Peak estimate: 1,500 12/31/14 estimate: 1,500 12/31/14 program participation: 71 1,500 1,000 Program approved: September 2013 Peak estimate: 10,000 12/31/14 estimate: 10,000 12/31/14 program participation: 4,508 6,000 4,000 500 2,000 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q1 2014 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation ELDERLY MORTGAGE ASSISTANCE PROGRAM (PAST-DUE PAYMENT) 2,500 2,000 Program approved: September 2013 Peak estimate: 2,500 12/31/14 estimate: 2,500 12/31/14 program participation: 401 1,500 1,000 500 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Notes: Programs may have been started or ended at different times. Estimated includes highest estimate of a range. *Florida estimates that it will serve approximately 25,000 homeowners in the aggregate between its Unemployment Mortgage Assistance Program and its Mortgage Loan Reinstatement Program. Sources: States provide estimates for program participation and report program participation numbers. Florida Housing Finance Corporation, Proposal, no date; Treasury and Florida Housing Finance Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 6/23/2010; Florida Housing Finance Corporation, first through ninth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 3/31/2011, 5/30/2012, 9/28/2012, 5/25/2013, 9/20/2013, and 7/11/2014; Florida Housing Finance Corporation, Florida Hardest Hit Fund (HHF) Information, Quarterly Reports, Quarterly Performance Reports Q3 2010 - Q4 2014, no date; Treasury, response to SIGTARP data call, 10/3/2013. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Georgia’s HHF Programs Treasury obligated $339,255,819 in HHF funds to Georgia.248 At the end of 2010, Georgia estimated that it would help as many as 18,300 homeowners with HHF but, as of December 31, 2014, had reduced that peak estimate by 26%, to 13,500. As of December 31, 2014, Georgia had three active HHF programs: one to provide unemployment assistance to homeowners, a second to provide past-due payment assistance to homeowners, and a third to modify homeowners’ mortgages. As of December 31, 2014, Georgia has helped 5,909 individual homeowners with its HHF program, the vast majority with the unemployment program.249 As of December 31, 2014, the state had drawn down $144.4 million (43%) of its HHF funds.250,xlvi As of December 31, 2014, the most recent data available, Georgia had spent $102.2 million (30% of its obligated funds) to help individual homeowners with its HHF programs.251,xlvii The remaining $19.6 million (6%) was spent on administrative expenses, and $23.1 million (7%) is held as cash-on-hand.252,xlviii Figure 4.25 shows the number of homeowners estimated to participate in Georgia’s program and the number of homeowners who have been assisted, as of December 31, 2014. Figure 4.26 shows the number of homeowners estimated to participate in each of Georgia’s programs (estimated program participation) and the reported number of homeowners who participated in each of Georgia’s programs (program participation), as of December 31, 2014. FIGURE 4.24 GA HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 0.2% 0.3% 99.5% Unemployment ($101,702,719) Past-Due Payment ($306,090) Modification ($215,091) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: GHFA Affordable Housing Inc., HomeSafe Georgia, US Treasury Reports, Quarterly Performance Report Q4 2014, no date. xlvi Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, Georgia had drawn down $194 million. xlvii A ccording to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. xlviii Figures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. 217 218 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.25 GEORGIA’S ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 12/31/2014 20,000 15,000 Peak estimate: 18,300 12/31/2014 estimate: 13,500 12/31/2014 program participation: 5,912 Homeowners assisted: 5,909 10,000 5,000 0 Q1 Q210 Q2 Q310 Q3 Q410 Q4 Q111 Q1 Q211 Q2 Q311 Q3 Q411 Q4 Q112 Q1 Q212 Q2 Q312 Q3 Q412 Q4 Q113 Q1 Q213 Q2 Q313 Q3 Q413 Q4 Q114 Q1 Q214 Q2 Q314 Q3 Q414 Q4 Q110 2010 2011 2012 State Estimated Program Participation 2013 2014 Homeowners Assisted Program Participation Notes: Estimated includes highest estimate of a range. Sources: States provide estimates for program participation and homeowners assisted numbers. GHFA Affordable Housing Inc., Proposal, no date; Treasury and GHFA Affordable Housing Inc., Commitment to Purchase Financial Instrument and HFA Participation Agreement, 9/23/2010; GHFA Affordable Housing Inc., first through seventh Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 6/28/2011, 5/3/2012, 12/12/2013, 1/31/2014, and 10/10/2014; GHFA Affordable Housing Inc., HomeSafe Georgia, US Treasury Reports, Quarterly Performance Reports Q4 2010 - Q4 2014, no date. 219 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.26 GEORGIA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 12/31/2014 MORTGAGE PAYMENT ASSISTANCE (UNEMPLOYMENT) MORTGAGE REINSTATEMENT PROGRAM (PAST-DUE PAYMENT) 5,000 20,000 15,000 4,000 Program approved: September 2010 Peak estimate: 18,300 12/31/14 estimate: 9,000 12/31/14 program participation: 5,874 10,000 Program approved: December 2013 Peak estimate: 5,000 12/31/14 estimate: 3,500 12/31/14 program participation: 30 3,000 2,000 5,000 1,000 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q1 2014 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation RECAST/MODIFICATION (MODIFICATION) 1,000 Program approved: December 2013 Peak estimate: 1,000 12/31/14 estimate: 1,000 12/31/14 program participation: 8 750 500 250 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Notes: Programs may have been started or ended at different times. Estimated includes highest estimate of a range. Sources: States provide estimates for program participation and homeowners assisted numbers. GHFA Affordable Housing Inc., Proposal, no date; Treasury and GHFA Affordable Housing Inc., Commitment to Purchase Financial Instrument and HFA Participation Agreement, 9/23/2010; GHFA Affordable Housing Inc., first through seventh Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 6/28/2011, 5/3/2012, 12/12/2013, 1/31/2014, and 10/10/2014; GHFA Affordable Housing Inc., HomeSafe Georgia, US Treasury Reports, Quarterly Performance Reports Q4 2010 - Q4 2014, no date. 220 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Illinois’s HHF Programs FIGURE 4.27 IL HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 10% 90% Unemployment ($262,789,053) Modification ($29,437,413) Blight ($0) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: Illinois Housing Development Authority, Illinois Hardest Hit Program, Reporting, Quarterly Performance Report Q4 2014, no date. Treasury obligated $445,603,557 in HHF funds to Illinois.253 In mid-2011, Illinois estimated that it would help as many as 29,000 homeowners with HHF but, as of December 31, 2014, reduced that peak estimate by 53%, to 13,500. As of December 31, 2014, Illinois had four active HHF programs: one to provide unemployment assistance to homeowners, a second and third to modify homeowners’ mortgages, and a fourth for blight elimination. As of December 31, 2014, Illinois has helped 13,722 individual homeowners with HHF programs with the largest numbers in the unemployment and home preservation modification programs.254 According to Treasury, Illinois stopped accepting new applications from struggling homeowners seeking help from the state’s HHF programs after September 30, 2013.255,xlix In addition to decreasing the number of homeowners it estimated helping with HHF, Illinois has shifted $1.9 million (0.4%) of its HHF funds away from existing HHF programs to blight elimination. This represents a shift from making payments directly to homeowners or their mortgage servicers to help keep homeowners in their homes. Treasury’s Blight Elimination Program allows for substantial payments of TARP funds to land banks, non-profits and other parties, including demolition contractors, in cash and mortgages that can be forgiven over time. As of December 31, 2014, the state had drawn down $360 million (81%) of its HHF funds.256,l As of December 31, 2014, the most recent data available, Illinois had spent $317.1 million (71% of its obligated funds) to help individual homeowners with its HHF programs.257,li The remaining $29.5 million (7%) was spent on administrative expenses, and $20.9 million (5%) is held as cash-onhand.258,lii No funds had yet been spent on blight elimination. Figure 4.28 shows, in aggregate, the number of homeowners estimated to participate in Illinois’s programs (estimated program participation), the reported number of homeowners who participated in one or more programs (program participation), and the total number of individual homeowners assisted, as of December 31, 2014. Because homeowners may participate in more than one program, the reported program participation numbers are higher than the total number of individual homeowners assisted. Figure 4.29 shows the number of homeowners estimated to participate in each of Illinois’s programs (estimated program participation) and the reported number of homeowners who participated in each of Illinois’s programs (program participation), as of December 31, 2014. xlix According to Treasury, Illinois is no longer accepting applications for assistance from homeowners because it determined that its allocated HHF funds would be spent on homeowners who already have been approved for HHF assistance. l Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, Illinois had drawn down $395 million. li A ccording to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. lii Figures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. Illinois HHF administrative expenses are paid by the Illinois State Administrative division, which the Illinois HFA periodically reimburses using HHF funding. As the Illinois HFA did not make any reimbursement payments to the Illinois State Administrative division in Q4, they did not report any administrative expense cash disbursements during the period. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.28 ILLINOIS ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 12/31/2014 30,000 25,000 20,000 15,000 Peak estimate: 29,000 12/31/2014 estimate: 13,500 12/31/2014 program participation: 13,757 Homeowners assisted: 13,722 10,000 5,000 0 Q1 Q210 Q2 Q310 Q3 Q410 Q4 Q111 Q1 Q211 Q2 Q311 Q3 Q411 Q4 Q112 Q1 Q212 Q2 Q312 Q3 Q412 Q4 Q113 Q1 Q213 Q2 Q313 Q3 Q413 Q4 Q114 Q1 Q214 Q2 Q314 Q3 Q414 Q4 Q110 2010 2011 State Estimated Program Participation 2012 2013 2014 Homeowners Assisted Program Participation Notes: Estimated includes highest estimate of a range. Program participation numbers may have double-counted individual homeowners who received assistance from more than one program in states that have more than one program. For its “Blight Elimination Program” (Blight), Illinois estimated a number of blighted properties proposed to be eliminated. This number is not included in the aggregate estimate of all programs because it refers to properties and not homeowners. Sources: States provide estimates for program participation and report program participation and homeowners assisted numbers. Illinois Housing Development Authority, Proposal, no date; Treasury and Illinois Housing Development Authority, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 9/23/2010; Illinois Housing Development Authority, first through tenth Amendment[s] to Agreement[s], 9/29/2010, 12/16/2010, 5/11/2011, 8/3/2011, 1/25/2012, 8/2/2012, 9/28/2012, 3/8/2012, 8/9/2013, and 4/11/2014; Illinois Housing Development Authority, Illinois Hardest Hit Program, Reporting, Quarterly Performance Reports Q1 2011 - Q4 2014, no date. 221 222 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.29 ILLINOIS ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 12/31/2014 HARDEST HIT FUND HOMEOWNER EMERGENCY LOAN PROGRAM (UNEMPLOYMENT) 30,000 MORTGAGE RESOLUTION FUND PROGRAM (MODIFICATION) Program approved: September 2010 Peak estimate: 27,000 12/31/14 estimate: 12,000 12/31/14 program participation: 13,236 25,000 20,000 15,000 2,000 1,500 Program approved: August 2011 Peak estimate: 2,000 12/31/14 estimate: 1,000 12/31/14 program participation: 177 1,000 10,000 500 5,000 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q1 2014 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 HARDEST HIT FUND HOME PRESERVATION PROGRAM (MODIFICATION) 500 Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation Q2 Q2 Q3 Q4 2014 Program Participation HARDEST HIT FUND BLIGHT REDUCTION PROGRAM (BLIGHT) 100 375 75 Program approved: September 2012 Peak estimate: 500 12/31/14 estimate: 500 12/31/14 program participation: 344 250 Program approved: April 2014 12/31/14 blighted homes proposed to be eliminated: 50 12/31/14 actual blighted homes eliminated: 0 50 125 25 0 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 2014 Program Participation Q4 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Notes: Programs may have been started or ended at different times. Estimated includes highest estimate of a range. For its “Blight Elimination Program” (Blight), Illinois estimated a number of blighted properties proposed to be eliminated. This number is not included in the aggregate estimate of all programs because it refers to properties and not homeowners. Sources: States provide estimates for program participation and report program participation numbers. Illinois Housing Development Authority, Proposal, no date; Treasury and Illinois Housing Development Authority, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 9/23/2010; Illinois Housing Development Authority, first through tenth Amendment[s] to Agreement[s], 9/29/2010, 12/16/2010, 5/11/2011, 8/3/2011, 1/25/2012, 8/2/2012, 9/28/2012, 3/8/2012, 8/9/2013, and 4/11/2014; Illinois Housing Development Authority, Illinois Hardest Hit Program, Reporting, Quarterly Performance Reports Q1 2011 - Q4 2014, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Indiana’s HHF Programs Treasury obligated $221,694,139 in HHF funds to Indiana.259 At the start of 2011, Indiana estimated helping as many as 16,257 homeowners with HHF but, as of December 31, 2014, had reduced that peak estimate by 37%, to 10,184. As of December 31, 2014, Indiana had four active HHF programs: one to provide unemployment assistance to homeowners, a second to modify homeowners’ mortgages, a third to provide transition assistance to homeowners, and a fourth for blight elimination. As of December 31, 2014, Indiana has helped 4,682 individual homeowners with HHF programs with the largest number in its unemployment program.260 Indiana’s Recast Program, which began in March 2013, has only 68 participants, while the Transition Assistance Program, also started on the same date, has just four participants.261 In addition to decreasing the number of homeowners it estimated helping with HHF, Indiana has shifted $75 million (34%) of its HHF funds away from existing HHF programs to blight elimination. This represents a shift from making payments directly to homeowners or their mortgage servicers to help keep homeowners in their homes. Treasury’s Blight Elimination Program allows for substantial payments of TARP funds to land banks, non-profits and other parties, including demolition contractors, in cash and mortgages that can be forgiven over time. As of December 31, 2014, the state had drawn down $110.7 million (50%) of its HHF funds.262,liii As of December 31, 2014, the most recent data available, Indiana had spent $57.2 million (26% of its obligated funds) to help individual homeowners with its HHF programs; no funds had yet been spent on blight elimination.263,liv The remaining $17.1 million (8%) was spent on administrative expenses, and $36.7 million (17%) is held as cash-on-hand.264,lv Figure 4.31 shows, in aggregate, the number of homeowners estimated to participate in Indiana’s programs (estimated program participation), the reported number of homeowners who participated in one or more programs (program participation), and the total number of individual homeowners assisted, as of December 31, 2014. Figure 4.32 shows the number of homeowners estimated to participate in each of Indiana’s programs (estimated program participation) and the reported number of homeowners who participated in each of Indiana’s programs (program participation), as of December 31, 2014. liii Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, Indiana had drawn down $110.7 million. liv According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. lv Figures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. FIGURE 4.30 IN HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 0.02% 3.41% 96.57% Unemployment ($55,221,928) Modification ($1,949,041) Transition ($10,000) Blight ($0) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: Indiana Housing and Community Development Authority, Indiana’s Hardest Hit Fund, Quarterly Reports to the U.S. Treasury, Quarterly Performance Report Q4 2014, no date. 223 224 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.31 INDIANA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 12/31/2014 20,000 15,000 10,000 Peak estimate: 16,257 12/31/2014 estimate: 10,184 12/31/2014 program participation: 4,682 Homeowners assisted: 4,682 5,000 0 Q1 Q210 Q2 Q310 Q3 Q410 Q4 Q111 Q1 Q211 Q2 Q311 Q3 Q411 Q4 Q112 Q1 Q212 Q2 Q312 Q3 Q412 Q4 Q113 Q1 Q213 Q2 Q313 Q3 Q413 Q4 Q114 Q1 Q214 Q2 Q314 Q3 Q414 Q4 Q110 2010 2011 State Estimated Program Participation 2012 2013 2014 Homeowners Assisted Program Participation Notes: Estimated includes highest estimate of a range. For its “Blight Elimination Program” (Blight), Indiana estimated a number of blighted properties proposed to be eliminated. This number is not included in the aggregate estimate of all programs because it refers to properties and not homeowners. Sources: States provide estimates for program participation and report program participation and homeowners assisted numbers. Indiana Housing and Community Development Authority, Proposal, 9/1/2010 and (amended) 2/14/2011; Treasury and Indiana Housing and Community Development Authority, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 9/23/2010; Indiana Housing and Community Development Authority, first through ninth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 3/9/2011, 9/28/2011, 1/25/2012, 7/17/2012, 9/28/2012, 3/8/2013, 12/12/2013, and 7/31/2014; Indiana Housing and Community Development Authority, Indiana’s Hardest Hit Fund, Quarterly Reports to the U.S. Treasury, Quarterly Performance Reports Q2 2011 - Q4 2014, no date. 225 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.32 INDIANA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 12/31/2014 HARDEST HIT FUND UNEMPLOYMENT BRIDGE PROGRAM (UNEMPLOYMENT) 20,000 HARDEST HIT FUND RECAST/MODIFICATION PROGRAM (MODIFICATION) Program approved: September 2010 Peak estimate: 16,257 12/31/14 estimate: 8,000 12/31/14 program participation: 4,610 15,000 2,000 1,500 10,000 1,000 5,000 500 0 Program approved: March 2013 Peak estimate: 2,000 12/31/14 estimate: 2,000 12/31/14 program participation: 68 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q1 2014 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 HARDEST HIT FUND TRANSITION ASSISTANCE PROGRAM (TRANSITION) Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation Q2 Q2 Q3 Q4 2014 Program Participation HARDEST HIT FUND BLIGHT ELIMINATION PROGRAM (BLIGHT) 5,000 200 150 4,000 Program approved: March 2013 Peak estimate: 184 12/31/14 estimate: 184 12/31/14 program participation: 4 100 Program approved: December 2013 Peak estimate: 5,000 12/31/14 blighted homes proposed to be eliminated: 5,000 12/31/14 actual blighted homes eliminated: 0 3,000 2,000 50 1,000 0 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 2014 Program Participation Q4 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Notes: Programs may have been started or ended at different times. Estimated includes highest estimate of a range. For its “Blight Elimination Program” (Blight), Indiana estimated a number of blighted properties proposed to be eliminated. This number is not included in the aggregate estimate of all programs because it refers to properties and not homeowners. Sources: States provide estimates for program participation and report program participation numbers. Indiana Housing and Community Development Authority, Proposal, 9/1/2010 and (amended) 2/14/2011; Treasury and Indiana Housing and Community Development Authority, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 9/23/2010; Indiana Housing and Community Development Authority, first through ninth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 3/9/2011, 9/28/2011, 1/25/2012, 7/17/2012, 9/28/2012, 3/8/2013, 12/12/2013, and 7/31/2014; Indiana Housing and Community Development Authority, Indiana’s Hardest Hit Fund, Quarterly Reports to the U.S. Treasury, Quarterly Performance Reports Q2 2011 - Q4 2014, no date. 226 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Kentucky’s HHF Program FIGURE 4.33 KY HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 100% Unemployment ($77,759,751) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Treasury obligated $148,901,875 in HHF funds to Kentucky.265 At the end of 2010, Kentucky estimated that it would help as many as 15,000 homeowners but, as of December 31, 2014, had reduced the number of homeowners it estimated helping with its single HHF program, the unemployment bridge program, by 49%, to 7,700 (although this estimate was increased from 5,960 as of the prior quarter). As of December 31, 2014, Kentucky had helped 6,369 homeowners with that program.266 As of December 31, 2014, the state had drawn down $104 million (70%) of its HHF funds.267,lvi As of December 31, 2014, the most recent data available, Kentucky had spent $77.8 million (52% of its obligated funds) to help 6,369 individual homeowners with its HHF program.268,lvii The remaining $11.8 million (8%) was spent on administrative expenses, and $15.2 million (10%) is held as cash-on-hand.269,lviii Figure 4.34 shows the number of homeowners estimated to participate in Kentucky’s program and the number of homeowners who have been assisted, as of December 31, 2014. Source: Kentucky Housing Corporation, American Recovery and Reinvestment Act and Troubled Asset Relief Program, Kentucky Unemployment Bridge Program, Quarterly Performance Reports Q4 2014, no date. lvi Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, Kentucky had drawn down $104 million. lvii A ccording to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. lviii Figures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.34 KENTUCKY’S UNEMPLOYMENT BRIDGE PROGRAM (UNEMPLOYMENT) ESTIMATED PROGRAM PARTICIPATION AND HOMEOWNERS ASSISTED, AS OF 12/31/2014 15,000 12,000 9,000 6,000 3,000 Program approved: September 2010 Peak estimate: 15,000 12/31/2014 estimate: 7,700 12/31/2014 program participation: 6,369 Homeowners assisted: 6,369 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Homeowners Assisted Notes: Estimated includes highest estimate of a range. Sources: States provide estimates for program participation and homeowners assisted numbers. Kentucky Housing Corporation, Proposal, 8/31/2010; Treasury and Kentucky Housing Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 9/23/2010; Kentucky Housing Corporation, first through seventh Amendment[s] to Agreement[s], 9/29/2010, 12/16/2010, 3/31/2011, 9/28/2011, 3/3/2012, 12/14/2012, and 10/10/2014; Kentucky Housing Corporation, American Recovery and Reinvestment Act and Troubled Asset Relief Program, Kentucky Unemployment Bridge Program, Quarterly Performance Reports Q4 2010 - Q4 2014, no date. 227 228 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Michigan’s HHF Programs FIGURE 4.35 MI HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 11% 64% 23% 2% Past-Due Payment ($135,628,962) Modification ($4,674,348) Unemployment ($48,748,673) Blight ($22,795,284) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: Michigan Homeowner Assistance Nonprofit Housing Corporation, Hardest Hit U.S. Treasury Reports, Quarterly Performance Reports Q4 2014, no date. Treasury obligated $498,605,738 in HHF funds to Michigan.270 At the end of 2010, Michigan estimated that it would help as many as 49,422 homeowners with HHF but, as of December 31, 2014, had reduced that peak estimate by 81%, to 9,444. As of December 31, 2014, Michigan has decreased the number of homeowners it estimated helping in HHF programs including its unemployment mortgage subsidy assistance, its mortgage modification program and modification with principal reduction programs, as well as its loan rescue past-due payment assistance program. As of December 31, 2014, Michigan had helped 24,568 homeowners, with the largest numbers in the past-due payment assistance and unemployment programs.271 In addition to decreasing the number of homeowners it estimated helping with HHF, Michigan has shifted $175 million (35%) of its HHF funds away from existing HHF programs to blight elimination. This represents a shift from making payments directly to homeowners or their mortgage servicers to help keep homeowners in their homes. Treasury’s Blight Elimination Program allows for substantial payments of TARP funds to land banks, non-profits and other parties, including demolition contractors, in cash and mortgages that can be forgiven over time. As of December 31, 2014, the state had drawn down $304.1 million (61%) of its HHF funds.272,lix As of December 31, 2014, the most recent data available, Michigan had spent $189.1 million (38% of its obligated funds) to help individual homeowners with HHF programs; it had also spent $22.8 million to demolish 1,887 vacant properties.273,lx The remaining $25.5 million (5%) was spent on administrative expenses, and $68.5 million (14%) is held as cash-on-hand.274,lxi Figure 4.36 shows, in aggregate, the number of homeowners estimated to participate in Michigan’s programs (estimated program participation), the reported number of homeowners who participated in one or more programs (program participation), and the total number of individual homeowners assisted, as of December 31, 2014. Figure 4.37 shows the number of homeowners estimated to participate in each of Michigan’s programs (estimated program participation) and the reported number of homeowners who participated in each of Michigan’s programs (program participation), as of December 31, 2014. lix Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, Michigan had drawn down $304.1 million. lx A ccording to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. lxi Figures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.36 MICHIGAN ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 12/31/2014 50,000 40,000 30,000 20,000 10,000 Peak estimate: 49,422 12/31/2014 estimate: 9,444 12/31/2014 program participation: 24,568 Homeowners assisted: 24,568 0 Q1 Q210 Q2 Q310 Q3 Q410 Q4 Q111 Q1 Q211 Q2 Q311 Q3 Q411 Q4 Q112 Q1 Q212 Q2 Q312 Q3 Q412 Q4 Q113 Q1 Q213 Q2 Q313 Q3 Q413 Q4 Q114 Q1 Q214 Q2 Q314 Q3 Q414 Q4 Q110 2010 2011 State Estimated Program Participation 2012 2013 2014 Homeowners Assisted Program Participation Notes: Estimated includes highest estimate of a range. For its “Blight Elimination Program” (Blight), Michigan estimated a number of blighted properties proposed to be eliminated. This number is not included in the aggregate estimate of all programs because it refers to properties and not homeowners. Sources: States provide estimates for program participation and report program participation and homeowners assisted numbers. Michigan Homeowner Assistance Nonprofit Housing Corporation, Proposal, 10/15/2010; Treasury and Michigan Homeowner Assistance Nonprofit Housing Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 6/23/2010; Michigan Homeowner Assistance Nonprofit Housing Corporation, first through ninth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 8/3/2011, 6/28/2012, 11/15/2012, 6/6/2013,12/12/2013, and 10/10/2014; Michigan Homeowner Assistance Nonprofit Housing Corporation, Hardest Hit U.S. Treasury Reports, Quarterly Performance Reports Q3 2010 - Q4 2014, no date; Treasury, response to SIGTARP data call, 10/7/2013. 229 230 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.37 MICHIGAN ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 12/31/2014 PRINCIPAL CURTAILMENT PROGRAM (MODIFICATION) Program approved: June 2010 Peak estimate: 3,044 12/31/14 estimate: 300 12/31/14 program participation: 305 4,000 3,000 LOAN RESCUE PROGRAM (PAST-DUE PAYMENT) Program approved: June 2010 Peak estimate: 21,760 12/31/14 estimate: 4,567 12/31/14 program participation: 17,548 25,000 20,000 15,000 2,000 10,000 1,000 5,000 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 Q2 2013 State Estimated Program Participation Program Participation Q3 Q4 2014 Program Participation MODIFICATION PLAN PROGRAM (MODIFICATION) Program approved: June 2010 Peak estimate: 24,618 12/31/14 estimate: 4,282 12/31/14 program participation: 6,618 20,000 Q2 2010 UNEMPLOYMENT MORTGAGE SUBSIDY PROGRAM (UNEMPLOYMENT) 25,000 Q1 2014 1,000 750 15,000 Program approved: June 2012 Peak estimate: 825 12/31/14 estimate: 295 12/31/14 program participation: 97 500 10,000 250 5,000 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 2014 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation BLIGHT ELIMINATION PROGRAM (BLIGHT) 7,000 6,000 5,000 4,000 3,000 2,000 Program approved: June 2013 12/31/14 blighted homes proposed to be eliminated: 7,000 12/31/14 actual blighted homes eliminated: 1,887 1,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Notes: Programs may have been started or ended at different times. Estimated includes highest estimate of a range. For its “Blight Elimination Program” (Blight), Michigan estimated a number of blighted properties proposed to be eliminated. This number is not included in the aggregate estimate of all programs because it refers to properties and not homeowners. Sources: States provide estimates for program participation and report program participation numbers. Michigan Homeowner Assistance Nonprofit Housing Corporation, Proposal, 10/15/2010; Treasury and Michigan Homeowner Assistance Nonprofit Housing Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 6/23/2010; Michigan Homeowner Assistance Nonprofit Housing Corporation, first through ninth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 8/3/2011, 6/28/2012, 11/15/2012, 6/6/2013, 12/12/2013, and 10/10/2014; Michigan Homeowner Assistance Nonprofit Housing Corporation, Hardest Hit U.S. Treasury Reports, Quarterly Performance Reports Q3 2010 - Q4 2014, no date; Treasury, response to SIGTARP data calls, 10/7/2013 and 7/8/2014. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Mississippi’s HHF Program Treasury obligated $101,888,323 in HHF funds to Mississippi.275 At the end of 2010, Mississippi estimated that it would provide HHF unemployment assistance to as many as 3,800 homeowners but, as of December 31, 2014, had reduced the number of homeowners it estimated helping with its single HHF program, the Home Saver unemployment program, by 8%, to 3,500. As of December 31, 2014, Mississippi had helped 2,984 homeowners through that unemployment program.276 As of December 31, 2014, the state had drawn down $55.8 million (55%) of its HHF funds.277,lxii As of December 31, 2014, the most recent data available, Mississippi had spent $43.7 million (43% of its obligated funds) to help 2,984 individual homeowners with its HHF program.278,lxiii The remaining $8.5 million (8%) was spent on administrative expenses, and $3.8 million (4%) is held as cash-on-hand.279,lxiv Figure 4.39 shows the number of homeowners estimated to participate in Mississippi’s program and the number of homeowners who have been assisted, as of December 31, 2014. FIGURE 4.38 MS HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 100% Unemployment ($43,746,075) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: Mississippi Home Corporation, Financial Disclosures, Hardest Hit Fund, HFA Performance Data Report[s], Quarterly Performance Report Q4 2014, no date. lxii Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, Mississippi had drawn down $65.8 million. lxiii A ccording to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. lxiv Figures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. 231 232 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.39 MISSISSIPPI’S HOME SAVER PROGRAM (UNEMPLOYMENT) ESTIMATED PROGRAM PARTICIPATION AND HOMEOWNERS ASSISTED, AS OF 12/31/2014 4,000 3,500 3,000 Program approved: September 2010 Peak estimate: 3,800 12/31/14 estimate: 3,500 12/31/14 program participation: 2,984 Homeowners assisted: 2,984 2,500 2,000 1,500 1,000 500 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 2014 Homeowners Assisted Notes: Estimated includes highest estimate of a range. Sources: States provide estimates for program participation and homeowners assisted numbers. Mississippi Home Corporation, Proposal, 9/1/2010; Treasury and Mississippi Home Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 9/23/2010; Mississippi Home Corporation, first through eighth Amendment[s] to Agreement[s], 9/29/2010, 12/16/2010, 12/8/2011, 9/28/2011, 1/25/2012, 9/28/2012, 4/25/2013, 9/20/2013, and 12/18/2014; Mississippi Home Corporation, Financial Disclosures, Hardest Hit Fund, HFA Performance Data Report[s], Quarterly Performance Reports Q4 2010 - Q4 2014, no date. Q4 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Nevada’s HHF Programs Treasury obligated $194,026,240 in HHF funds to Nevada.280 In mid-2011, Nevada estimated that it would help as many as 23,556 homeowners with HHF but, as of December 31, 2014, had reduced that peak estimate by 68%, to 7,565. As of December 31, 2014, Nevada had seven active HHF programs: two to provide unemployment assistance to homeowners, three to modify homeowners’ mortgages with principal reduction assistance, one to provide second-lien reduction assistance to homeowners, and one to provide transition assistance to homeowners. As of December 31, 2014, Nevada had helped 5,539 individual homeowners with HHF programs, with the largest numbers in the unemployment and the principal reduction programs.281 Neither Nevada’s Home Retention Program, launched in September 2013, nor its Recast Refinance program, launched in June 2014, has helped a single homeowner during their program lives.282 As of December 31, 2014, the state had drawn down $112.1 million (58%) of its HHF funds.283,lxv As of December 31, 2014, the most recent data available, Nevada had spent $85.8 million (44% of its obligated funds) to help individual homeowners with its HHF programs.284,lxvi The remaining $13.7 million (7%) was spent on administrative expenses, and $13.3 million (7%) is held as cash-on-hand.285,lxvii Figure 4.41 shows, in aggregate, the number of homeowners estimated to participate in Nevada’s programs (estimated program participation), the reported number of homeowners who participated in one or more programs (program participation), and the total number of individual homeowners assisted, as of December 31, 2014. Figure 4.42 shows the number of homeowners estimated to participate in each of Nevada’s programs (estimated program participation) and the reported number of homeowners who participated in each of Nevada’s programs (program participation), as of December 31, 2014. lxv Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, Nevada had drawn down $112.1 million. lxvi According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. lxvii F igures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. FIGURE 4.40 NV HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 58.4% 35.8% 0.3% 5.5% Modification ($50,100,394) Second-Lien Reduction ($4,680,948) Transition ($289,179) Unemployment ($30,702,785) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: Nevada Affordable Housing Assistance Corporation, Nevada Hardest Hit Fund, US Treasury Reports, Quarterly Performance Report Q4 2014, no date. 233 234 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.41 NEVADA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 12/31/2014 25,000 Peak estimate: 23,556 12/31/2014 estimate: 7,565 12/31/2014 program participation: 5,539 Homeowners assisted: 5,539 20,000 15,000 10,000 5,000 0 Q1 Q210 Q2 Q310 Q3 Q410 Q4 Q111 Q1 Q211 Q2 Q311 Q3 Q411 Q4 Q112 Q1 Q212 Q2 Q312 Q3 Q412 Q4 Q113 Q1 Q213 Q2 Q313 Q3 Q413 Q4 Q114 Q1 Q214 Q2 Q314 Q3 Q414 Q4 Q110 2010 2011 State Estimated Program Participation 2012 2013 2014 Homeowners Assisted Program Participation Notes: Estimated includes highest estimate of a range. Program participation numbers may have double-counted individual homeowners who received assistance from more than one program in states that have more than one program. Sources: States provide estimates for program participation and report program participation and homeowners assisted numbers. Nevada Affordable Housing Assistance Corporation, Proposal, 6/14/2010; Treasury and Nevada Affordable Housing Assistance Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 6/23/2010; Nevada Affordable Housing Assistance Corporation, first through twelfth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 4/5/2011, 5/25/2011, 10/28/2011, 12/8/2011, 2/28/2012, 6/28/2012, 9/28/2012, 8/28/2013, and 6/11/2014; Nevada Affordable Housing Assistance Corporation, Nevada Hardest Hit Fund, US Treasury Reports, Quarterly Performance Reports Q1 2011 - Q4 2014, no date. 235 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.42 NEVADA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 12/31/2014 PRINCIPAL REDUCTION PROGRAM (MODIFICATION) SECOND MORTGAGE REDUCTION PLAN (SECOND-LIEN REDUCTION) Program approved: June 2010 Peak estimate: 3,016 12/31/14 estimate: 1,205 12/31/14 program participation: 1,208 4,000 3,000 3,000 Program approved: June 2010 Peak estimate: 2,200 12/31/14 estimate: 404 12/31/14 program participation: 412 2,500 2,000 1,500 2,000 1,000 1,000 500 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation Q2 Q3 Q4 2014 Program Participation MORTGAGE ASSISTANCE PROGRAM (UNEMPLOYMENT) 20,000 Program approved: June 2010 Peak estimate: 1,713 12/31/14 estimate: 100 12/31/14 program participation: 104 1,500 Q2 2010 SHORT-SALE ACCELERATION PROGRAM (TRANSITION) 2,000 Q1 2014 Program approved: September 2010 Peak estimate: 16,969 12/31/14 estimate: 4,065 12/31/14 program participation: 3,589 15,000 1,000 10,000 500 5,000 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q1 2014 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 MORTGAGE ASSISTANCE PROGRAM ALTERNATIVE (UNEMPLOYMENT) Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation Q2 Q2 Q3 Q4 2014 Program Participation HOME RETENTION PROGRAM (MODIFICATION) 1,200 500 1,000 375 Program approved: August 2013 Peak estimate: 1,150 12/31/14 estimate: 615 12/31/14 program participation: 0 800 Program approved: February 2012 Peak estimate: 416 12/31/14 estimate: 176 12/31/14 program participation: 226 250 125 600 400 200 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q1 2014 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation NEVADA RECAST REFINANCE AND MODIFICATION PROGRAM (MODIFICATION) 1,000 750 Program approved: June 2014 Peak estimate: 1,000 12/31/14 estimate: 1,000 12/31/14 program participation: 0 500 250 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Notes: Programs may have been started or ended at different times. Estimated includes highest estimate of a range. Sources: States provide estimates for program participation and report program participation numbers. Nevada Affordable Housing Assistance Corporation, Proposal, 6/14/2010; Treasury and Nevada Affordable Housing Assistance Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 6/23/2010; Nevada Affordable Housing Assistance Corporation, first through twelfth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 4/5/2011, 5/25/2011, 10/28/2011, 12/8/2011, 2/28/2012, 6/28/2012, 9/28/2012, 8/28/2013, and 6/11/2014; Nevada Affordable Housing Assistance Corporation, Nevada Hardest Hit Fund, US Treasury Reports, Quarterly Performance Reports Q1 2011 - Q4 2014, no date. 236 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM New Jersey’s HHF Program FIGURE 4.43 NJ HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 100% Unemployment ($205,740,714) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Treasury obligated $300,548,144 in HHF funds to New Jersey.286 From the end of 2010 to the end of 2013, New Jersey estimated helping 6,900 homeowners with HHF but, as of December 31, 2014, had reduced the number of homeowners it estimated helping in its single HHF program, the Homekeeper unemployment program, by 6%, to 6,500. As of December 31, 2014, New Jersey helped 5,993 individual homeowners with HHF through its program.287 According to Treasury, New Jersey stopped accepting new applications from struggling homeowners seeking help from their HHF programs submitted after November 30, 2013.288,lxviii As of December 31, 2014, New Jersey has drawn down $245.5 million (82%) of its HHF funds and spent $205.7 million (68%) of its obligated funds on program expenses to help individual homeowners.289,lxix,lxx The remaining $22.4 million (7%) was spent on administrative expenses, and $18.9 million (6%) is held as cash-on-hand.290,lxxi Figure 4.44 shows the number of homeowners estimated to participate in New Jersey’s program and the number of homeowners who have been assisted, as of December 31, 2014. Source: New Jersey Housing and Mortgage Finance Agency, The New Jersey HomeKeeper Program, About the Program, Performance Reports, Quarterly Performance Report Q4 2014, no date. lxviii According to Treasury, New Jersey is no longer accepting applications for assistance from homeowners because it determined that its allocated HHF funds would be spent on homeowners who already have been approved for HHF assistance. lxix Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, New Jersey had drawn down $245.5 million. lxx According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. lxxi F igures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.44 NEW JERSEY’S HOMEKEEPER PROGRAM (UNEMPLOYMENT) ESTIMATED PROGRAM PARTICIPATION AND HOMEOWNERS ASSISTED, AS OF 12/31/2014 8,000 7,000 6,000 Program approved: September 2010 Peak estimate: 6,900 12/31/2014 estimate: 6,500 12/31/2014 program participation: 5,993 Homeowners assisted: 5,993 5,000 4,000 3,000 2,000 1,000 0 Q1 Q210 Q2 Q310 Q3 Q410 Q4 Q111 Q1 Q211 Q2 Q311 Q3 Q411 Q4 Q112 Q1 Q212 Q2 Q312 Q3 Q412 Q4 Q113 Q1 Q213 Q2 Q313 Q3 Q413 Q4 Q114 Q1 Q214 Q2 Q314 Q3 Q414 Q4 Q110 2010 2011 2012 State Estimated Program Participation 2013 2014 Homeowners Assisted Notes: Estimated includes highest estimate of a range. Sources: States provide estimates for program participation and homeowners assisted numbers. New Jersey Housing and Mortgage Finance Agency, Proposal, 9/1/2010; Treasury and New Jersey Housing and Mortgage Finance Agency, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 9/23/2010; New Jersey Housing and Mortgage Finance Agency, first through seventh Amendment[s] to Agreement[s], 9/29/2010, 12/16/2010, 8/31/2011, 1/25/2012, 8/24/2012, 10/30/2013, and 4/11/2014; New Jersey Housing and Mortgage Finance Agency, The New Jersey HomeKeeper Program, About the Program, Performance Reports, Quarterly Performance Reports Q3 2011 - Q4 2014, no date. 237 238 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM North Carolina’s HHF Programs FIGURE 4.45 NC HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 1% 99% Modification ($0) Second-Lien Reduction ($2,834,256) Unemployment ($288,052,095) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: North Carolina Housing Finance Agency, Hardest Hit Fund & Performance Reporting, Quarterly Performance Report Q4 2014, no date. Treasury obligated $482,781,786 in HHF funds to North Carolina.291 From mid2011 to mid-2013, North Carolina estimated that it would help as many as 22,290 homeowners with HHF but, as of December 31, 2014, had reduced that peak estimate to 21,310. As of December 31, 2014, North Carolina had four active HHF programs: two to provide unemployment assistance to homeowners, a third to provide second-lien reduction assistance to homeowners, and a fourth to modify homeowners’ mortgages with principal reduction. As of December 31, 2014, North Carolina has helped 18,277 individual homeowners with its HHF programs, with the largest number in the two unemployment programs.292 North Carolina has ended two programs that had not assisted any homeowners: the Permanent Loan Modification Program (August 2013) and the Principal Reduction Recast Program (December 2013). A fifth program, the Modification Enabling Pilot Project, approved in December 2013, also has zero participants as of December 31, 2014. As of December 31, 2014, the state had drawn down $395.2 million (82%) of its HHF funds and spent $290.9 million (60%) of their obligated funds on program expenses to help individual homeowners.293,lxxii,lxxiii The remaining $49.1 million (10%) was spent on administrative expenses, and $59.2 million (12%) is held as cash-on-hand.294,lxxiv Figure 4.46 shows, in aggregate, the number of homeowners estimated to participate in North Carolina’s programs (estimated program participation), the reported number of homeowners who participated in one or more programs (program participation), and the total number of individual homeowners assisted, as of December 31, 2014. Because homeowners may participate in more than one program, the reported program participation numbers are higher than the total number of individual homeowners assisted. Figure 4.47 shows the number of homeowners estimated to participate in each of North Carolina’s programs (estimated program participation) and the reported number of homeowners who participated in each of North Carolina’s programs (program participation), as of December 31, 2014. lxxii Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, North Carolina had drawn down $395.2 million. lxxiii According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. lxxiv Figures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.46 NORTH CAROLINA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 12/31/2014 25,000 20,000 Peak estimate: 22,290 12/31/2014 estimate: 21,310 12/31/2014 program participation: 18,397 Homeowners assisted: 18,277 15,000 10,000 5,000 0 Q1 Q210 Q2 Q310 Q3 Q410 Q4 Q111 Q1 Q211 Q2 Q311 Q3 Q411 Q4 Q112 Q1 Q212 Q2 Q312 Q3 Q412 Q4 Q113 Q1 Q213 Q2 Q313 Q3 Q413 Q4 Q114 Q1 Q214 Q2 Q314 Q3 Q414 Q4 Q110 2010 2011 State Estimated Program Participation 2012 2013 2014 Homeowners Assisted Program Participation Notes: Estimated includes highest estimate of a range. Program participation numbers may have double-counted individual homeowners who received assistance from more than one program in states that have more than one program. Sources: States provide estimates for program participation and report program participation and homeowners assisted numbers. North Carolina Housing Finance Agency, Proposal, 7/23/2010; Treasury and North Carolina Housing Finance Agency, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 8/23/2010; North Carolina Housing Finance Agency, first through seventh Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 5/25/2011, 1/25/2012, 8/9/2013, and 12/12/2013; North Carolina Housing Finance Agency, Hardest Hit Fund & Performance Reporting, Quarterly Performance Reports Q3 2010 - Q4 2014, no date; Treasury, response to SIGTARP data call, 10/7/2013. 239 240 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.47 NORTH CAROLINA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 12/31/2014 MORTGAGE PAYMENT PROGRAM-1 (UNEMPLOYMENT) MORTGAGE PAYMENT PROGRAM-2 (UNEMPLOYMENT) 6,000 15,000 5,000 12,000 4,000 Program approved: September 2010 Peak estimate: 14,100 12/31/14 estimate: 14,100 12/31/14 program participation: 13,804 9,000 3,000 Program approved: September 2010 Peak estimate: 5,750 12/31/14 estimate: 5,410 12/31/14 program participation: 4,452 2,000 1,000 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 Q2 2012 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 6,000 3,000 0 Q3 Q4 Q1 2014 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 SECOND MORTGAGE REFINANCE PROGRAM (SECOND-LIEN REDUCTION) Q3 Q4 Q1 Q2 2013 State Estimated Program Participation Program Participation Q2 2012 Q3 Q4 2014 Program Participation PERMANENT LOAN MODIFICATION PROGRAM (MODIFICATION) 2,000 500 1,500 375 Program approved: September 2010 Peak estimate: 2,000 12/31/14 estimate: 1,000 12/31/14 program participation: 141 1,000 500 Program ended: August 2013 Peak estimate: 440 12/31/14 estimate: 0 12/31/14 program participation: 0 250 125 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q1 2014 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 PRINCIPAL REDUCTION RECAST PROGRAM (MODIFICATION) Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation Q2 2012 Q2 Q3 Q4 2014 Program Participation MODIFICATION ENABLING PILOT PROJECT (MODIFICATION) 2,000 1000 1,500 750 Program ended: December 2013 Peak estimate: 680 12/31/14 estimate: 0 12/31/14 program participation: 0 1,000 500 Program approved: December 2013 Peak estimate: 800 12/31/14 estimate: 800 12/31/14 program participation: 0 500 250 0 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 Q1 2014 Program Participation Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Notes: Programs may have been started or ended at different times. Estimated includes highest estimate of a range. Sources: States provide estimates for program participation and report program participation numbers. North Carolina Housing Finance Agency, Proposal, 7/23/2010; Treasury and North Carolina Housing Finance Agency, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 8/23/2010; North Carolina Housing Finance Agency, first through seventh Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 5/25/2011, 1/25/2012, 8/9/2013, and 12/12/2013; North Carolina Housing Finance Agency, Hardest Hit Fund & Performance Reporting, Quarterly Performance Reports Q3 2010 - Q4 2014, no date; Treasury, response to SIGTARP data call, 10/7/2013. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Ohio’s HHF Programs Treasury obligated $570,395,099 in HHF funds to Ohio.295 At the end of 2010, Ohio estimated that it would help as many as 63,485 homeowners with HHF but, as of December 31, 2014, had reduced that peak estimate by 35%, to 41,201. As of December 31, 2014, Ohio had eight active HHF programs: three to modify homeowners’ mortgages, a fourth and fifthlxxv to provide past-due payment assistance to homeowners, a sixth to provide unemployment assistance to homeowners, a seventh to provide transition assistance to homeowners, and an eighth for blight elimination. As of December 31, 2014, Ohio has helped 24,214 individual homeowners, with the largest numbers in the past due payment and unemployment assistance programs.296 Ohio ended a ninth program, the Short Refinance Program in December 2012, which had not helped a single homeowner over the program’s life. Ohio’s Transition Assistance Program, launched in September 2010, has only helped 74 homeowners during nearly five years of operation. According to Treasury, Ohio stopped accepting new applications after April 30, 2014.297 In addition to decreasing the number of homeowners it estimated helping with HHF, Ohio has shifted $60 million (11%) of its HHF funds away from existing HHF programs to blight elimination. This represents a shift from making payments directly to homeowners or their mortgage servicers to help keep homeowners in their homes. Treasury’s Blight Elimination Program allows for substantial payments of TARP funds to land banks, non-profits and other parties, including demolition contractors, in cash and mortgages that can be forgiven over time. As of December 31, 2014, the state had drawn down $477.2 million (84%) of its HHF funds.298,lxxvi As of December 31, 2014, the most recent data available, Ohio had spent $388.1 million (68% of its obligated funds) to help individual homeowners with its HHF programs; it had also spent $4.8 million to demolish and remove 428 properties under its blight elimination program, which was approved in August 2013.299,lxxvii The remaining $45.9 million (8%) was spent on administrative expenses, and $40.1 million (7%) is held as cash-on-hand.300,lxxviii Figure 4.49 shows, in aggregate, the number of homeowners estimated to participate in Ohio’s programs (estimated program participation), the reported number of homeowners who participated in one or more programs (program participation), and the total number of individual homeowners assisted, as of December 31, 2014. Because homeowners may participate in more than one program, the reported program participation numbers are higher than the total number of individual homeowners assisted. Figure 4.50 shows the number of homeowners estimated to participate in each of Ohio’s programs (estimated lxxv Previously classified as a modification program, the Homeownership Retention Assistance program was reclassified as a Past-Due Payment program in Treasury’s response to SIGTARP’s January 2015 data call. lxxvi T reasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, Ohio had drawn down $499.2 million. lxxvii A ccording to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. lxxviii Figures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. FIGURE 4.48 OH HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 0.1% 45.6% 1.3% 34.6% 18.4% Past-Due Payment ($175,257,782) Modification ($70,884,755) Unemployment ($133,144,961) Transition ($355,966) Blight ($4,833,691) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: Ohio Homeowner Assistance LLC, Save the Dream Ohio: Quarterly Reports, Quarterly Performance Report Q4 2014, no date. 241 242 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM program participation) and the reported number of homeowners who participated in each of Ohio’s programs (program participation), as of December 31, 2014. FIGURE 4.49 OHIO ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 12/31/2014 80,000 Peak estimate: 63,485 12/31/2014 estimate: 41,201 12/31/2014 program participation: 39,538 Homeowners assisted: 24,214 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Q1 Q210 Q2 Q310 Q3 Q410 Q4 Q111 Q1 Q211 Q2 Q311 Q3 Q411 Q4 Q112 Q1 Q212 Q2 Q312 Q3 Q412 Q4 Q113 Q1 Q213 Q2 Q313 Q3 Q413 Q4 Q114 Q1 Q214 Q2 Q314 Q3 Q414 Q4 Q110 2010 2011 State Estimated Program Participation 2012 2013 2014 Homeowners Assisted Program Participation Notes: Estimated includes highest estimate of a range. Program participation numbers may have double-counted individual homeowners who received assistance from more than one program in states that have more than one program. For its “Blight Elimination Program” (Blight), Ohio estimated a number of blighted properties proposed to be eliminated. This number is not included in the aggregate estimate of all programs because it refers to properties and not homeowners. Sources: States provide estimates for program participation and report program participation and homeowners assisted numbers. Ohio Homeowner Assistance LLC, Proposal [revised], 4/11/2011; Treasury and Ohio Homeowner Assistance LLC, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 9/23/2010; Ohio Homeowner Assistance LLC, first through eleventh Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 3/31/2011, 12/8/2011, 12/14/2012, 3/22/2013, 8/28/2013, 12/12/2013, 2/27/2014, and 12/18/2014; Ohio Homeowner Assistance LLC, Save the Dream Ohio: Quarterly Reports, Quarterly Performance Reports Q4 2010 - Q4 2014, no date; Treasury, response to SIGTARP data call, 10/7/2013. 243 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.50 OHIO ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 12/31/2014 RESCUE PAYMENT ASSISTANCE PROGRAM Program approved: September 2010 (PAST-DUE PAYMENT) Peak estimate: 21,000 12/31/14 estimate: 21,000 12/31/14 program participation: 20,039 25,000 20,000 MORTGAGE PAYMENT ASSISTANCE PROGRAM (UNEMPLOYMENT) Program approved: September 2010 Peak estimate: 31,900 12/31/14 estimate: 15,500 12/31/14 program participation: 14,719 40,000 30,000 15,000 20,000 10,000 10,000 5,000 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q1 2014 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 MODIFICATION WITH CONTRIBUTION ASSISTANCE PROGRAM (MODIFICATION) Q3 Q4 Q1 Q2 2013 State Estimated Program Participation Program Participation Q2 Q3 Q4 2014 Program Participation LIEN ELIMINATION ASSISTANCE (MODIFICATION) 7,500 3,000 6,000 2,500 Program approved: September 2010 Peak estimate: 2,350 12/31/14 estimate: 1,150 12/31/14 program participation: 1,160 2,000 4,500 1,500 Program approved: December 2011 Peak estimate: 6,400 12/31/14 estimate: 1,300 12/31/14 program participation: 1,516 3,000 1,500 1,000 500 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 4,000 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation Q2 Q3 Q4 2014 Program Participation HOMEOWNERSHIP RETENTION ASSISTANCE (PAST-DUE PAYMENT) Program approved: September 2010 Peak estimate: 4,900 12/31/14 estimate: 63 12/31/14 program participation: 74 5,000 Q2 2010 TRANSITION ASSISTANCE PROGRAM (TRANSITION) 6,000 Q1 2014 4,000 Program approved: December 2012 Peak estimate: 3,100 12/31/14 estimate: 1,738 12/31/14 program participation: 1,844 3,000 3,000 2,000 2,000 1,000 1,000 0 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 2014 Program Participation Q4 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 2014 Program Participation Q4 244 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM OHIO ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 12/31/2014 (CONTINUED) HOMEOWNER STABILIZATION ASSISTANCE PROGRAM (MODIFICATION) SHORT REFINANCE PROGRAM (TRANSITION) 1,000 8,000 750 6,000 Program approved: March 2013 Peak estimate: 900 12/31/14 estimate: 450 12/31/14 program participation: 186 500 Program ended: December 2012 Peak estimate: 6,500 12/31/14 estimate: 0 12/31/14 program participation: 0 4,000 250 2,000 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 2014 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation NEIGHBORHOOD INITIATIVE PROGRAM (BLIGHT) 6,000 5,000 Program approved: August 2013 12/31/14 blighted homes proposed to be eliminated: 5,000 12/31/14 actual blighted homes eliminated: 428 4,000 3,000 2,000 1,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Notes: Programs may have been started or ended at different times. Estimated includes highest estimate of a range. For its “Blight Elimination Program” (Blight), Ohio estimated a number of blighted properties proposed to be eliminated. This number is not included in the aggregate estimate of all programs because it refers to properties and not homeowners. Sources: States provide estimates for program participation and report program participation numbers. Ohio Homeowner Assistance LLC, Proposal, 8/3/2010; Treasury and Ohio Homeowner Assistance LLC, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 9/23/2010; Ohio Homeowner Assistance LLC, first through eleventh Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 3/31/2011, 12/8/2011, 12/14/2012, 3/22/2013, 8/28/2013, 12/12/2013, 2/27/2014, and 12/18/2014; Ohio Homeowner Assistance LLC, Save the Dream Ohio: Quarterly Reports, Quarterly Performance Reports Q4 2010 - Q4 2014, no date; Treasury, response to SIGTARP data call, 10/7/2013. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Oregon’s HHF Programs Treasury obligated $220,042,786 in HHF funds to Oregon.301 As of March 31, 2014, Oregon estimated that it would help as many as 15,280 homeowners with HHF, but as of December 31, 2014, reduced that estimate to 15,150. As of December 31, 2014, the state had four active HHF programs: an unemployment assistance program, two separate mortgage modification assistance programs, and a past-due payment assistance program. As of December 31, 2014, Oregon has helped 11,620 individual homeowners with its HHF programs, with the largest numbers in the unemployment and past due payment assistance programs.302 Oregon has ended two additional programs for which the state had reported helping no homeowners: the Loan Modification Assistance Program (June 2013) and the Transition Assistance Program (December 2011). According to Treasury, Oregon stopped accepting new applications after June 30, 2014.303 As of December 31, 2014, the state had drawn down 100% of its HHF funds.304,lxxix Oregon had also recovered $17.3 million in funds from homeowners who left the program before their HHF award was fully forgiven (lien release). As of December 31, 2014, the most recent data available, Oregon had spent $175.4 million to help individual homeowners, $34.3 million was spent on administrative expenses, and $29.5 million is held as cash-on-hand.305,lxxx,lxxxi Figure 4.52 shows, in aggregate, the number of homeowners estimated to participate in Oregon’s programs (estimated program participation), the reported number of homeowners who participated in one or more programs (program participation), and the total number of individual homeowners assisted, as of December 31, 2014. Because homeowners may participate in more than one program, the reported program participation numbers are higher than the total number of individual homeowners assisted. Figure 4.53 shows the number of homeowners estimated to participate in each of Oregon’s programs (estimated program participation) and the reported number of homeowners who participated in each of Oregon’s programs (program participation), as of December 31, 2014. lxxix Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, Oregon had drawn down $220 million, 100% of its obligated funds. lxxx According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. lxxxi F igures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. FIGURE 4.51 OR HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 8% 20% 72% Past-Due Payment ($14,181,437) Unemployment ($125,851,226) Modification ($35,328,688) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: Oregon Affordable Housing Assistance Corporation, Oregon Homeownership Stabilization Initiative, Reporting, Quarterly Performance Reports Q4 2014, no date. 245 246 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.52 OREGON ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 12/31/2014 20,000 Peak estimate: 15,280 12/31/2014 estimate: 15,150 12/31/2014 program participation: 15,654 Homeowners assisted: 11,620 15,000 10,000 5,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 State Estimated Program Participation Q3 2012 Q4 Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Homeowners Assisted Program Participation Notes: Estimated includes highest estimate of a range. Program participation numbers may have double-counted individual homeowners who received assistance from more than one program in states that have more than one program. Sources: States provide estimates for program participation and report program participation and homeowners assisted numbers. Oregon Affordable Housing Assistance Corporation, Proposal, no date; Treasury and Oregon Affordable Housing Assistance Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 8/3/2010; Oregon Affordable Housing Assistance Corporation, first through fifteenth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 3/31/2011, 5/25/2011, 9/28/2011, 12/8/2011, 3/29/2012, 7/17/2012, 2/6/2013, 4/25/2013, 6/6/2013, 8/28/2013, 2/27/2014, and 6/11/2014; Oregon Affordable Housing Assistance Corporation, Oregon Homeownership Stabilization Initiative, Reporting, Quarterly Performance Reports Q2 2011 - Q4 2014, no date. 247 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.53 OREGON ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 12/31/2014 LOAN MODIFICATION ASSISTANCE PROGRAM (MODIFICATION) 3,000 MORTGAGE PAYMENT ASSISTANCE PROGRAM (UNEMPLOYMENT) 2,000 Program approved: September 2010 Peak estimate: 11,000 12/31/14 estimate: 11,000 12/31/14 program participation: 11,144 15,000 Program ended: June 2013 Peak estimate: 2,600 12/31/14 estimate: 0 12/31/14 program participation: 0 2,500 12,000 9,000 1,500 6,000 1,000 3,000 500 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 Q2 2013 State Estimated Program Participation Program Participation LOAN PRESERVATION ASSISTANCE PROGRAM Program approved: September 2010 (PAST-DUE PAYMENT) Q3 Q4 2014 Program Participation TRANSITION ASSISTANCE PROGRAM (TRANSITION) Peak estimate: 4,000 12/31/14 estimate: 3,900 12/31/14 program participation: 4,290 5,000 Q1 2014 3,000 Program ended: December 2011 Peak estimate: 2,515 12/31/14 estimate: 0 12/31/14 program participation: 0 2,500 4,000 2,000 3,000 1,500 2,000 1,000 1,000 500 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q1 2014 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation Q2 Q3 Q4 2014 Program Participation REBUILDING AMERICAN HOMEOWNERSHIP ASSISTANCE PILOT PROJECT (MODIFICATION) 400 100 300 75 Program approved: March 2011 Peak estimate: 330 12/31/14 estimate: 200 12/31/14 program participation: 160 100 Q3 2010 LOAN REFINANCE ASSISTANCE PROGRAM (MODIFICATION) 200 Q2 Program approved: February 2013 Peak estimate: 50 12/31/14 estimate: 50 12/31/14 program participation: 60 50 25 0 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 Q1 2014 Program Participation Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Notes: Programs may have been started or ended at different times. Estimated includes highest estimate of a range. Sources: States provide estimates for program participation and report program participation numbers. Oregon Affordable Housing Assistance Corporation, Proposal, no date; Treasury and Oregon Affordable Housing Assistance Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 8/3/2010; Oregon Affordable Housing Assistance Corporation, first through fifteenth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 3/31/2011, 5/25/2011, 9/28/2011, 12/8/2011, 3/29/2012, 7/17/2012, 2/6/2013, 4/25/2013, 6/6/2013, 8/28/2013, 2/27/2014, and 6/11/2014; Oregon Affordable Housing Assistance Corporation, Oregon Homeownership Stabilization Initiative, Reporting, Quarterly Performance Reports Q2 2011 - Q4 2014, no date. 248 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Rhode Island’s HHF Program FIGURE 4.54 RI HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 20% 1% 18% 61% Modification ($12,663,750) Transition ($340,227) Past-Due Payment ($11,588,560) Unemployment ($38,090,847) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: Rhode Island Housing and Mortgage Finance Corporation, Hardest Hit Fund – Rhode Island, About HHFRI, Reports, Quarterly Performance Report Q4 2014, no date. Treasury obligated $79,351,573 in HHF funds to Rhode Island.306 At the end of 2010, Rhode Island estimated that it would help as many as 13,125 homeowners with HHF but, as of December 31, 2014, reduced that peak estimate by 74%, to 3,413. Rhode Island has decreased the number of homeowners it estimated helping in each of its HHF programs, including its unemployment, mortgage modification, principal reduction assistance, past-due payment assistance, and transition assistance programs. As of December 31, 2014, Rhode Island has helped 3,075 individual homeowners with HHF programs, with the largest numbers in the unemployment and past due payment programs.307 According to Treasury, Rhode Island stopped accepting new applications from struggling homeowners seeking help from their HHF programs submitted after January 31, 2013.308,lxxxii As of December 31, 2014, the state had drawn down 100% of its HHF funds.309,lxxxiii As of December 31, 2014, the most recent data available, Rhode Island had spent $62.7 million (79% of its obligated funds) to help individual homeowners with its HHF programs.310,lxxxiv The remaining $8.1 million (10%) was spent on administrative expenses, and $9.4 million (12%) is held as cash-on-hand.311,lxxxv Figure 4.55 shows, in aggregate, the number of homeowners estimated to participate in Rhode Island’s programs (estimated program participation), the reported number of homeowners who participated in one or more programs (program participation), and the total number of individual homeowners assisted, as of December 31, 2014. Because homeowners may participate in more than one program, the reported program participation numbers are higher than the total number of individual homeowners assisted. Figure 4.56 shows the number of homeowners estimated to participate in each of Rhode Island’s programs (estimated program participation) and the reported number of homeowners who participated in each of Rhode Island’s programs (program participation), as of December 31, 2014. lxxxii According to Treasury, Rhode Island is no longer accepting applications for assistance from homeowners because it determined that its allocated HHF funds would be spent on homeowners who already have been approved for HHF assistance. lxxxiii Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, Rhode Island had drawn down 100% of its obligated funds. lxxxiv According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. lxxxv Figures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.55 RHODE ISLAND ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 12/31/2014 15,000 Peak estimate: 13,125 12/31/2014 estimate: 3,413 12/31/2014 program participation: 3,355 Homeowners assisted: 3,075 12,000 9,000 6,000 3,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 State Estimated Program Participation Q3 2012 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 Homeowners Assisted Program Participation Notes: Estimated includes highest estimate of a range. Program participation numbers may have double-counted individual homeowners who received assistance from more than one program in states that have more than one program. Sources: States provide estimates for program participation and report program participation and homeowners assisted numbers. Rhode Island Housing and Mortgage Finance Corporation, Proposal, 5/27/2010 and (amended) 7/22/2010; Treasury and Rhode Island Housing and Mortgage Finance Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 8/3/2010; Rhode Island Housing and Mortgage Finance Corporation, first through ninth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 5/25/2011, 1/25/2012, 3/29/2012, 12/14/2012, 7/17/2013, and 1/31/2014; Rhode Island Housing and Mortgage Finance Corporation, Hardest Hit Fund – Rhode Island, About HHFRI, Reports, Quarterly Performance Reports Q4 2010 - Q4 2014, no date; Treasury, response to SIGTARP data call, 10/7/2013. Q3 2014 Q4 249 250 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.56 RHODE ISLAND ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 12/31/2014 LOAN MODIFICATION ASSISTANCE PROGRAM (MODIFICATION) TEMPORARY AND IMMEDIATE HOMEOWNER ASSISTANCE (PAST-DUE PAYMENT) 3,500 3,000 Program approved: September 2010 Peak estimate: 3,500 12/31/14 estimate: 477 12/31/14 program participation: 483 3,000 2,500 2,000 Program approved: September 2010 Peak estimate: 2,750 12/31/14 estimate: 681 12/31/14 program participation: 667 2,500 2,000 1,500 1,500 1,000 1,000 500 500 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 Q2 2011 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 Q2 2012 Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation Q2 Q3 Q4 2014 Program Participation MORTGAGE PAYMENT ASSISTANCE – UNEMPLOYMENT (UNEMPLOYMENT) Program approved: September 2010 Peak estimate: 875 12/31/14 estimate: 70 12/31/14 program participation: 65 750 Q2 2010 MOVING FORWARD ASSISTANCE (TRANSITION) 1,000 Q1 2014 6,000 Program approved: September 2010 Peak estimate: 6,000 12/31/14 estimate: 2,153 12/31/14 program participation: 2,112 5,000 4,000 500 3,000 2,000 250 1,000 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 Q2 2011 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 Q1 2014 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation PRINCIPAL REDUCTION PROGRAM (MODIFICATION) 100 75 Program approved: May 2011 Peak estimate: 100 12/31/14 estimate: 32 12/31/14 program participation: 28 50 25 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Notes: Programs may have been started or ended at different times. Estimated includes highest estimate of a range. Sources: States provide estimates for program participation and report program participation numbers. Rhode Island Housing and Mortgage Finance Corporation, Proposal, 5/27/2010 and (amended) 7/22/2010; Treasury and Rhode Island Housing and Mortgage Finance Corporation, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 8/3/2010; Rhode Island Housing and Mortgage Finance Corporation, first through ninth Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 5/25/2011, 1/25/2012, 3/29/2012, 12/14/2012, 7/17/2013, and 1/31/2014; Rhode Island Housing and Mortgage Finance Corporation, Hardest Hit Fund – Rhode Island, About HHFRI, Reports, Quarterly Performance Reports Q4 2010 - Q4 2014, no date; Treasury, response to SIGTARP data call, 10/7/2013. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 South Carolina’s HHF Programs Treasury obligated $295,431,547 in HHF funds to South Carolina.312 At the end of 2010, South Carolina estimated that it would help as many as 34,100 homeowners with HHF but, as of December 31, 2014, reduced that peak estimate by 46%, to 18,350. As of December 31, 2014, South Carolina had five active HHF programs: one to provide unemployment assistance to homeowners, a second to provide past-due payment assistance to homeowners, a third to modify homeowners’ mortgages, a fourth to provide transition assistance to homeowners, and a fifth for blight elimination. As of December 31, 2014, South Carolina had helped 8,808 individual homeowners with HHF programs, with the largest numbers in the past-due assistance and unemployment programs.313 South Carolina ended its program to provide second-lien reduction assistance to homeowners in August 2011 and its HAMP modification assistance program in October 2013. Neither of those programs had assisted a single homeowner. South Carolina’s remaining modification assistance program, approved in October 2013, has only 38 participants as of December 31, 2014. In addition to decreasing the number of homeowners it estimated helping with HHF, South Carolina has shifted 35% of its HHF funds for a total of $35 million away from existing HHF programs for blight elimination. This represents a shift from making payments directly to homeowners or their mortgage servicers to help keep homeowners in their homes. Treasury’s Blight Elimination Program allows for substantial payments of TARP funds to land banks, non-profits and other parties, including demolition contractors, in cash and mortgages that can be forgiven over time. As of December 31, 2014, the state had drawn down $162.5 million (55%) of its HHF funds, and had spent $127.7 million (43% of its obligated funds) to help individual homeowners with its HHF programs; no HHF funds had been spent on blight elimination.314,lxxxvi,lxxxvii The remaining $23.1 million (8%) was spent on administrative expenses, and $12.5 million (4%) is held as cash-on-hand.315,lxxxviii Figure 4.58 shows, in aggregate, the number of homeowners estimated to participate in South Carolina’s programs (estimated program participation), the reported number of homeowners who participated in one or more programs (program participation), and the total number of individual homeowners assisted, as of December 31, 2014. Because homeowners may participate in more than one program, the reported program participation numbers are higher than the total number of individual homeowners assisted. Figure 4.59 shows the number of homeowners estimated to participate in each of South Carolina’s programs (estimated program participation) and the reported number of homeowners who participated in each of South Carolina’s programs (program participation), as of December 31, 2014. lxxxvi Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, South Carolina had drawn down $162.5 million. lxxxvii According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. lxxxviii Figures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. FIGURE 4.57 SC HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 52.5% 45.9% 0.9% 0.7% Past-Due Payment ($67,051,794) Modification ($904,624) Transition ($1,115,504) Unemployment ($58,606,836) Demolition ($0) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: SC Housing Corp., SC HELP, Reports, Quarterly Performance Reports Q4 2014, no date. 251 252 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.58 SOUTH CAROLINA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 12/31/2014 35,000 30,000 25,000 20,000 15,000 Peak estimate: 34,100 12/31/2014 estimate: 18,350 12/31/2014 program participation: 13,593 Homeowners assisted: 8,808 10,000 5,000 0 Q1 Q210 Q2 Q310 Q3 Q410 Q4 Q111 Q1 Q211 Q2 Q311 Q3 Q411 Q4 Q112 Q1 Q212 Q2 Q312 Q3 Q412 Q4 Q113 Q1 Q213 Q2 Q313 Q3 Q413 Q4 Q114 Q1 Q214 Q2 Q314 Q3 Q414 Q4 Q110 2010 2011 2012 2013 2014 State Estimated Program Participation Homeowners Assisted Program Participation Notes: Estimated includes highest estimate of a range. Program participation numbers may have double-counted individual homeowners who received assistance from more than one program in states that have more than one program. For its “Blight Elimination Program” (Blight), South Carolina estimated a number of blighted properties proposed to be eliminated. This number is not included in the aggregate estimate of all programs because it refers to properties and not homeowners. Sources: States provide estimates for program participation and report program participation and homeowners assisted numbers. SC Housing Corp., Proposal, 6/1/2010; Treasury and SC Housing Corp., Commitment to Purchase Financial Instrument and HFA Participation Agreement, 8/3/2010; SC Housing Corp., first through seventh Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 8/31/2011, 11/15/2012, 10/30/2013, and 7/31/2014; SC Housing Corp., SC HELP, Reports, Quarterly Performance Reports Q1 2011 - Q4 2014, no date. 253 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.59 SOUTH CAROLINA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 12/31/2014 MONTHLY PAYMENT ASSISTANCE PROGRAM Program approval: September 2010 (UNEMPLOYMENT) Peak estimate: 14,000 12/31/14 estimate: 6,000 12/31/14 program participation: 4,870 15,000 12,000 DIRECT LOAN ASSISTANCE PROGRAM (PAST-DUE PAYMENT) Program approved: September 2010 12,000 9,000 9,000 6,000 6,000 3,000 3,000 0 Peak estimate: 11,500 12/31/14 estimate: 11,500 12/31/14 program participation: 8,461 15,000 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 Q2 2013 State Estimated Program Participation Q3 Q4 4,000 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation Q2 Q3 Q4 2014 Program Participation PROPERTY DISPOSITION ASSISTANCE PROGRAM (TRANSITION) Program approved: September 2010 Peak estimate: 6,000 12/31/14 estimate: 300 12/31/14 program participation: 224 6,000 Program ended: October 2013 Peak estimate: 6,000 12/31/14 estimate: 0 12/31/14 program participation: 0 5,000 Q2 2010 HAMP ASSISTANCE PROGRAM (MODIFICATION) 6,000 Q1 2014 5,000 4,000 3,000 3,000 2,000 2,000 1,000 1,000 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 Q2 2013 State Estimated Program Participation Q3 Q4 2,000 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Program Participation Q2 Q3 Q4 2014 Program Participation MODIFICATION ASSISTANCE PROGRAM (MODIFICATION) 6000 Program ended: August 2011 Peak estimate: 2,600 12/31/14 estimate: 0 12/31/14 program participation: 0 2,500 Q2 2010 SECOND MORTGAGE ASSISTANCE PROGRAM (SECOND-LIEN REDUCTION) 3,000 Q1 2014 Program approved: October 2013 Peak estimate: 3,500 12/31/14 estimate: 550 12/31/14 program participation: 38 5000 4000 1,500 3000 1,000 2000 500 1000 0 0 Q1 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 2014 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation NEIGHBORHOOD INITIATIVE PROGRAM (BLIGHT) 1500 1250 Program approved: July 2014 12/31/14 blighted homes proposed to be eliminated: 1,300 12/31/14 actual blighted homes eliminated: 0 1000 750 500 250 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Notes: Programs may have been started or ended at different times. Estimated includes highest estimate of a range. For its “Blight Elimination Program” (Blight), South Carolina estimated a number of blighted properties proposed to be eliminated. This number is not included in the aggregate estimate of all programs because it refers to properties and not homeowners. Sources: States provide estimates for program participation and report program participation numbers. SC Housing Corp., Proposal, 6/1/2010; Treasury and SC Housing Corp., Commitment to Purchase Financial Instrument and HFA Participation Agreement, 8/3/2010; SC Housing Corp, first through seventh Amendment[s] to Agreement[s], 9/23/2010, 9/29/2010, 12/16/2010, 8/31/2011, 11/15/2012, 10/30/2013, and 7/31/2014; SC Housing Corp., SC HELP, Reports, Quarterly Performance Reports Q1 2011 - Q4 2014, no date. 254 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Tennessee’s HHF Program FIGURE 4.60 TN HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 100% Unemployment ($137,882,181) Treasury obligated $217,315,593 in HHF funds to Tennessee.316 At the end of 2011, Tennessee estimated that it would provide HHF assistance to as many as 13,500 homeowners through its single HHF unemployment program but, as of December 31, 2014, had reduced that peak estimate by 43%, to 7,700. As of December 31, 2014, Tennessee had helped 7,355 individual homeowners with its program.317 According to Treasury, as of September 30, 2014, Tennessee has stopped accepting new applications.318 As of December 31, 2014, the state had drawn down $177.3 million (82%) of its HHF funds and spent $137.9 million (63%) to help individual homeowners.319,lxxxix,xc The remaining $16.9 million (8%) was spent on administrative expenses, and $23.1 million (11%) is held as cash-on-hand.320,xci Figure 4.61 shows the number of homeowners estimated to participate in Tennessee’s program and the number of homeowners who have been assisted, as of December 31, 2014. Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Source: Tennessee Housing Development Agency, Keep My Tennessee Home, Reports, Quarterly Performance Report Q4 2014, no date. lxxxix Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, Tennessee had drawn down $177.3 million. xc According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. xci F igures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.61 TENNESSEE’S HARDEST HIT FUND PROGRAM (UNEMPLOYMENT) ESTIMATED PROGRAM PARTICIPATION AND HOMEOWNERS ASSISTED, AS OF 12/31/2014 15,000 12,000 9,000 Program approved: September 2010 Peak estimate: 13,500 12/31/2014 estimate: 7,700 12/31/2014 program participation: 7,355 Homeowners assisted: 7,355 6,000 3,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Homeowners Assisted Notes: Estimated includes highest estimate of a range. Sources: States provide estimates for program participation and homeowners assisted numbers. Tennessee Housing Development Agency, Proposal, 9/1/2010; Treasury and Tennessee Housing Development Agency, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 9/23/2010; Tennessee Housing Development Agency, first through eighth Amendment[s] to Agreement[s], 9/29/2010, 12/16/2010, 5/25/2011, 9/28/2011, 12/8/2011, 5/3/2012, 11/15/2012, and 6/11/2014; Tennessee Housing Development Agency, Keep My Tennessee Home, Reports, Quarterly Performance Reports Q1 2011 - Q4 2014, no date. 255 256 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Washington, DC’s HHF Program FIGURE 4.62 WASHINGTON, DC HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH DECEMBER 31, 2014 100% Unemployment ($13,423,877) Notes: Spending data was obtained from the state’s Quarterly Performance Report. For some states, this differs from what is reported on their Quarterly Financial Report submitted to Treasury, which reconciles each type of cash disbursement to funds drawn from Treasury. Treasury obligated $20,697,198 in HHF funds to Washington, DC.321 At the end of 2010, Washington, DC estimated that it would provide HHF assistance to as many as 1,000 homeowners with its single HHF HomeSaver unemployment program but, as of December 31, 2014, had increased that peak estimate to 1,300.xcii As of December 31, 2014, Washington DC has helped 695 homeowners.322 According to Treasury, Washington, DC stopped accepting new applications after November 22, 2013.323 As of December 31, 2014, Washington, DC had drawn down $18.2 million (88%) of its HHF funds.324,xciii As of December 31, 2014, the most recent data available, Washington, DC had spent $13.4 million (65% of its obligated funds) to help individual homeowners.325,xciv The remaining $3.1 million (15%) was spent on administrative expenses and $2.3 million (11%) is held as cash-on-hand.326,xcv Figure 4.63 shows the number of homeowners estimated to participate in Washington, DC’s program and the number of homeowners who have been assisted, as of December 31, 2014. Source: District of Columbia Housing Finance Agency, HomeSaver – A Foreclosure Prevention Program, Quarterly Performance Reports Q4 2014, no date. xcii Washington, DC had previously reduced its estimate to helping 800 homeowners as of June 30, 2014. xciii Treasury has separately published March 31, 2015, figures for amounts drawn down; as of March 31, 2015, Washington, DC had drawn down $18.2 million. xciv According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; states vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. xcv F igures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FIGURE 4.63 WASHINGTON, DC’S HOMESAVER PROGRAM (UNEMPLOYMENT) ESTIMATED PROGRAM PARTICIPATION AND HOMEOWNERS ASSISTED, AS OF 12/31/2014 1,500 Program approved: September 2010 Peak estimate: 1,300 12/31/2014 estimate: 1,300 12/31/2014 program participation: 695 Homeowners assisted: 695 1,200 900 600 300 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Homeowners Assisted Notes: Estimated includes highest estimate of a range. Sources: States provide estimates for program participation and homeowners assisted numbers. District of Columbia Housing Finance Agency, Proposal, 9/1/2010; Treasury and District of Columbia Housing Finance Agency, Commitment to Purchase Financial Instrument and HFA Participation Agreement, 9/23/2010; District of Columbia Housing Finance Agency, first through ninth Amendment[s] to Agreement[s], 9/29/2010, 12/16/2010, 3/31/2011, 5/25/2011, 10/28/2011, 3/29/2012, 12/14/2012, 9/20/2013, and 7/11/2014; District of Columbia Housing Finance Agency, HomeSaver – A Foreclosure Prevention Program, Quarterly Performance Reports Q1 2011 Q4 2014, no date. 257 258 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FHA Short Refinance Program For more information concerning FHA Short Refinance eligibility, see SIGTARP’s April 2011 Quarterly Report, pages 85-87. On March 26, 2010, Treasury and HUD announced the FHA Short Refinance program, which gives homeowners the option of refinancing an underwater, non- FHA-insured mortgage into an FHA-insured mortgage at 97.75% of the home’s value. In March 2013, Treasury reduced TARP funds allocated to provide loss protection to FHA through a $1 billion for 10 years (October 2020) letter of credit, plus up to $25 million in fees for the letter of credit.327 In December 2014, Treasury and HUD extended the expiration of the program by two years, to December 31, 2016. On March 31, 2015, Treasury amended the letter of credit to reduce the maximum amount to $100 million and extending its term through December 31, 2022.328 FHA Short Refinance is voluntary for servicers. Therefore, not all underwater homeowners who qualify may be able to participate in the program.329 As of December 31, 2014, according to Treasury, 5,694 loans had been refinanced under the program.330 As of December 31, 2014, Treasury has paid $121,508 on claims for five defaults under the program; however, it is possible that more loans have defaulted but FHA has not yet evaluated the claims.331 Treasury has deposited $50 million into a reserve account for future claims.332 It has also spent approximately $10 million on administrative expenses associated with the letter of credit.333 Servicers must review the current a third-party appraisal by a HUD-approved appraiser. The homeowner is then reviewed for credit risk and, if necessary, referred for a review to confirm that the homeowner’s total monthly mortgage payments on all liens after the refinance is not greater than 31% of the homeowner’s monthly gross income and the homeowner’s total household debt is not greater than 50%.334 Next, the lien holders must forgive principal that is more than 115% of the value of the home. The first-lien lender must forgive at least 10% of principal balance of the first-lien loan, in exchange for a cash payment for 97.75% of the current home value from the proceeds of the refinance. The lender may maintain a subordinate second lien for up to 17.25% of that value.335 If a homeowner defaults, the letter of credit purchased by Treasury compensates the investor for a first percentage of losses, with FHA responsible for the remainder. For loans refinanced under the program prior to June 1, 2013, Treasury is responsible for losses covering approximately 4.38% – 18.85% of the unpaid principal balance; for loans refinanced from June 1, 2013 through January 25, 2015, Treasury’s loss coverage responsibility is 0%, and FHA is solely responsible for covering any losses on those loans. For loans refinanced between January 26, 2015 and March 31, 2015, Treasury’s loss coverage responsibility is 14.85%.336 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 FINANCIAL INSTITUTION SUPPORT PROGRAMS Treasury created six TARP programs through which it made capital investments or asset guarantees in exchange for equity in participating financial institutions. Three of the programs, the Capital Purchase Program (“CPP”), the Community Development Capital Initiative (“CDCI”), and the Capital Assistance Program (“CAP”), were open to all qualifying financial institutions. The other three, the Systemically Significant Failing Institutions (“SSFI”) program, the Targeted Investment Program (“TIP”), and the Asset Guarantee Program (“AGP”), were available on a case-by-case basis to institutions that needed assistance beyond that available through CPP. With the expiration of TARP funding authorization, no new investments can be made through these six programs. Capital Purchase Program Treasury’s stated goal for CPP was to invest in “healthy, viable institutions” as a way to promote financial stability, maintain confidence in the financial system, and enable lenders to meet the nation’s credit needs.337 CPP was a voluntary program open by application to qualifying financial institutions, including U.S.-controlled banks, savings associations, and certain bank and savings and loan holding companies.338 Under CPP, Treasury used TARP funds predominantly to purchase preferred equity interests in the financial institutions. The institutions issued Treasury senior preferred shares that pay a 5% annual dividend for the first five years and a 9% annual dividend thereafter. Subchapter S Corporations (“S corporations”) paid an initial rate of 7.7%, that increases to 13.8%. Rate increases began in the quarter ended December 31, 2013. In addition to the senior preferred shares, publicly traded institutions issued Treasury warrants to purchase common stock with an aggregate market price equal to 15% of the senior preferred share investment.339 Privately held institutions issued warrants to Treasury to purchase additional senior preferred stock worth 5% of Treasury’s initial preferred stock investment.340 According to Treasury, through CPP, in total Treasury purchased $204.9 billion in preferred stock and subordinated debentures from 707 institutions in 48 states, the District of Columbia, and Puerto Rico.341 Status of Program As of March 31, 2015, 61 of the 707 institutions remained in CPP; in 30 of them, Treasury holds only warrants to purchase stock. Treasury does not consider these 30 institutions to be in TARP, however Treasury applies all proceeds from the sale of warrants in these banks to recovery amounts in TARP’s CPP program. As of March 31, 2015, 31 of the 61 institutions had outstanding principal investments. Taxpayers were still owed $5.4 billion.342 According to Treasury, it had write-offs and realized losses of $5.1 billion in the program, leaving $329.1 million in TARP funds outstanding. While Treasury has not yet realized those losses, it expects that all of its investments in the banks will be lost.343 As of March 31, 2015, 25 of the Subchapter S Corporations (“S corporations”): Corporate form that passes corporate income, losses, deductions, and credit through to shareholders for Federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are taxed at their individual income tax rates. Subordinated Debentures: Form of debt security that ranks below other loans or securities with regard to claims on assets or earnings. For discussion of SIGTARP’s recommendations on TARP exit paths for community banks, see SIGTARP’s October 2011 Quarterly Report, pages 167-169. For discussion of SIGTARP’s recommendations issued on October 9, 2012, regarding CPP preferred stock auctions, see SIGTARP’s October 2012 Quarterly Report, pages 180-183. 259 260 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.64 STATUS OF CPP RECIPIENTS, AS OF 3/31/2015 3% 23% 36% 1% 5% 5% 4% 19% 4% Fully Repaid Principal (256) Remaining Principal Investment in CPP (31) Refinanced into SBLF (137) Refinanced into CDCI (28) Sold for less than par (34) Failed/subsidiary failed (32) Merged (4) Auction: Sold at loss (166) Auction: Sold at profit (19) Note: 31 banks repaid CPP principal but remain in TARP with Treasury holding only warrants. Source: Treasury, response to SIGTARP data call, 4/10/2015. 31 banks with remaining principal investments had missed dividends and interest payments.344 As of March 31, 2015, Treasury has recovered $197.3 billion of the CPP principal (or 96.3%).345 Treasury converted $363.3 million in preferred stock for nearly a quarter (165) of CPP bank investments into CDCI, which therefore is still an outstanding obligation to TARP. Additionally, $2.2 billion in CPP investments in 137 banks was refinanced in 2011 into SBLF, a non-TARP Treasury program.346 However, only 256 of the 707 banks, or 36%, fully repaid CPP principal.347 Of the other banks that exited with less than full repayment, four CPP banks merged with other CPP banks; Treasury sold its investments in 33 banks for less than par and sold at auction its investments in 185 banks (Treasury sold 166 of these at a loss); and 32 institutions or their subsidiary banks failed, meaning Treasury has lost or expects to lose its entire investment in those banks.348 Figure 4.64 shows the status of the 707 CPP recipients as of March 31, 2015. As of March 31, 2015, Treasury had received approximately $12.1 billion in interest and dividends from CPP recipients. Treasury also had received $8 billion through the sale of CPP warrants that were obtained from TARP recipients.349 For a complete list of CPP share repurchases, see Appendix D: “Transaction Detail.” Although the 10 largest investments accounted for $142.6 billion of the program, CPP made many smaller investments: 311 of the 707 recipients received less than $10 million.350 All but one of the recipients with remaining principal investments have outstanding investments of less than $100 million, with more than half of the banks with remaining principal investments, or 65%, having outstanding investments of less than $10 million.351 As of March 31, 2015, of the 31 banks with remaining principal investments in CPP, eight were in the Southeast region, five were in the Southwest/South Central region, seven were in the Midwest region, five were in the Mid-Atlantic/ Northeast region, four were in the West region, and two were in the Mountain West/Plains region. The Southeast region and the Southwest/South Central region had the largest total remaining CPP investments; $181.6 billion and $53.1 million, respectively. These regions were followed in remaining CPP investments by the Mid-Atlantic/Northeast region ($45.9 million), the Midwest region ($38.5 million), the West region ($24.1 million), and the Mountain West/Plains region ($5.9 million). Table 4.34 and Figure 4.65 show the geographical distribution of the banks that remain in CPP as of March 31, 2015, by region. Tables 4.35–4.40 show the distribution by state. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 4.34 BANKS WITH CPP PRINCIPAL REMAINING, BY REGION, AS OF 3/31/2015 Banks with Remaining Principal Principal Investment Remaining Number of Banks with Missed Dividend/Interest Payments Value of Missed Dividend/ Interest Payments West 4 $24,066,000 3 $2,529,813 Moutain West/Plains 2 5,876,000 2 1,866,045 Southwest/South Central 5 53,085,000 4 10,511,279 Midwest 7 38,477,000 5 10,272,266 Mid-Atlantic/Northeast 5 45,862,000 5 13,985,228 Southeast Total 8 181,581,824 6 14,184,423 31 $348,947,824 25 $53,349,053 FIGURE 4.65 AMOUNT OF CPP PRINCIPAL INVESTMENT REMAINING, BY REGION, AS OF 3/31/2015 AK MOUNTAIN WEST/ PLAINS $6 MILLION WA MT OR ID WEST $24 MILLION CA HI NV ND WY MN AZ WI SD CO IL KS OK NM MO AR NY OH IN PA WV VA KY NH MA CT RI NJ DE MD NC TN MS AL TX MID-ATLANTIC/ NORTHEAST VT ME $46 MILLION MI IA NE UT MIDWEST $38 MILLION SC GA SOUTHEAST $182 MILLION LA FL SOUTHWEST/ SOUTH CENTRAL $53 MILLION WEST MOUNTAIN WEST/PLAINS SOUTHWEST/SOUTH CENTRAL MIDWEST MID-ATLANTIC/NORTHEAST SOUTHEAST PR 261 262 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM West TABLE 4.35 BANKS WITH CPP PRINCIPAL REMAINING, BY STATE, AS OF 3/31/2015 Principal Investment Remaining CA 4 $24,066,000 3 $2,529,813 Total 4 $24,066,000 3 $2,529,813 WA AK OR Number of Banks with Missed Value of Missed Dividend/Interest Dividend/Interest Payments Payments Banks with Remaining Principal CA HI WEST Principal investment remaining in CPP banks >$100 million $21-$100 million $1-$20 million $0 Mountain West/Plains TABLE 4.36 BANKS WITH CPP PRINCIPAL REMAINING, BY STATE, AS OF 3/31/2015 MT ID NV ND WY SD NE UT CO MOUNTAIN WEST/ PLAINS Principal investment remaining in CPP banks KS >$100 million $21-$100 million $1-$20 million $0 Banks with Remaining Principal Principal Investment Remaining Number of Banks with Missed Value of Missed Dividend/Interest Dividend/Interest Payments Payments CO 1 $3,076,000 1 $1,019,045 KS 1 2,800,000 1 847,000 Total 2 $5,876,000 2 $1,866,045 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Southwest/South Central TABLE 4.37 BANKS WITH CPP PRINCIPAL REMAINING, BY STATE, AS OF 3/31/2015 AZ OK NM TX SOUTHWEST/ SOUTH CENTRAL AR LA Number of Banks with Missed Value of Missed Dividend/Interest Dividend/Interest Payments Payments Banks with Remaining Principal Principal Investment Remaining AR 2 $37,117,000 2 $9,545,459 AZ 1 2,568,000 1 802,320 LA 1 2,400,000 1 163,500 TX 1 11,000,000 0 0 Total 5 $53,085,000 4 $10,511,279 >$100 million $21-$100 million $1-$20 million $0 Principal investment remaining in CPP banks Midwest TABLE 4.38 BANKS WITH CPP PRINCIPAL REMAINING, BY STATE, AS OF 3/31/2015 MN WI MI IA IL MO MIDWEST Principal investment remaining in CPP banks IN OH KY >$100 million $21-$100 million $1-$20 million $0 Number of Banks with Missed Value of Missed Dividend/Interest Dividend/Interest Payments Payments Banks with Remaining Principal Principal Investment Remaining IL 3 $23,040,000 2 $6,489,906 KY 1 6,300,000 1 2,140,425 MO 2 4,037,000 1 168,673 WI 1 5,100,000 1 1,473,263 Total 7 $38,477,000 5 $10,272,266 263 264 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Mid-Atlantic/Northeast TABLE 4.39 BANKS WITH CPP PRINCIPAL REMAINING, BY STATE, AS OF 3/31/2015 NH MA NY CT NJ DE MD PA WV VA WV Principal Investment Remaining MA 1 $12,063,000 1 $4,101,420 MD 3 24,360,000 3 7,122,900 ME VT MID-ATLANTIC/ NORTHEAST Principal investment remaining in CPP banks RI Number of Banks with Missed Value of Missed Dividend/Interest Dividend/Interest Payments Payments Banks with Remaining Principal NJ 1 9,439,000 1 2,760,908 Total 5 $45,862,000 5 $13,985,228 >$100 million $21-$100 million $1-$20 million $0 Southeast TABLE 4.40 BANKS WITH CPP PRINCIPAL REMAINING, BY STATE, AS OF 3/31/2015 MS AL Principal Investment Remaining AL 1 $2,760,000 1 $544,065 FL 1 4,389,000 1 1,267,680 GA 2 19,680,000 2 5,416,920 MS 1 2,443,320 0 0 PR 1 124,966,504 0 0 SC 2 27,343,000 2 6,955,758 Total 8 $181,581,824 6 $14,184,423 NC TN SC GA PR FL SOUTHEAST Principal investment remaining in CPP banks >$100 million $21-$100 million $1-20 million $0 Number of Banks with Missed Value of Missed Dividend/Interest Dividend/Interest Payments Payments Banks with Remaining Principal SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Dividends and Interest As of March 31, 2015, Treasury had received $12.1 billion in dividends on its CPP investments.352 However, as of that date, missed dividend and interest payments by 175 institutions, including banks with missed payments that no longer have outstanding CPP principal investments, totaled approximately $527 million. Approximately $37.7 million of the unpaid amounts are non-cumulative, meaning that the institution has no legal obligation to pay Treasury unless the institution declares a dividend.353 More than four-fifths, or 25 of the 31 banks that had remaining CPP principal investments as of March 31, 2015, were not current on their dividend and interest payments to Treasury.354 The 25 banks were behind by as many as 25 payments and in total were overdue in payments to Treasury of $53.3 million.355 As of March 31, 2015, 25 of the 31 banks with remaining principal investments were overdue by at least three payments, including 24 banks that were overdue by at least six payments.356 Of the banks with remaining principal investments that are not current on payments, 20 have unpaid dividend and interest payments that are cumulative, and five have unpaid dividend payments that are non-cumulative. Tables 4.35–4.40 show the distribution of missed payments and value of those payments by state. CPP Dividend Rates Increase for Remaining Banks All banks with remaining principal investments have reached the five-year anniversary in CPP, at which point their dividend rate increased from 5% to 9% (some banks structured as S corporations have had their interest rate increase from 7.7% to 13.8%). Table 4.41 lists the remaining banks by date of dividend rate increase. As of March 31, 2015, of the 31 banks with remaining principal investments in CPP, 25 already have overdue missed dividends and interest. For these banks, with the increase in the dividend rate, the amount overdue to Treasury will grow more quickly. While all banks, regardless of size, received CPP on the same terms, the one-size-fits-all repayment terms may not fit all. Because so many of these banks were not paying the 5% dividend, an increase to 9% may not have the intended effect of incentivizing them to exit TARP, particularly if they lack the ability to raise capital. In October 2011, SIGTARP recommended to Treasury that it assess whether it should renegotiate the terms of its CPP contracts for those community banks that will not be able to exit TARP prior to the dividend rate increase. Treasury did not implement this recommendation. For more on SIGTARP’s October 2011 recommendation regarding how Treasury should treat community banks unable to exit TARP before the dividend rate increase, see SIGTARP’s October 2011 Quarterly Report, pages 167-169, and SIGTARP’s January 2012 Quarterly Report, pages 159-161. 265 266 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.41 CPP-RELATED DIVIDEND RATE INCREASES, AS OF 3/31/2015 Value of Missed Dividend/Interest Payments Number of Missed Dividend Payments Location Investment Date Outstanding Capital Amount First BanCorp San Juan, PR 1/16/2009 $124,966,504 Broadway Financial Corporation Los Angeles, CA 11/14/2008 15,000,000 Tidelands Bancshares, Inc Mount Pleasant, SC 12/19/2008 14,448,000 $3,828,720 18 One United Bank Boston, MA 12/19/2008 12,063,000 4,101,420 24 Cecil Bancorp, Inc. Elkton, MD 12/23/2008 11,560,000 3,496,900 21 Citizens Commerce Bancshares, Inc. Versailles, KY 2/6/2009 6,300,000 2,140,425 22 Patapsco Bancorp, Inc. Dundalk, MD 12/19/2008 6,000,000 1,875,000 20 CalWest Bancorp Rancho Santa Margarita, CA 1/23/2009 4,656,000 1,328,205 18 US Metro Bank Garden Grove, CA 2/6/2009 2,861,000 621,180 13 Goldwater Bank, N.A. Scottsdale, AZ 1/30/2009 2,568,000 802,320 20 Institution Rate Increased 2/15/2014 Saigon National Bank Westminster, CA 12/23/2008 1,549,000 580,428 25 Calvert Financial Corporation Ashland, MO 1/23/2009 1,037,000 168,673 9 Liberty Shares, Inc. Hinesville, GA 2/20/2009 17,280,000 4,756,320 18 HCSB Financial Corporation Loris, SC 3/6/2009 12,895,000 3,127,038 17 Farmers & Merchants Bancshares, Inc. Houston, TX 3/6/2009 11,000,000 City National Bancshares Corporation Newark, NJ 4/10/2009 9,439,000 2,760,908 21 Capital Commerce Bancorp, Inc. Milwaukee, WI 4/10/2009 5,100,000 1,473,263 19 Pinnacle Bank Holding Company, Inc. Orange City, FL 3/6/2009 1,267,680 19 Metropolitan Capital Bancorp, Inc. Chicago, IL 856,073 15 Rate Increased 5/15/2014 4/10/2009 4,389,000 4,388,000 Allied First Bancorp, Inc. Oswego, IL 4/24/2009 3,652,000 St. Johns Bancshares, Inc. St. Louis, MO 3/13/2009 3,000,000 Prairie Star Bancshares, Inc. Olathe, KS 4/3/2009 2,800,000 847,000 20 Citizens Bank & Trust Company Covington, LA 3/20/2009 2,400,000 163,500 5 CSRA Bank Corp. Wrens, GA 3/27/2009 2,400,000 660,600 18 Chambers Bancshares, Inc.a Danville, AR 5/29/2009 19,817,000 4,600,618 9 OneFinancial Corporation Little Rock, AR 6/5/2009 17,300,000 4,944,841 12 Suburban Illinois Bancorp, Inc.c Elmhurst, IL 6/19/2009 15,000,000 5,633,833 16 Harbor Bankshares Corporation Baltimore, MD 7/17/2009 6,800,000 1,751,000 19 Rate Increased 8/15/2014 b Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 CPP-RELATED DIVIDEND RATE INCREASES, AS OF 3/31/2015 (CONTINUED) Number of Missed Dividend Payments Institution Location Investment Date Outstanding Capital Amount Value of Missed Dividend/Interest Payments Grand Mountain Bancshares, Inc. Granby, CO 5/29/2009 $3,076,000 $1,019,045 23 SouthFirst Bancshares, Inc. Sylacauga, AL 6/12/2009 2,760,000 544,065 13 Hattiesburg, MS 9/25/2009 2,443,320 Rate Increased 11/15/2014 Grand Financial Corporationd Notes: Numbers may not total due to rounding. a Chambers Bancshares, Inc. is an S-Corporation, so its interest rate increased from 7.7% to 13.8% on the five-year anniversary of Treasury’s investment (5/29/2009). b OneFinancial Corporation is an S-Corporation, so its interest rate increased from 7.7% to 13.8% on the five-year anniversary of Treasury’s investment (6/5/2009). c Suburban Illinois Bancorp, Inc. is an S-Corporation, so its interest rate increased from 7.7% to 13.8% on the five-year anniversary of Treasury’s investment (6/19/2009). d Grand Financial Corporation is an S-Corporation, so its interest rate increases from 7.7% to 13.8% on the five-year anniversary of Treasury’s investment (9/25/2009). Treasury’s Policy on Missed Dividend and Interest Payments According to Treasury, it “evaluates its CPP investments on an ongoing basis with the help of outside advisors, including external asset managers. The external asset managers provide a valuation for each CPP investment” that results in Treasury assigning the institution a credit score.357 For those that have unfavorable credit scores, including any institution that has missed more than three dividend (or interest) payments, Treasury has stated that the “asset manager dedicates more resources to monitoring the institution and may talk to the institution on a more frequent basis.”358 Under the terms of the preferred shares or subordinated debentures held by Treasury as a result of its CPP investments, in certain circumstances, such as when a participant misses six dividend (or interest) payments, Treasury has the right to appoint up to two additional members to the institution’s board of directors.359 These directors will not represent Treasury, but rather will have the same fiduciary duties to shareholders as all other directors. They will be compensated by the institution in a manner similar to other directors.360 As of March 31, 2015, of the 31 institutions with remaining principal investments, 24 CPP institutions have missed at least six payments.361 As of March 31, 2015, Treasury had made director appointments to the boards of directors of 13 CPP banks, as noted in Table 4.43.362 Most of those banks no longer have remaining CPP principal investments. None of the 31 banks with remaining principal investments have Treasury-appointed directors. For institutions that miss five or more dividend (or interest) payments, Treasury has stated that it would seek consent from such institutions to send observers to the institutions’ board meetings.363 As of March 31, 2015, of the 31 CPP banks with remaining principal investments, 25 had missed at least five payments.364 According to Treasury, the observers would be selected from its Office of Financial Stability (“OFS”) and assigned to “gain a better understanding of the institution’s condition and challenges and to observe how the board is addressing the situation.”365 Their participation would be “limited to inquiring about distributed materials, presentations, and actions proposed or taken during the meetings, as well as addressing any questions concerning” their role.366 The findings of the 267 268 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM observers are taken into account when Treasury evaluates whether to appoint individuals to an institution’s board of directors.367 As of March 31, 2015, Treasury had assigned observers to 12 current CPP recipients, as noted in Table 4.43.368 Seven of the 707 banks that received CPP investments have never made a single dividend payment to Treasury since receiving CPP investments. Of these seven banks, two have remaining CPP principal investments and three have exited TARP as a result of bankruptcy. Midwest Banc Holdings, Inc., Melrose Park, Illinois, One Georgia Bank, Atlanta, Georgia, and Rising Sun Bancorp, Rising Sun, Maryland, both exited CPP by bankruptcy. The two remaining banks that have never made a dividend payment are: Saigon National Bank, Westminster, California (25 missed payments); and Grand Mountain Bankshares, Granby, Colorado (23). SIGTARP and Treasury do not use the same methodology to report unpaid dividend and interest payments. For example, Treasury generally excludes institutions from its “non-current” reporting: (i) that have completed a recapitalization, restructuring, or exchange with Treasury (though Treasury does report such institutions as non-current during the pendency of negotiations); (ii) for which Treasury sold the CPP investment to a third party, or otherwise disposed of the investment to facilitate the sale of the institution to a third party; (iii) that filed for bankruptcy relief; or (iv) that had a subsidiary bank fail.369 SIGTARP generally includes such activity in Table 4.43 under “Value of Unpaid Amounts” with the value set as of the date of the bankruptcy, restructuring, or other event that relieves the institution of the legal obligation to continue to make dividend and interest payments. If a completed transaction resulted in payment to Treasury for all unpaid dividends and interest, SIGTARP does not include the institution’s obligations under unpaid amounts. As of March 31, 2015, for all CPP banks, including those that were missing payments when they exited, 93 banks had missed at least 10 dividend (or interest) payments and 138 banks had missed five dividend (or interest) payments totaling $441.2 million.370 Table 4.43 lists CPP recipients that had unpaid dividend (or interest) payments as of March 31, 2015. For a complete list of CPP recipients and institutions making dividend or interest payments, see Appendix D: “Transaction Detail.” Twelve Banks Rejected Treasury Observers Twelve banks have rejected Treasury’s requests to send an observer to the institutions’ board meetings.371 The banks had initial CPP investments of as much as $27 million, have missed as many as 25 quarterly dividend payments to Treasury, and have been overdue in dividend payments by as much as $4.1 million.372 Five of these banks have since been sold at a loss to Treasury at auction.373 Two of these banks have remaining CPP principal investments, all of which continue to have missed payments.374 At 25 missed dividend payments, Saigon National Bank, Westminster, California, which has never made a dividend payment, has more missed payments than any TARP bank, yet rejected Treasury’s request to send an observer to its board meetings.375 Table 4.42 lists the banks that rejected Treasury observers. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 4.42 CPP BANKS THAT REJECTED TREASURY OBSERVERS Institution Intermountain Community Bancorp CPP Principal Investment Number of Missed Payments Value of Missed Payments Date of Treasury Request Date of Rejection $27,000,000 —a $— 3/11/2011 4/12/2011 b — 10/18/2011 11/23/2011 3,204,600 3/28/2012 4/27/2012 e Community Bankers Trust Corporation 17,680,000 — White River Bancshares Companyc 16,800,000 14d Timberland Bancorp, Inc. 16,641,000 — — 6/27/2011 8/18/2011 12,000,000 12f 3,020,400 3/10/2011 5/6/2011 11,385,000 h 15 2,134,688 3/9/2011 5/18/2012 i c Alliance Financial Services Inc.c Central Virginia Bankshares, Inc. g Commonwealth Business Bank 7,701,000 10 1,049,250 8/13/2010 9/20/2010 Pacific International Bancorpj 6,500,000 —k — 9/23/2010 11/17/2010 Rising Sun Bancorpm 5,983,000 20 1,749,960 12/3/2010 2/28/2011 Omega Capital Corp.c 2,816,000 15l 575,588 12/3/2010 1/13/2011 Citizens Bank & Trust Company 2,400,000 5 163,500 9/23/2010 11/17/2010 Saigon National Bank 1,549,000 25 580,428 8/13/2010 9/20/2010 c Notes: Numbers may not total due to rounding. a Bank later became current in accrued and unpaid dividends after missing the initial scheduled payment date(s). Prior to repayment, Intermountain Community Bancorp had 12 missed payments totaling $4.1 million. b Bank later became current in accrued and unpaid dividends after missing the initial scheduled payment date(s). Prior to repayment, Community Bankers had seven missed payments totaling $1.5 million. c Bank was sold at a loss at auction. d White River Bancshares Company was sold at auction and its missed payments to Treasury were not repaid. e Bank later became current in accrued and unpaid dividends after missing the initial scheduled payment date(s). Prior to repayment, Timberland had eight missed payments totaling $1.7 million. f Alliance Financial Services Inc. was sold at a loss at auction and its missed payments to Treasury were not repaid. g Bank accepted and then declined Treasury’s request to have a Treasury observer attend board of directors meetings. h Central Virginia Bankshares, Inc. was sold to C&F Financial Corporation and its missed payments to Treasury were not repaid. i Commonwealth Business Bank was sold at a loss at auction and its missed payments to Treasury were not repaid. j Bank has exited the Capital Purchase Program. k Bank later became current in accrued and unpaid dividends after missing the initial scheduled payment date(s). Prior to repayment, Pacific International Bancorp had 10 missed payments totaling $0.8 million. l Omega Capital Corp. was sold at a loss at auction and its missed payments to Treasury were not repaid. m Rising Sun Bancorp entered bankruptcy and its missed payments to Treasury were not repaid. Source: Treasury, Dividends and Interest Report, 4/10/2015. 269 270 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.43 CPP-RELATED MISSED DIVIDEND AND INTEREST PAYMENTS, AS OF 3/31/2015 Company Dividend or Payment Type Number of Missed Payments Saigon National Bank Non-Cumulative OneUnited Bank Observers Assigned to Board of Directors1 Value of Missed Payments2 Value of Unpaid Amounts2,3,4 25 $580,428 $580,428 Interest 24 4,101,420 4,101,420 Grand Mountain Bancshares, Inc. Cumulative 23 1,019,045 1,019,045 Citizens Commerce Bancshares, Inc. Cumulative 22 2,140,425 2,140,425 Cecil Bancorp, Inc. Cumulative 21 3,496,900 3,496,900 City National Bancshares Corporation Cumulative 21 2,760,908 2,760,908 Goldwater Bank, N.A.** Non-Cumulative 20 802,320 802,320 Patapsco Bancorp, Inc. Cumulative 20 1,875,000 1,875,000 Prairie Star Bancshares, Inc. Cumulative 20 847,000 847,000 Capital Commerce Bancorp, Inc. Cumulative 19 1,473,263 1,473,263 Harbor Bankshares Corporation** Cumulative 19 1,921,000 1,751,000 Pinnacle Bank Holding Company Cumulative 19 1,267,680 1,267,680 CalWest Bancorp Cumulative 18 1,328,205 1,328,205 CSRA Bank Corp. Cumulative 18 660,600 660,600 Liberty Shares, Inc. Cumulative 18 4,756,320 4,756,320 Tidelands Bancshares, Inc Cumulative 18 3,828,720 3,828,720 HCSB Financial Corporation Cumulative 17 3,127,038 3,127,038 Suburban Illinois Bancorp, Inc. Interest 16 5,633,833 5,633,833 Allied First Bancorp, Inc. Cumulative 15 856,073 856,073 SouthFirst Bancshares, Inc. Cumulative 13 544,065 544,065 US Metro Bank Non-Cumulative 13 621,180 621,180 OneFinancial Corporation*,** Non-Cumulative 12 4,944,841 4,944,841 *,** ** Calvert Financial Corporation Cumulative 9 168,673 168,673 Chambers Bancshares, Inc.*,** Interest 9 4,600,618 4,600,618 Citizens Bank & Trust Company Non-Cumulative 5 163,500 163,500 Non-Cumulative 23 1,059,242 1,059,242 United American Bank Non-Cumulative 21 2,482,702 2,482,702 U.S. Century Bank Exchanges, Sales, Recapitalizations, and Failed Banks Lone Star Bank***** ***** Non-Cumulative 21 15,378,590 15,378,590 **** Rising Sun Bancorp Cumulative 20 1,749,960 1,749,960 Royal Bancshares of Pennsylvania, Inc.***** Cumulative 20 7,601,750 7,601,750 Idaho Bancorp**** Cumulative 19 1,786,238 1,786,238 Cumulative 18 4,893,750 4,893,750 Blue Valley Ban Corp ***** Continued on next page 271 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 CPP-RELATED MISSED DIVIDEND AND INTEREST PAYMENTS, AS OF 3/31/2015 Dividend or Payment Type Company Number of Missed Payments Observers Assigned to Board of Directors1 (CONTINUED) Value of Missed Payments2 Value of Unpaid Amounts2,3,4 Pacific City Financial Corporation***** Cumulative 18 $3,973,050 $3,973,050 Centrue Financial Corporation Cumulative 18 6,959,475 6,959,475 Georgia Primary Bank Non-Cumulative 18 1,113,163 1,113,163 Northern States Financial Corp***** Cumulative 18 3,872,475 3,872,475 Western Community Bancshares, Inc. Cumulative 17 1,834,538 1,834,538 Anchor BanCorp Wisconsin, Inc.**** Cumulative 17 23,604,167 23,604,167 First Banks, Inc. Cumulative 17 64,543,063 64,543,063 Syringa Bancorp Cumulative 17 1,853,000 1,853,000 Market Bancorporation, Inc. Cumulative 16 449,080 449,080 Provident Community Bancshares, Inc. Cumulative 15 1,737,375 1,737,375 Central Virginia Bankshares, Inc.***** Cumulative 15 2,134,688 2,134,688 ***** Omega Capital Corp. Cumulative 15 575,588 575,588 Rogers Bancshares, Inc. Cumulative 15 5,109,375 5,109,375 Cumulative 15 761,588 761,588 Cumulative 15 7,766,250 7,766,250 ***** ***** ***** **** **** Pathway Bancorp ***** Bridgeview Bancorp, Inc. ***** Madison Financial Corporation Cumulative 15 688,913 688,913 Midtown Bank & Trust Company**,***** Non-Cumulative 15 1,067,213 1,067,213 TCB Holding Company**** Cumulative 15 2,397,488 2,397,488 Provident Community Bancshares, Inc.***** Cumulative 15 1,737,375 1,737,375 Marine Bank & Trust Company***** Non-Cumulative 15 613,125 613,125 Highlands Independent Bancshares, Inc.***** Cumulative 15 1,436,313 1,436,313 NCAL Bancorp***** Cumulative 14 2,207,500 2,207,500 1st FS Corporation Cumulative 14 2,864,575 2,864,575 Dickinson Financial Corporation II***** Cumulative 14 27,859,720 27,859,720 FC Holdings, Inc.***** Cumulative 14 4,013,730 4,013,730 Ridgestone Financial Services, Inc.***** Cumulative 14 2,079,175 2,079,175 Intervest Bancshares Corporation***** Cumulative 14 4,375,000 4,375,000 Fidelity Federal Bancorp***** Cumulative 14 1,229,924 1,229,924 Cumulative 14 7,245,000 7,245,000 Great River Holding Company Cumulative 14 2,466,660 2,466,660 Porter Bancorp, Inc. Cumulative 13 6,737,500 6,737,500 First Southwest Bancorporation, Inc.***** Cumulative 13 974,188 974,188 Cumulative 13 531,375 ***** ***** Premierwest Bancorp***** *,**,***** Tennessee Valley Financial Holdings, Inc. ***** 531,375 Continued on next page 272 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM CPP-RELATED MISSED DIVIDEND AND INTEREST PAYMENTS, AS OF 3/31/2015 Observers Assigned to Board of Directors1 (CONTINUED) Dividend or Payment Type Number of Missed Payments Non-Cumulative 13 Pacific Commerce Bank Non-Cumulative 13 751,089 695,771 Patriot Bancshares, Inc.***** Cumulative 13 4,612,010 4,612,010 Bank of the Carolinas Corporation***** Cumulative 14 2,306,325 2,306,325 White River Bancshares Company***** Cumulative 14 3,204,600 3,204,600 Stonebridge Financial Corp.***** Cumulative 12 1,794,180 1,794,180 Premier Financial Corp Interest 12 1,597,857 1,597,857 Citizens Bancshares Co. (MO) Cumulative 12 4,086,000 4,086,000 Northwest Bancorporation, Inc.***** Cumulative 12 1,716,750 1,716,750 Plumas Bancorp***** Cumulative 12 1,792,350 1,792,350 Company First Sound Bank***** **,***** *,**,***** **** Value of Missed Payments2 Value of Unpaid Amounts2,3,4 $1,202,500 $1,202,500 Gold Canyon Bank Non-Cumulative 12 254,010 254,010 Santa Clara Valley Bank, N.A.***** Non-Cumulative 12 474,150 474,150 Spirit BankCorp, Inc. Cumulative 12 4,905,000 4,905,000 Alliance Financial Services, Inc.*,***** Interest 12 3,020,400 3,020,400 First Trust Corporation*,***** Interest 12 4,522,611 4,522,611 Cumulative 12 2,911,200 2,911,200 Eastern Virginia Bankshares, Inc. Cumulative 11 3,300,000 3,300,000 The Queensborough Company***** Cumulative 11 1,798,500 1,798,500 Boscobel Bancorp, Inc.*,***** Interest 11 1,288,716 1,288,716 Investors Financial Corporation of Pettis County, Inc.* Interest 11 922,900 922,900 Florida Bank Group, Inc.***** Cumulative 11 3,068,203 3,068,203 Reliance Bancshares, Inc. Cumulative 11 5,995,000 5,995,000 Village Bank and Trust Financial Corp.***** Cumulative 11 2,026,475 2,026,475 AB&T Financial Corporation Cumulative 11 481,250 481,250 Atlantic Bancshares, Inc. Cumulative 11 299,255 299,255 First Financial Service Corporation***** Cumulative 10 2,500,000 2,500,000 Old Second Bancorp, Inc.***** Cumulative 10 9,125,000 9,125,000 Security State Bank Holding-Company Interest 10 2,931,481 2,931,481 Bank of George***** Non-Cumulative 10 364,150 364,150 Valley Community Bank Non-Cumulative 10 749,375 749,375 Commonwealth Business Bank***** Non-Cumulative 10 1,049,250 1,049,250 Gregg Bancshares, Inc.**** Cumulative 9 101,115 101,115 Metropolitan Bank Group, Inc./NC Bancorp, Inc.*** Cumulative 9 12,716,368 9,511,543 **** ***** Community First, Inc. ***** ***** ***** ***** ***** *,**,***** ***** Continued on next page 273 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 CPP-RELATED MISSED DIVIDEND AND INTEREST PAYMENTS, AS OF 3/31/2015 Company Dividend or Payment Type National Bancshares, Inc.***** Cumulative SouthCrest Financial Group, Inc.***** Cumulative Citizens Bancorp Number of Missed Payments Observers Assigned to Board of Directors1 (CONTINUED) Value of Missed Payments2 Value of Unpaid Amounts2,3,4 9 $3,024,383 $3,024,383 9 1,581,863 1,581,863 Cumulative 9 1,275,300 1,275,300 Community Pride Bank Corporation Interest 9 803,286 803,286 Premier Bank Holding Company**** Cumulative 9 1,164,938 1,164,938 RCB Financial Corporation***** Cumulative 9 1,055,520 1,055,520 Central Federal Corporation***** Cumulative 8 722,500 722,500 **** *,**,***** CoastalSouth Bancshares, Inc Cumulative 8 1,687,900 1,687,900 HMN Financial, Inc.***** Cumulative 8 2,600,000 2,600,000 One Georgia Bank Non-Cumulative 8 605,328 605,328 Independent Bank Corporation*** Cumulative 8 14,193,996 6,164,420 First Intercontinental Bank***** Non-Cumulative 8 697,400 697,400 Coloeast Bankshares, Inc. Cumulative 8 1,090,000 1,090,000 Cascade Financial Corporation***** Cumulative 7 3,409,875 3,409,875 Integra Bank Corporation**** Cumulative 7 7,313,775 7,313,775 Princeton National Bancorp, Inc.**** Cumulative 7 2,194,763 2,194,763 Brogan Bankshares, Inc. Interest 7 352,380 352,380 Maryland Financial Bank***** Non-Cumulative 7 162,138 162,138 .***** **** ***** * Severn Bancorp, Inc. Cumulative 6 1,754,475 1,754,475 Central Pacific Financial Corp.***,9 Cumulative 6 10,125,000 — ***** Coastal Banking Company, Inc. Cumulative 6 995,000 995,000 ***** First Reliance Bancshares, Inc. Cumulative 6 1,254,720 1,254,720 FNB United Corp.*** Cumulative 6 3,862,500 — ***** FPB Bancorp, Inc. (FL) Cumulative 6 435,000 435,000 Indiana Bank Corp.**** Cumulative 6 107,310 107,310 Naples Bancorp, Inc. Cumulative 6 327,000 327,000 First Place Financial Corp. Cumulative 6 5,469,525 5,469,525 Worthington Financial Holdings, Inc.***** Cumulative 6 222,360 222,360 Fort Lee Federal Savings Bank**** Non-Cumulative 6 106,275 106,275 Alarion Financial Services, Inc. Cumulative 6 532,560 532,560 Community Financial Shares, Inc. Cumulative 5 759,820 759,820 Delmar Bancorp***** Cumulative 5 613,125 613,125 First BanCorp (PR) Cumulative 5 42,681,526 — First Federal Bancshares of Arkansas, Inc.***** Cumulative 5 1,031,250 1,031,250 Flagstar Bancorp, Inc.***** Cumulative 5 16,666,063 16,666,063 **** ***** ***** *** *** Continued on next page 274 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM CPP-RELATED MISSED DIVIDEND AND INTEREST PAYMENTS, AS OF 3/31/2015 Company Dividend or Payment Type Midwest Banc Holdings, Inc.5 Cumulative Pacific Capital Bancorp***,9 Cumulative Number of Missed Payments Observers Assigned to Board of Directors1 (CONTINUED) Value of Missed Payments2 Value of Unpaid Amounts2,3,4 5 $4,239,200 $4,239,200 5 13,547,550 — Non-Cumulative 5 494,063 494,063 Northwest Commercial Bank Non-Cumulative 5 135,750 135,750 IA Bancorp, Inc.**,***** Cumulative 5 472,365 393,638 CB Holding Corp. Cumulative 4 224,240 224,240 Colony Bankcorp, Inc.***** Cumulative 4 1,400,000 1,400,000 First Community Bank Corporation of America***** Cumulative 4 534,250 534,250 Green Bankshares, Inc.***** Cumulative 4 3,613,900 3,613,900 Hampton Roads Bankshares, Inc.***,9 Cumulative 4 4,017,350 4,017,350 Pierce County Bancorp Cumulative 4 370,600 370,600 Santa Lucia Bancorp***** Cumulative 4 200,000 200,000 Sterling Financial Corporation (WA) Cumulative 4 18,937,500 18,937,500 TIB Financial Corp*****,7 Cumulative 4 1,850,000 1,850,000 Community Bank of the Bay Non-Cumulative 4 72,549 72,549 The Bank of Currituck Non-Cumulative 4 219,140 219,140 The Connecticut Bank and Trust Company***** Non-Cumulative 4 246,673 246,673 Plato Holdings Inc.*,***** Interest 4 207,266 207,266 Virginia Company Bank GulfSouth Private Bank **** **** **** **** ***,9 6 ***** Non-Cumulative 3 185,903 185,903 Blue River Bancshares, Inc.**** Cumulative 3 204,375 204,375 Community West Bancshares Cumulative 3 585,000 585,000 Legacy Bancorp, Inc.**** Cumulative 3 206,175 206,175 Sonoma Valley Bancorp Cumulative 3 353,715 353,715 Superior Bancorp Inc.**** Cumulative 3 2,587,500 2,587,500 Tennessee Commerce Bancorp, Inc.**** Cumulative 3 1,125,000 1,125,000 The South Financial Group, Inc. Cumulative 3 13,012,500 13,012,500 Treaty Oak Bancorp, Inc.***** Cumulative 3 133,553 133,553 Bank of Commerce ***** Non-Cumulative 3 122,625 122,625 Carolina Trust Bank***** Non-Cumulative 3 150,000 150,000 Commerce National Bank Non-Cumulative 3 150,000 150,000 Cadence Financial Corporation***** Cumulative 2 550,000 550,000 ***** First Alliance Bancshares, Inc. Cumulative 2 93,245 93,245 Pacific Coast National Bancorp**** Cumulative 2 112,270 112,270 The Baraboo Bancorporation, Inc.***** Cumulative 2 565,390 565,390 ***** ***** **** ***** ,7 Continued on next page 275 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 CPP-RELATED MISSED DIVIDEND AND INTEREST PAYMENTS, AS OF 3/31/2015 Company Dividend or Payment Type Number of Missed Payments Colonial American Bank***** Non-Cumulative Fresno First Bank*** Non-Cumulative FBHC Holding Company Observers Assigned to Board of Directors1 (CONTINUED) Value of Missed Payments2 Value of Unpaid Amounts2,3,4 2 $15,655 $15,655 2 33,357 33,357 Interest 2 123,127 123,127 Gateway Bancshares, Inc. Cumulative 2 163,500 163,500 CIT Group Inc.****,8 Cumulative 2 29,125,000 29,125,000 UCBH Holdings, Inc.**** Cumulative 1 3,734,213 3,734,213 Exchange Bank***** Non-Cumulative 1 585,875 585,875 Non-Cumulative 1 *,***** Tifton Banking Company **** Total 51,775 51,775 $608,782,009 $527,026,987 Notes: Numbers may not total due to rounding. Approximately $35.7 million of the $520.9 million in unpaid CPP dividend/interest payments are non-cumulative and Treasury has no legal right to missed dividends that are non-cumulative. * Missed interest payments occur when a Subchapter S recipient fails to pay Treasury interest on a subordinated debenture in a timely manner. ** Partial payments made after the due date. *** C ompleted an exchange with Treasury. For an exchange of mandatorily convertible preferred stock or trust preferred securities, dividend payments normally continue to accrue. For an exchange of mandatorily preferred stock for common stock, no additional preferred dividend payments will accrue. **** F iled for bankruptcy or subsidiary bank failed. For completed bankruptcy proceedings, Treasury’s investment was extinguished and no additional dividend payments will accrue. For bank failures, Treasury may elect to file claims with bank receivers to collect current and/or future unpaid dividends. ***** Treasury sold or is selling its CPP investment to the institution or a third party. No additional preferred dividend payments will accrue after a sale, absent an agreement to the contrary. Treasury has appointed one or more directors to the Board of Directors. Treasury has assigned an observer to the Board of Directors. F or First BanCorp and Pacific Capital Bancorp, Treasury had a contractual right to assign an observer to the board of directors. For the remainder, Treasury obtained consent from the institution to assign an observer to the board of directors. Includes unpaid cumulative dividends, non-cumulative dividends, and Subchapter S interest payments but does not include interest accrued on unpaid cumulative dividends. 3 Excludes institutions that missed payments but (i) have fully caught-up or exchanged new securities for missed payments, or (ii) have repaid their investment amounts and exited the Capital Purchase Program. 4 Includes institutions that missed payments and (i) completed an exchange with Treasury for new securities, (ii) purchased their CPP investment from Treasury, or saw a third party purchase its CPP investment from Treasury, or (iii) are in, or have completed bankruptcy proceedings or its subsidiary bank failed. 5 For Midwest Banc Holdings, Inc., the number of missed payments is the number last reported from SIGTARP Quarterly Report to Congress 4/20/2010, prior to bankruptcy filing; missed payment amounts are from Treasury’s response to SIGTARP data call, 10/13/2010. 6 Treasury reported four missed payments by Community Bank of the Bay before it was allowed to transfer from CPP to CDCI. Upon transfer, Treasury reset the number of missed payments to zero. 7 For South Financial Group, Inc. and TIB Financial Corp, the number of missed payments and unpaid amounts reflect figures Treasury reported prior to the sale. 8 For CIT Group Inc., the number of missed payments is from the number last reported from SIGTARP Quarterly Report to Congress 1/30/2010, shortly after the bankruptcy filing; missed payment amounts are from Treasury’s response to SIGTARP data call, 10/13/2010. 9 Completed exchanges: - The exchange between Treasury and Hampton Roads, and the exchange between Treasury and Sterling Financial did not account for unpaid dividends. The number of missed payments and unpaid amounts reflect the figures Treasury reported prior to the exchange. - The exchange between Treasury and Central Pacific Financial Corp., and the exchange between Treasury and Pacific Capital Bancorp did account for unpaid dividends, thereby eliminating any unpaid amounts. The number of missed payments reflects the amount Treasury reported prior to the exchange. 1 2 Sources: Treasury, Dividends and Interest Report, 4/10/2015; Treasury, responses to SIGTARP data calls, 1/7/2011, 4/6/2011, 7/8/2011, 10/11/2011, 1/10/2012, 4/5/2012, 7/10/2012, 10/4/2012, 1/10/2013, 4/4/2013, 7/5/2013, 10/7/2013, 1/13/2014, 4/10/2014, 7/11/2014, 10/6/2014, 1/5/2015, and 4/6/2015. 276 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM CPP Recipients: Bankrupt or with Failed Subsidiary Banks Despite Treasury’s stated goal of limiting CPP investments to “healthy, viable institutions,” as of March 31, 2015, 32 CPP participants had gone bankrupt or had a subsidiary bank fail, as indicated in Table 4.44.376 TABLE 4.44 CPP RECIPIENTS: BANKRUPT OR WITH FAILED SUBSIDIARY BANKS, AS OF 3/31/2015 Company Initial Invested Amount Investment Date Status Bankruptcy/ Failure Datea ($ MILLIONS) Subsidiary Bank $2,330.0 12/31/2008 Bankruptcy proceedings completed with no recovery of Treasury’s investment; subsidiary bank remains active 298.7 11/14/2008 In bankruptcy; subsidiary bank failed 11/6/2009 United Commercial Bank, San Francisco, CA 4.1 1/16/2009 Bankruptcy proceedings completed with no recovery of Treasury’s investment; subsidiary bank failed 11/13/2009 Pacific Coast National Bank, San Clemente, CA 89.4b 12/5/2008 In bankruptcy; subsidiary bank failed 5/14/2010 Midwest Bank and Trust Company, Elmwood Park, IL Sonoma Valley Bancorp, Sonoma, CA 8.7 2/20/2009 Subsidiary bank failed 8/20/2010 Sonoma Valley Bank, Sonoma, CA Pierce County Bancorp, Tacoma, WA 6.8 1/23/2009 Subsidiary bank failed 11/5/2010 Pierce Commercial Bank, Tacoma, WA Tifton Banking Company, Tifton, GA 3.8 4/17/2009 Failed 11/12/2010 N/A Legacy Bancorp, Inc., Milwaukee, WI 5.5 1/30/2009 Subsidiary bank failed 3/11/2011 Legacy Bank, Milwaukee, WI Superior Bancorp, Inc., Birmingham, AL 69.0 12/5/2008 Subsidiary bank failed 4/15/2011 Superior Bank, Birmingham, AL Integra Bank Corporation, Evansville, IN 83.6 2/27/2009 Subsidiary bank failed 7/29/2011 Integra Bank, Evansville, IN 5.5 5/8/2009 Failed 7/15/2011 N/A 7/15/2011 First Peoples Bank, Port Saint Lucie, FL 9/23/2011 Citizens Bank of Northern California, Nevada City, CA CIT Group Inc., New York, NY UCBH Holdings Inc., San Francisco, CA Pacific Coast National Bancorp, San Clemente, CA Midwest Banc Holdings, Inc., Melrose Park, IL One Georgia Bank, Atlanta, GA FPB Bancorp, Port Saint Lucie, FL 5.8 12/5/2008 Subsidiary bank failed Citizens Bancorp, Nevada City, CA 10.4 12/23/2008 Subsidiary bank failed 11/1/2009 CIT Bank, Salt Lake City, UT Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 CPP RECIPIENTS: BANKRUPT OR WITH FAILED SUBSIDIARY BANKS, AS OF 3/31/2015 Initial Invested Amount Investment Date CB Holding Corp., Aledo, IL $4.1 5/29/2009 Tennessee Commerce Bancorp, Inc., Franklin, TN 30.0 Blue River Bancshares, Inc., Shelbyville, IN Fort Lee Federal Savings Bank Company ($ MILLIONS) (CONTINUED) Bankruptcy/ Failure Datea Subsidiary Bank Subsidiary bank failed 10/14/2011 Country Bank, Aledo, IL 12/19/2008 Subsidiary bank failed 1/27/2012 Tennessee Commerce Bank, Franklin, TN 5.0 3/6/2009 Subsidiary bank failed 2/10/2012 SCB Bank, Shelbyville, IN 1.3 5/22/2009 Failed 4/20/2012 N/A 7/13/2012 Glasgow Savings Bank, Glasgow, MO Status Gregg Bancshares, Inc. 0.9 2/13/2009 Subsidiary bank failed Premier Bank Holding Company 9.5 3/20/2009 In bankruptcy 8/14/2012 N/A GulfSouth Private Bank 7.5 9/25/2009 Failed 10/19/2012 N/A Investors Financial Corporation of Pettis County, Inc. 4.0 5/8/2009 Subsidiary bank failed 10/19/2012 Excel Bank, Sedalia, MO First Place Financial Corporation 72.9 3/13/2009 In bankruptcy 10/29/2012 First Place Bank, Warren, OH Princeton National Bancorp 25.1 1/23/2009 Subsidiary bank failed 11/2/2012 Citizens First National Bank, Princeton, IL 1.6 6/26/2009 Failed 4/5/2013 N/A Gold Canyon Bank Indiana Bank Corp. 1.3 4/24/2009 In bankruptcy 4/9/2013 N/A 25.0 1/30/2009 In bankruptcy 7/5/2013 N/A 110.0 1/30/2009 Filed for and exited bankruptcy protectionc 8/12/2013 N/A 11.7 1/16/2009 Subsidiary bank failed 12/13/2013 Texas Community Bank, The Woodlands, TX Syringa Bancorp 8.0 1/16/2009 Subsidiary bank failed 1/31/2014 Syringa Bank, Boise, ID Idaho Bancorp, Boise, ID 6.9 1/16/2009 In bankruptcy 4/24/2014 N/A Rising Sun Bancorp, Rising Sun, MD 6.0 1/9/2009 Subsidiary bank failed 10/17/2014 NRBS Financial Rising Sun, MD Western Community Bancshares, Inc. Palm Desert, CA 7.3 12/23/2008 Subsidiary bank failed 11/7/2014 Frontier Bank Palm Desert, CA Rogers Bancshares, Inc. Anchor BanCorp Wisconsin Inc. TCB Holding Company Total $3,259.4 Notes: Numbers may not total due to rounding. a Date is the earlier of the bankruptcy filing by holding company or the failure of subsidiary bank. b The amount of Treasury’s investment prior to bankruptcy was $89,874,000. On 3/8/2010, Treasury exchanged its $84,784,000 of preferred stock in Midwest Banc Holdings, Inc. (MBHI) for $89,388,000 of MCP, which is equivalent to the initial investment amount of $84,784,000, plus $4,604,000 of capitalized previously accrued and unpaid dividends. c Treasury recouped $6 million of its investment once the company’s plan of reorganization became effective. Source: Treasury, Transactions Report, 4/3/2015. 277 278 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Realized Losses and Write-offs When a CPP investment is sold at a loss, or an institution that Treasury invested in fails or has its subsidiary fail, Treasury records the loss as a realized loss or a writeoff. For these recorded losses, Treasury has no expectation of regaining any portion of the lost investment. According to Treasury, as of March 31, 2015, Treasury had realized losses and write-offs of $5.1 billion on its CPP investments. This total includes $69.5 million in realized losses this quarter. Table 4.45 shows all realized losses and write-offs by Treasury on CPP investments through March 31, 2015. TABLE 4.45 REALIZED LOSSES AND WRITE-OFFS IN CPP, AS OF 3/31/2015 ($ MILLIONS) TARP Investment Loss $4 $2 12/3/2010 Sale of preferred stock at a loss 3 3 2/15/2011 Sale of preferred stock at a loss 44 6 3/4/2011 Sale of preferred stock at a loss 3 2 3/9/2011 First Federal Bancshares of Arkansas, Inc. 17 11 5/3/2011 Sale of preferred stock at a loss First Community Bank Corporation of America 11 3 5/31/2011 Sale of preferred stock at a loss Cascade Financial Corporation 39 23 6/30/2011 Sale of preferred stock at a loss Green Bankshares, Inc. 72 4 9/7/2011 Sale of preferred stock at a loss 4 1 10/21/2011 Sale of preferred stock at a loss 124 14 4/3/2012 Sale of preferred stock at a loss Institution Date Description Realized Losses The Bank of Currituck Treaty Oak Bancorp, Inc. Cadence Financial Corporation FBHC Holding Company Santa Lucia Bancorp Banner Corporation/Banner Bank Sale of subordinated debentures at a loss First Financial Holdings Inc. 65 8 4/3/2012 Sale of preferred stock at a loss MainSource Financial Group, Inc. 57 4 4/3/2012 Sale of preferred stock at a loss Seacoast Banking Corporation of Florida 50 9 4/3/2012 Sale of preferred stock at a loss Wilshire Bancorp, Inc. 62 4 4/3/2012 Sale of preferred stock at a loss WSFS Financial Corporation 53 4 4/3/2012 Sale of preferred stock at a loss 135 62 Ameris Bancorp Central Pacific Financial Corp. 52 4 6/19/2012 Sale of preferred stock at a loss 4/4/2012 Sale of common stock at a loss Farmers Capital Corporation 30 8 6/19/2012 Sale of preferred stock at a loss First Capital Bancorp, Inc. 11 1 6/19/2012 Sale of preferred stock at a loss First Defiance Financial Corp. 37 1 6/19/2012 Sale of preferred stock at a loss LNB Bancorp, Inc. Taylor Capital Group, Inc. 25 3 105 11 6/19/2012 Sale of preferred stock at a loss 6/19/2012 Sale of preferred stock at a loss United Bancorp, Inc. 21 4 6/19/2012 Sale of preferred stock at a loss Fidelity Southern Corporation 48 5 7/3/2012 Sale of preferred stock at a loss First Citizens Banc Corp 21 2 7/3/2012 Sale of preferred stock at a loss Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 REALIZED LOSSES AND WRITE-OFFS IN CPP, AS OF 3/31/2015 Institution Firstbank Corporation Metrocorp Bancshares, Inc. TARP Investment Loss $33 $2 45 1 ($ MILLIONS) (CONTINUED) Date 7/3/2012 Description Sale of preferred stock at a loss 7/3/2012 Sale of preferred stock at a loss Peoples Bancorp of North Carolina, Inc. 25 2 7/3/2012 Sale of preferred stock at a loss Pulaski Financial Corp. 33 4 7/3/2012 Sale of preferred stock at a loss Southern First Bancshares, Inc. 17 2 7/3/2012 Sale of preferred stock at a loss 4 3 7/12/2012 Sale of preferred stock at a loss 20 5 8/9/2012 Sale of preferred stock at a loss Naples Bancorp, Inc. Commonwealth Bancshares, Inc. Diamond Bancorp, Inc. 20 6 8/9/2012 Sale of preferred stock at a loss Fidelity Financial Corporation 36 4 8/9/2012 Sale of preferred stock at a loss Market Street Bancshares, Inc. 20 2 8/9/2012 Sale of preferred stock at a loss CBS Banc-Corp. 24 2 8/10/2012 Sale of preferred stock at a loss Marquette National Corporation 36 10 8/10/2012 Sale of preferred stock at a loss Park Bancorporation, Inc. 23 6 8/10/2012 Sale of preferred stock at a loss 7 2 8/10/2012 Sale of preferred stock at a loss Trinity Capital Corporation Premier Financial Bancorp, Inc. 36 9 8/10/2012 Sale of preferred stock at a loss Exchange Bank 43 5 8/13/2012 Sale of preferred stock at a loss Millennium Bancorp, Inc. Sterling Financial Corporation 7 4 303 188 8/14/2012 Sale of preferred stock at a loss 8/20/2012 Sale of preferred stock at a loss BNC Bancorp 31 2 8/29/2012 Sale of preferred stock at a loss First Community Corporation 11 0 8/29/2012 Sale of preferred stock at a loss First National Corporation 14 2 8/29/2012 Sale of preferred stock at a loss Mackinac Financial Corporation 11 1 8/29/2012 Sale of preferred stock at a loss Yadkin Valley Financial Corporation 13 5 9/18/2012 Sale of preferred stock at a loss Alpine Banks of Colorado 70 13 9/20/2012 Sale of preferred stock at a loss F&M Financial Corporation (NC) 17 1 9/20/2012 Sale of preferred stock at a loss F&M Financial Corporation (TN) 17 4 9/21/2012 Sale of preferred stock at a loss First Community Financial Partners, Inc. 22 8 9/21/2012 Sale of preferred stock at a loss Central Federal Corporation 7 4 9/26/2012 Sale of preferred stock at a loss Congaree Bancshares, Inc. 3 0.6 10/31/2012 Sale of preferred stock at a loss Metro City Bank 8 0.8 10/31/2012 Sale of preferred stock at a loss 12 3 10/31/2012 Sale of preferred stock at a loss Germantown Capital Corporation 5 0.4 10/31/2012 First Gothenburg Bancshares, Inc. 8 0.7 10/31/2012 Sale of preferred stock at a loss 10 0.9 10/31/2012 Sale of preferred stock at a loss Centerbank 2 0.4 10/31/2012 Sale of preferred stock at a loss The Little Bank, Incorporated 8 0.1 10/31/2012 Sale of preferred stock at a loss Oak Ridge Financial Services, Inc. 8 0.6 10/31/2012 Sale of preferred stock at a loss Blue Ridge Bancshares, Inc. Blackhawk Bancorp, Inc. Sale of preferred stock at a loss Continued on next page 279 280 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM REALIZED LOSSES AND WRITE-OFFS IN CPP, AS OF 3/31/2015 Institution TARP Investment Loss ($ MILLIONS) (CONTINUED) Date Description Peoples Bancshares of TN, Inc. $4 $1 10/31/2012 Sale of preferred stock at a loss Hometown Bankshares Corporation 10 0.8 10/31/2012 Western Illinois Bancshares, Inc. 11 0.7 11/9/2012 Sale of preferred stock at a loss Capital Pacific Bancorp 4 0.2 11/9/2012 Sale of preferred stock at a loss Three Shores Bancorporation, Inc. 6 0.6 11/9/2012 Sale of preferred stock at a loss Regional Bankshares, Inc. 2 0.1 11/9/2012 Sale of preferred stock at a loss Timberland Bancorp, Inc. 17 2 11/9/2012 Sale of preferred stock at a loss First Freedom Bancshares, Inc. 9 0.7 11/9/2012 Sale of preferred stock at a loss Bankgreenville Financial Corporation 1 0.1 11/9/2012 Sale of preferred stock at a loss F&C Bancorp. Inc. 3 0.1 11/13/2012 Sale of subordinated debentures at a loss 12 0.4 11/13/2012 Sale of subordinated debentures at a loss Farmers Enterprises, Inc. Franklin Bancorp, Inc. 5 2 Sound Banking Company 3 0.2 Parke Bancorp, Inc. Sale of preferred stock at a loss 11/13/2012 Sale of preferred stock at a loss 11/13/2012 Sale of preferred stock at a loss 16 5 Country Bank Shares, Inc. 8 0.6 11/29/2012 Sale of preferred stock at a loss 11/29/2012 Clover Community Bankshares, Inc. 3 0.4 11/29/2012 Sale of preferred stock at a loss CBB Bancorp 4 0.3 11/29/2012 Sale of preferred stock at a loss Alaska Pacific Bancshares, Inc. 5 0.5 11/29/2012 Sale of preferred stock at a loss 11/29/2012 Sale of preferred stock at a loss Sale of preferred stock at a loss Trisummit Bank 7 2 Layton Park Financial Group, Inc. 3 0.6 11/29/2012 Community Bancshares of Mississippi, Inc. (Community Holding Company of Florida, Inc.) 1 0.1 11/30/2012 Sale of preferred stock at a loss FFW Corporation 7 0.7 11/30/2012 Sale of preferred stock at a loss Hometown Bancshares, Inc. 2 0.1 11/30/2012 Sale of preferred stock at a loss Bank of Commerce 3 0.5 11/30/2012 Sale of preferred stock at a loss Corning Savings And Loan Association 1 0.1 11/30/2012 Sale of preferred stock at a loss Carolina Trust Bank 4 0.6 11/30/2012 Sale of preferred stock at a loss Community Business Bank 4 0.3 11/30/2012 Sale of preferred stock at a loss 4 0.7 11/30/2012 Sale of preferred stock at a loss 195 15 11/30/2012 KS Bancorp, Inc Pacific Capital Bancorp Sale of preferred stock at a loss Sale of common stock at a loss Community West Bancshares 16 4 12/11/2012 Sale of preferred stock at a loss Presidio Bank 11 2 12/11/2012 The Baraboo Bancorporation, Inc. 21 7 12/11/2012 Sale of preferred stock at a loss 2 0.7 22 2 Manhattan Bancshares, Inc. 3 0.1 12/11/2012 First Advantage Bancshares, Inc. 1 0.1 12/11/2012 Sale of preferred stock at a loss Security Bancshares of Pulaski County, Inc. Central Community Corporation 12/11/2012 Sale of preferred stock at a loss Sale of preferred stock at a loss 12/11/2012 Sale of preferred stock at a loss Sale of subordinated debentures at a loss Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 REALIZED LOSSES AND WRITE-OFFS IN CPP, AS OF 3/31/2015 Institution Community Investors Bancorp, Inc. TARP Investment Loss ($ MILLIONS) (CONTINUED) Date Description $3 $0.1 12/20/2012 Sale of preferred stock at a loss First Business Bank, National Association 4 0.4 12/20/2012 Sale of preferred stock at a loss Bank Financial Services, Inc. 1 0.1 12/20/2012 Sale of preferred stock at a loss 10 0.2 12/20/2012 Hyperion Bank 2 0.5 12/21/2012 Sale of preferred stock at a loss First Independence Corporation 3 0.9 12/21/2012 Sale of preferred stock at a loss First Alliance Bancshares, Inc. 3 1 12/21/2012 Sale of preferred stock at a loss 12/21/2012 Century Financial Services Corporation Community Financial Shares, Inc. Sale of subordinated debentures at a loss 7 4 12 3 6 0.2 Citizens Bancshares Co. 25 12 2/8/2013 Sale of preferred stock at a loss Colony Bankcorp, Inc. 28 6 2/8/2013 Sale of preferred stock at a loss Alliance Financial Services, Inc. Biscayne Bancshares, Inc. Delmar Bancorp Sale of preferred stock at a loss 2/7/2013 Sale of preferred stock at a loss 2/8/2013 Sale of subordinated debentures at a loss 9 3 146 65 F & M Bancshares, Inc. 4 0.5 2/8/2013 Sale of preferred stock at a loss First Priority Financial Corp. 5 1 2/8/2013 Sale of preferred stock at a loss 26 7 2/8/2013 Sale of preferred stock at a loss Dickinson Financial Corporation II HMN Financial, Inc. Waukesha Bankshares, Inc. 2/8/2013 Sale of preferred stock at a loss 2/8/2013 Sale of preferred stock at a loss 6 0.4 2/8/2013 Sale of preferred stock at a loss FC Holdings, Inc. 21 2 2/20/2013 Sale of preferred stock at a loss First Sound Bank 7 4 2/20/2013 Sale of preferred stock at a loss First Trust Corporation 18 4 2/20/2013 National Bancshares, Inc. 25 6 2/20/2013 Sale of preferred stock at a loss Sale of subordinated debentures at a loss Ridgestone Financial Services, Inc. 11 2 2/20/2013 Sale of preferred stock at a loss Carolina Bank Holdings, Inc. 16 1 2/21/2013 Sale of preferred stock at a loss Santa Clara Valley Bank, N.A. 3 0.4 3/8/2013 Sale of preferred stock at a loss Coastal Banking Company, Inc. 10 0.4 3/11/2013 Sale of preferred stock at a loss CoastalSouth Bancshares, Inc. 16 3 3/11/2013 Sale of preferred stock at a loss First Reliance Bancshares, Inc. 15 5 3/11/2013 Sale of preferred stock at a loss Southcrest Financial Group, Inc. 13 1 3/11/2013 Sale of preferred stock at a loss The Queensborough Company 12 0.3 3/11/2013 Sale of preferred stock at a loss Old Second Bancorp, Inc. 73 47 3/27/2013 Sale of preferred stock at a loss Stonebridge Financial Corp. 11 9 3/27/2013 Sale of preferred stock at a loss Alliance Bancshares, Inc. 3 0.1 3/28/2013 Sale of preferred stock at a loss Amfirst Financial Services, Inc 5 0.2 3/28/2013 6 0.5 3/28/2013 Sale of preferred stock at a loss 267 24 3/28/2013 First Southwest Bancorporation, Inc. Flagstar Bancorp, Inc. Sale of subordinated debentures at a loss Sale of preferred stock at a loss Continued on next page 281 282 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM REALIZED LOSSES AND WRITE-OFFS IN CPP, AS OF 3/31/2015 Institution United Community Banks, Inc. First Security Group, Inc. BancStar, Inc. ($ MILLIONS) (CONTINUED) TARP Investment Loss Date $180 $7 3/28/2013 33 18 Exchange of preferred stock at 4/11/2013 a loss 9 0.1 4/26/2013 Sale of preferred stock at a loss Description Sale of preferred stock at a loss NewBridge Bancorp 52 1 4/29/2013 Sale of preferred stock at a loss First Financial Service Corporation 20 9 4/29/2013 Sale of preferred stock at a loss Guaranty Federal Bancshares, Inc. 17 0.4 4/29/2013 Sale of preferred stock at a loss Intervest Bancshares Corporation 25 1 6/24/2013 Sale of preferred stock at a loss First Western Financial, Inc. 20 3 6/24/2013 Sale of preferred stock at a loss Worthington Financial Holdings, Inc. 3 0.4 6/24/2013 Sale of preferred stock at a loss Farmers & Merchants Financial Corporation 0 0.1 6/24/2013 Sale of preferred stock at a loss Metropolitan Bank Group, Inc. 82 49 6/28/2013 Sale of preferred stock at a loss Alarion Financial Services, Inc. Anchor Bancorp Wisconsin, Inc. 7 0.1 7/22/2013 Sale of preferred stock at a loss 110 104 9/27/2013 Sale of common stock at a loss Centrue Financial Corporation 33 22 ColoEast Bankshares, Inc. 10 1 Commonwealth Business Bank 20 0.4 7/17/2013 Sale of preferred stock at a loss Crosstown Holding Company 11 0.2 7/22/2013 Sale of preferred stock at a loss 3 0.5 9/25/2013 Sale of preferred stock at a loss 295 190 6 3 20 12 8/14/2013 Sale of preferred stock at a loss 3 — 7/22/2013 Sale of preferred stock at a loss Desoto County Bank First Banks, Inc. First Intercontinental Bank Florida Bank Group, Inc. Mountain Valley Bancshares, Inc. RCB Financial Corporation 10/18/2013 Sale of preferred stock at a loss 7/22/2013 9/25/2013 Sale of preferred stock at a loss Sale of preferred stock at a loss 8/12/2013 Sale of preferred stock at a loss 9 1 9/25/2013 Sale of preferred stock at a loss Severn Bancorp, Inc. 23 — 9/25/2013 Sale of preferred stock at a loss Universal Bancorp 10 0.5 8/12/2013 Sale of preferred stock at a loss Virginia Company Bank Central Virginia Bankshares, Inc. Bank of George 5 2 8/12/2013 Sale of preferred stock at a loss 11 8 10/1/2013 Sale of preferred stock at a loss 10/21/2013 Sale of preferred stock at a loss 3 2 Blue Valley Ban Corp 22 0.5 Spirit Bank Corp Inc. 30 21 6 3 Valley Community Bank 10/21/2013 Sale of preferred stock at a loss 10/21/2013 Sale of preferred stock at a loss 10/21/2013 Sale of preferred stock at a loss Monarch Community Bancorp, Inc. 7 2 11/15/2013 Sale of common stock at a loss AB&T Financial Corporation 4 2 11/19/2013 38 28 Bridgeview Bancorp, Inc. Midtown Bank & Trust Company Sale of preferred stock at a loss 11/19/2013 Sale of preferred stock at a loss 5 2 11/19/2013 Village Bank and Trust Financial Corp 15 9 11/19/2013 Sale of preferred stock at a loss 1st Financial Services Corporation 16 8 12/31/2013 4 2 Pacific Commerce Bank Sale of preferred stock at a loss Sale of preferred stock at a loss 2/10/2014 Sale of preferred stock at a loss Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 REALIZED LOSSES AND WRITE-OFFS IN CPP, AS OF 3/31/2015 TARP Investment Institution Meridian Bank ($ MILLIONS) (CONTINUED) Loss Date Description $13 $2 3/17/2014 IA Bancorp, Inc/Indus American Bank 6 0.1 3/17/2014 Sale of preferred stock at a loss Sale of preferred stock at a loss Community First Bancshares, Inc. (AR) 13 0.2 2/10/2014 Sale of preferred stock at a loss Georgia Primary Bank 5 3 2/10/2014 Sale of preferred stock at a loss Chicago Shore Corporation 7 0.1 3/17/2014 Sale of preferred stock at a loss Hampton Roads Bankshares, Inc. 80 77 4/14/2014 Sale of preferred stock at a loss Community First, Inc. 18 12 4/14/2014 Sale of common stock at a loss Northern States Financial Corporation 17 11 4/30/2014 Sale of preferred stock at a loss Provident Community Bancshares, Inc. 9 4 4/30/2014 Sale of preferred stock at a loss 52 41 5/23/2014 Sale of common stock at a loss Communityone Bancorp/FNB United Corp. United American Bank 9 5 7/2/2014 Sale of preferred stock at a loss Maryland Financial Bank 2 1 7/2/2014 Sale of preferred stock at a loss 3 1 7/2/2014 Sale of preferred stock at a loss Bank of the Carolinas Corporation Marine Bank & Trust Company 13 10 7/16/2014 Sale of preferred stock at a loss Regent Bancorp, Inc. 10 2 10/17/2014 Sale of preferred stock at a loss 7 1 10/24/2014 Highlands Independent Bancshares, Inc. Lone Star Bank Porter Bancorp, Inc.(PBI) Louisville, KY NCAL Bancorp First Bancorp (PR) U.S. Century Bank Total CPP Realized Losses Sale of preferred stock at a loss 3 1 12/3/2014 Sale of preferred stock at a loss 35 32 12/3/2014 Sale of preferred stock at a loss 10 6 12/10/2014 Sale of preferred stock at a loss 400 134 3/6/2015 Sale of common stock at a loss 50 38 3/17/2015 Sale of preferred stock at a loss $1,671 Write-Offs CIT Group Inc. Pacific Coast National Bancorp South Financial Group, Inc. $2,330 $2,330 4 4 12/10/2009 Bankruptcy 2/11/2010 Bankruptcy 347 217 9/30/2010 Sale of preferred stock at a loss TIB Financial Corpa 37 25 9/30/2010 Sale of preferred stock at a loss UCBH Holdings Inc. 299 299 85 85 a Midwest Banc Holdings, Inc. 11/6/2009 Bankruptcy 5/14/2010 Bankruptcy Sonoma Valley Bancorp 9 9 8/20/2010 Bankruptcy Pierce County Bancorp 7 7 11/5/2010 Tifton Banking Company 4 4 Legacy Bancorp, Inc. 6 6 Superior Bancorp Inc. 69 69 Bankruptcy 11/12/2010 Bankruptcy 3/11/2011 Bankruptcy 4/15/2011 Bankruptcy FPB Bancorp, Inc. 6 6 7/15/2011 One Georgia Bank 6 6 7/15/2011 Bankruptcy 84 84 Integra Bank Corporation 7/29/2011 Bankruptcy Bankruptcy Continued on next page 283 284 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM REALIZED LOSSES AND WRITE-OFFS IN CPP, AS OF 3/31/2015 ($ MILLIONS) (CONTINUED) TARP Investment Loss Citizens Bancorp $10 $10 9/23/2011 Bankruptcy CB Holding Corp. 4 4 10/14/2011 Bankruptcy 30 30 1/27/2012 Bankruptcy 5 5 Institution Tennessee Commerce Bancorp, Inc. Blue River Bancshares, Inc. Date Description 2/10/2012 Bankruptcy Fort Lee Federal Savings Bank, FSB 1 1 4/20/2012 Bankruptcy Gregg Bancshares, Inc. 1 1 7/13/2012 Bankruptcy 10 10 8/14/2012 Bankruptcy GulfSouth Private Bank 8 8 10/19/2012 Investors Financial Corporation of Pettis County, Inc. 4 4 10/19/2012 Bankruptcy First Place Financial Corp. 73 73 10/29/2012 Bankruptcy Princeton National Bancorp, Inc. 25 25 11/2/2012 Bankruptcy 2 2 Premier Bank Holding Company Gold Canyon Bank Indiana Bank Corp. Bankruptcy 4/5/2013 Bankruptcy 1 1 4/9/2013 Bankruptcy Rogers Bancshares, Inc 25 25 7/5/2013 Bankruptcy TCB Holding Company 12 12 12/13/2013 Bankruptcy 8 8 1/31/2014 Bankruptcy Syringa Bancorp Idaho Bancorp Rising SunBancorp Western Community Bancshares, Inc. 7 7 400 103 12/5/2014 Sale of common stock at a loss 10 6 12/10/2014 Sale of preferred stock at a loss Total CPP Write-Offs $3,386 Total of CPP Realized Losses and Write-Offs $5,057 4/24/2014 Bankruptcy Notes: Numbers may not total due to rounding. a In the time since these transactions were classified as write-offs, Treasury has changed its practices and now classifies sales of preferred stock at a loss as realized losses. Sources: Treasury, Transactions Report, 4/3/2015; Treasury, response to SIGTARP data call, 4/6/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Restructurings, Recapitalizations, Exchanges, and Sales of CPP Investments Certain CPP institutions continue to experience high losses and financial difficulties, resulting in inadequate capital or liquidity. To avoid insolvency or improve the quality of their capital, these institutions may ask Treasury to convert its CPP preferred shares into a more junior form of equity or to accept a lower valuation, resulting in Treasury taking a discount or loss. If a CPP institution is undercapitalized and/or in danger of becoming insolvent, it may propose to Treasury a restructuring (or recapitalization) plan to avoid failure (or to attract private capital) and to “attempt to preserve value” for Treasury’s investment.377 Treasury may also sell its investment in a troubled institution to a third party at a discount in order to facilitate that party’s acquisition of a troubled institution. According to Treasury, although it may incur partial losses on its investment in the course of these transactions, such an outcome may be deemed necessary to avoid the total loss of Treasury’s investment that would occur if the institution failed.378 Under these circumstances, the CPP participant asks Treasury for a formal review of its proposal. The proposal details the institution’s recapitalization plan and may estimate how much capital the institution plans to raise from private investors and whether Treasury and other preferred shareholders will convert their preferred stock to common stock. The proposal may also involve a proposed discount on the conversion to common stock, although Treasury would not realize any loss until it disposes of the stock.379 In other words, Treasury would not know whether a loss will occur, or the extent of such a loss, until it sells the common stock it receives as part of such an exchange. According to Treasury, when it receives such a request, it asks one of the external asset managers that it has hired to analyze the proposal and perform due diligence on the institution.380 The external asset manager interviews the institution’s managers, gathers non-public information, and conducts loan-loss estimates and capital structure analysis. The manager submits its evaluation to Treasury, which then decides whether to restructure its CPP investment.381 Table 4.46 shows all restructurings, recapitalizations, exchanges, and sales of CPP investments through March 31, 2015. Undercapitalized: Condition in which a financial institution does not meet its regulator’s requirements for sufficient capital to operate under a defined level of adverse conditions. Due Diligence: Appropriate level of attention or care a reasonable person should take before entering into an agreement or a transaction with another party. In finance, it often refers to the process of conducting an audit or review of the institution before initiating a transaction. 285 286 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.46 TREASURY RESTRUCTURINGS, RECAPITALIZATIONS, EXCHANGES, & SALES, AS OF 3/31/2015 Company Investment Date Original Investments Combined Investments ($ MILLIONS) Investment Status Sold at Loss at Auction First Banks, Inc. 12/31/2008 $295.4 Sold at auction Flagstar Bancorp Inc. 1/30/2009 267.0 Sold at loss in auction United Community Banks, Inc. 12/5/2008 180.0 Sold at loss in auction 1/16/2009 146.0 Sold at loss in auction Banner Corporation Dickinson Financial Corporation II 11/21/2008 124.0 Sold at loss in auction Taylor Capital Group 11/21/2008 104.8 Sold at loss in auction 1/16/2009 73.0 Sold at loss in auction Old Second Bancorp, Inc. Alpine Banks of Colorado 3/27/2009 70.0 Sold at loss in auction First Financial Holdings Inc. 12/5/2008 65.0 Sold at loss in auction Wilshire Bancorp, Inc. 12/12/2008 62.2 Sold at loss in auction MainSource Financial Group, Inc. 1/16/2009 57.0 Sold at loss in auction WSFS Financial Corporation 1/23/2009 52.6 Sold at loss in auction NewBridge Bancorp 12/12/2008 52.4 Sold at loss in auction Ameris Bancorp 11/21/2008 52.0 Sold at loss in auction 3/13/2009 51.5 Sold at loss in auction Seacoast Banking Corporation of Florida 12/19/2008 50.0 Sold at loss in auction Fidelity Southern Corporation 12/19/2008 48.2 Sold at loss in auction MetroCorp Bancshares, Inc. 1/16/2009 45.0 Sold at loss in auction Communityone Bancorp/FNB United Corp. Cadence Financial Corporation Exchange Bank Reliance Bancshares, Inc. 1/9/2009 44.0 Sold at loss in auction 12/19/2008 43.0 Sold at loss in auction 2/13/2009 40.0 Sold at auction Cascade Financial Corporation 11/21/2008 39.0 Sold at loss in auction Bridgeview Bancorp, Inc. 12/19/2008 38.0 Sold at loss in auction First Defiance Financial Corp. 12/5/2008 37.0 Sold at loss in auction Fidelity Financial Corporation 12/19/2008 36.3 Sold at loss in auction Marquette National Corporation 12/19/2008 35.5 Sold at loss in auction 3/27/2009 35.5 Sold at loss in auction 11/21/2008 35.0 Sold at loss in auction 1/30/2009 33.0 Sold at loss in auction 1/9/2009 32.7 Sold at loss in auction Trinity Capital Corporation Porter Bancorp, Inc. (PBI) Lousiville, KY Firstbank Corporation Centrue Financial Corporation Pulaski Financial Corp 1/16/2009 32.5 Sold at loss in auction BNC Bancorp 12/5/2008 31.3 Sold at loss in auction Royal Bancshares of Pennsylvania, Inc. 2/20/2009 30.4 Sold at auction Spirit Bank Corp. Inc. 3/27/2009 30.0 Sold at loss in auction First United Corporation 1/30/2009 30.0 Sold at loss in auction Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TREASURY RESTRUCTURINGS, RECAPITALIZATIONS, EXCHANGES, & SALES, AS OF 3/31/2015 Investment Date Original Investments Farmers Capital Bank Corporation 1/9/2009 $30.0 Sold at loss in auction Colony Bankcorp, Inc. 1/9/2009 28.0 Sold at loss in auction HMN Financial, Inc 12/23/2008 26.0 Sold at loss in auction Patriot Bancshares, Inc. 12/19/2008 26.0 Sold at loss in auction LNB Bancorp Inc. 12/12/2008 25.2 Sold at loss in auction Peoples Bancorp of North Carolina, Inc. 12/23/2008 25.1 Sold at loss in auction 5/29/2009 25.0 Sold at loss in auction Company Citizens Bancshares Co. Intervest Bancshares Corporation Combined Investments ($ MILLIONS) (CONTINUED) Investment Status 12/23/2008 25.0 Sold at loss in auction National Bancshares, Inc. 2/27/2009 24.7 Sold at loss in auction CBS Banc-Corp 3/27/2009 24.3 Sold at loss in auction 1/9/2009 24.0 Sold at auction 11/21/2008 23.4 Sold at auction First Citizens Banc Corp 1/23/2009 23.2 Sold at loss in auction Park Bancorporation, Inc. 3/6/2009 23.2 Sold at loss in auction Eastern Virginia Bankshares, Inc. Severn Bancorp, Inc. Premier Financial Bancorp, Inc. 10/2/2009 22.3 Sold at loss in auction Central Community Corporation 2/20/2009 22.0 Sold at loss in auction 12/11/2009 22.0 Sold at loss in auction First Community Financial Partners, Inc. Blue Valley Ban Corp 12/5/2008 21.8 Sold at loss in auction FC Holdings, Inc. 6/26/2009 21.0 Sold at loss in auction The Baraboo Bancorporation, Inc. 1/16/2009 20.7 Sold at loss in auction United Bancorp, Inc. 1/16/2009 20.6 Sold at loss in auction Diamond Bancorp, Inc. 5/22/2009 20.4 Sold at loss in auction Commonwealth Bancshares, Inc. 5/22/2009 20.4 Sold at loss in auction 2/6/2009 20.4 Sold at loss in auction First Western Financial, Inc. Market Street Bancshares, Inc. 5/15/2009 20.3 Sold at loss in auction BNCCORP, Inc. 1/16/2009 20.1 Sold at auction First Financial Service Corporation 1/9/2009 20.0 Sold at loss in auction First Trust Corporation 6/5/2009 18.0 Sold at loss in auction Community First Inc. 2/27/2009 17.8 Sold at auction Southern First Bancshares, Inc. 2/27/2009 17.3 Sold at loss in auction F&M Financial Corporation (TN) 2/13/2009 17.2 Sold at loss in auction Northern States Financial Corp. 2/20/2009 17.2 Sold at loss in auction F & M Financial Corporation (NC) 2/6/2009 17.0 Sold at loss in auction Guaranty Federal Bancshares, Inc. 1/30/2009 17.0 Sold at loss in auction White River Bancshares Company 2/20/2009 16.8 Sold at auction Timberland Bancorp Inc. Parke Bancorp Inc. Pacific City Financial Corporation 12/23/2008 16.6 Sold at loss in auction 1/30/2009 16.3 Sold at loss in auction 12/19/2008 16.2 Sold at auction Continued on next page 287 288 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TREASURY RESTRUCTURINGS, RECAPITALIZATIONS, EXCHANGES, & SALES, AS OF 3/31/2015 Company Carolina Bank Holdings, Inc. Investment Date Original Investments Combined Investments ($ MILLIONS) (CONTINUED) Investment Status 1/9/2009 $16.0 Sold at loss in auction CoastalSouth Bancshares, Inc. 8/28/2009 16.0 Sold at loss in auction Community West Bancshares 12/19/2008 15.6 Sold at loss in auction 3/6/2009 15.3 Sold at loss in auction First Reliance Bancshares, Inc Village Bank and Trust Financial Corp 5/1/2009 14.7 Sold at loss in auction First National Corporation 3/13/2009 13.9 Sold at loss in auction Yadkin Valley Financial Corporation 7/24/2009 13.3 Sold at loss in auction Community First Bancshares, Inc. 4/3/2009 12.7 Sold at loss in auction Alliance Financial Services Inc. 6/26/2009 12.0 Sold at loss in auction Farmers Enterprises, Inc. 6/19/2009 12.0 Sold at loss in auction 1/9/2009 12.0 Sold at loss in auction The Queensborough Company 1/30/2009 11.9 Sold at auction First Community Corporation Plumas Bancorp 11/21/2008 11.4 Sold at loss in auction Western Illinois Bancshares, Inc. 12/23/2008 11.4 Sold at loss in auction 4/3/2009 11.0 Sold at loss in auction First Capital Bancorp, Inc. Mackinac Financial Corporation 4/24/2009 11.0 Sold at loss in auction Ridgestone Financial Services, Inc. 2/27/2009 11.0 Sold at loss in auction Stonebridge Financial Corp. 1/23/2009 11.0 Sold at loss in auction Security State Bank Holding Company 5/1/2009 10.8 Sold at auction 11/20/2009 10.8 Sold at loss in auction Crosstown Holding Company Presidio Bank 1/23/2009 10.7 Sold at auction Northwest Bancorporation, Inc. 2/13/2009 10.5 Sold at auction Blackhawk Bancorp, Inc. 3/13/2009 10.0 Sold at loss in auction Century Financial Services Corporation 6/19/2009 10.0 Sold at loss in auction ColoEast Bankshares, Inc. 2/13/2009 10.0 Sold at auction HomeTown Bankshares Corporation 9/18/2009 10.0 Sold at loss in auction Coastal Banking Company, Inc. 12/5/2008 10.0 Sold at loss in auction Universal Bancorp 5/22/2009 9.9 Sold at auction Provident Community Bancshares, Inc. 3/13/2009 9.3 Sold at loss in auction Delmar Bancorp 12/4/2009 9.0 Sold at loss in auction RCB Financial Corporation 6/19/2009 8.9 Sold at auction United American Bank 2/20/2009 8.7 Sold at loss in auction 12/22/2009 8.7 Sold at loss in auction 4/3/2009 8.6 Sold at loss in auction First Freedom Bancshares, Inc. BancStar, Inc. First Western Financial, Inc. Great River Holding Company 2/6/2009 8.6 Sold at loss in auction 7/17/2009 8.4 Sold at loss in auction Commonwealth Business Bank 1/23/2009 7.7 Sold at auction Metro City Bank 1/30/2009 7.7 Sold at loss in auction Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TREASURY RESTRUCTURINGS, RECAPITALIZATIONS, EXCHANGES, & SALES, AS OF 3/31/2015 Company Investment Date Original Investments Combined Investments ($ MILLIONS) (CONTINUED) Investment Status Oak Ridge Financial Services, Inc. 1/30/2009 $7.7 Sold at loss in auction First Gothenburg Bancshares, Inc. 2/27/2009 7.6 Sold at loss in auction Country Bank Shares, Inc. 1/30/2009 7.5 Sold at loss in auction The Little Bank, Incorporated 12/23/2009 7.5 Sold at loss in auction FFW Corporation 12/19/2008 7.3 Sold at loss in auction TriSummit Bank Chicago Shore Corporation Fidelity Federal Bancorp 4/3/2009 7.0 Sold at loss in auction 7/31/2009 7.0 Sold at loss in auction 11/13/2009 6.7 Sold at auction Alarion Financial Services, Inc. 1/23/2009 6.5 Sold at auction First Intercontinental Bank 3/13/2009 6.4 Sold at auction Biscayne Bancshares, Inc. 6/19/2009 6.4 Sold at loss in auction Premier Financial Bancorp, Inc. 5/22/2009 6.3 Sold at auction Meridian Bank 2/13/2009 6.2 Sold at loss in auction IA Bancorp, Inc. 9/18/2009 6.0 Sold at loss in auction Three Shores Bancorporation, Inc. 1/23/2009 5.7 Sold at loss in auction Boscobel Bancorp Inc. 5/15/2009 5.6 Sold at auction Waukesha Bankshares, Inc. 6/26/2009 5.6 Sold at loss in auction 3/6/2009 5.5 Sold at loss in auction First Southwest Bancorporation, Inc. Valley Community Bank 1/9/2009 5.5 Sold at loss in auction Midtown Bank & Trust Company 2/27/2009 5.2 Sold at loss in auction Franklin Bancorp, Inc. 5/22/2009 5.1 Sold at loss in auction AmFirst Financial Services, Inc. 8/21/2009 5.0 Sold at loss in auction 3/6/2009 5.0 Sold at loss in auction Germantown Capital Corporation Alaska Pacific Bancshares Inc. 2/6/2009 4.8 Sold at loss in auction 6/12/2009 4.7 Sold at auction 12/18/2009 4.6 Sold at loss in auction 5/1/2009 4.5 Sold at loss in auction Community Pride Bank Corporation 11/13/2009 4.4 Sold at auction CBB Bancorp 12/20/2009 4.4 Sold at loss in auction 4/10/2009 4.2 Sold at loss in auction 12/23/2008 4.1 Sold at loss in auction 2/6/2009 4.0 Sold at loss in auction Virginia Company Bank First Priority Financial Corp. Georgia Primary Bank Bank of Southern California, N.A. Pacific Commerce Bank Carolina Trust Bank Capital Pacific Bancorp Community Business Bank 12/23/2008 4.0 Sold at loss in auction 2/27/2009 4.0 Sold at loss in auction KS Bancorp Inc. 8/21/2009 4.0 Sold at loss in auction Peoples of Bancshares of TN, Inc. 3/20/2009 3.9 Sold at loss in auction Pathway Bancorp 3/27/2009 3.7 Sold at auction F & M Bancshares, Inc. 11/6/2009 3.5 Sold at loss in auction AB&T Financial Corporation 1/23/2009 3.5 Sold at loss in auction First Alliance Bancshares, Inc. 6/26/2009 3.4 Sold at loss in auction Continued on next page 289 290 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TREASURY RESTRUCTURINGS, RECAPITALIZATIONS, EXCHANGES, & SALES, AS OF 3/31/2015 Company Investment Date Original Investments Madison Financial Corporation 3/13/2009 $3.4 Sold at auction 1/9/2009 3.3 Sold at loss in auction Congaree Bancshares, Inc. Combined Investments ($ MILLIONS) (CONTINUED) Investment Status Mountain Valley Bancshares, Inc. 9/25/2009 3.3 Sold at auction First Independence Corporation 8/28/2009 3.2 Sold at loss in auction Oregon Bancorp, Inc. 4/24/2009 3.2 Sold at auction Sound Banking Co. 1/9/2009 3.1 Sold at loss in auction Lone Star Bank 2/6/2009 3.1 Sold at loss in auction Marine Bank & Trust Company Alliance Bancshares, Inc. 3/6/2009 3.0 Sold at loss in auction 6/26/2009 3.0 Sold at loss in auction Bank of Commerce 1/16/2009 3.0 Sold at loss in auction Clover Community Bankshares, Inc. 3/27/2009 3.0 Sold at loss in auction 5/22/2009 3.0 Sold at loss in auction Layton Park Financial Group, Inc. F&C Bancorp. Inc. 12/18/2009 3.0 Sold at loss in auction Tennessee Valley Financial Holdings, Inc. 12/23/2008 3.0 Sold at auction Santa Clara Valley Bank, N.A. 2/13/2009 2.9 Sold at loss in auction Omega Capital Corp. 4/17/2009 2.8 Sold at auction Bank of George 3/13/2009 2.7 Sold at loss in auction Worthington Financial Holdings, Inc. 5/15/2009 2.7 Sold at loss in auction Community Investors Bancorp, Inc. 12/23/2008 2.6 Sold at loss in auction Manhattan Bancshares, Inc. 6/19/2009 2.6 Sold at loss in auction Plato Holdings Inc. 7/17/2009 2.5 Sold at loss in auction Brogan Bankshares, Inc. 5/15/2009 2.4 Sold at auction 5/1/2009 2.3 Sold at loss in auction 2/13/2009 2.2 Sold at loss in auction CenterBank Security Bancshares of Pulaski County, Inc. Market Bancorporation, Inc. 2/20/2009 2.1 Sold at auction 12/29/2009 2.0 Sold at auction Hometown Bancshares, Inc. 2/13/2009 1.9 Sold at loss in auction Maryland Financial Bank 3/27/2009 1.7 Sold at loss in auction 2/6/2009 1.6 Sold at loss in auction Atlantic Bancshares, Inc. Hyperion Bank Regional Bankshares Inc. 2/13/2009 1.5 Sold at loss in auction Desoto County Bank 2/13/2009 1.2 Sold at auction First Advantage Bancshares, Inc. 5/22/2009 1.2 Sold at loss in auction 2/6/2009 1.1 Sold at loss in auction Community Bancshares of MS BankGreenville Financial Corp. 2/13/2009 1.0 Sold at loss in auction Bank Financial Services, Inc. 8/14/2009 1.0 Sold at loss in auction Corning Savings and Loan Association 2/13/2009 0.6 Sold at loss in auction Farmers & Merchants Financial Corporation 3/20/2009 0.4 Sold at loss in auction Continued on next page 291 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TREASURY RESTRUCTURINGS, RECAPITALIZATIONS, EXCHANGES, & SALES, AS OF 3/31/2015 Investment Date Original Investments 2/6/2009 $0.3 Sold at auction 12/5/2008 $347.0 Sold Whitney Holding Corporation 12/19/2008 300.0 Sold Green Bankshares 12/23/2008 72.3 Sold 8/7/2009 52.2 Sold 2/13/2009 41.4 Sold 12/12/2008 41.3 Sold 12/5/2008 37.0 Sold Company Freeport Bancshares, Inc. Combined Investments ($ MILLIONS) (CONTINUED) Investment Status Sold at Loss South Financial Group, Inc. U.S. Century PremierWest Bancorp Capital Bank Corporation TIB Financial Corp. First Security Group, Inc. 1/9/2009 33.0 Sold Florida Bank Group, Inc. 7/24/2009 20.5 Sold 3/6/2009 16.5 Sold First Federal Bankshares of Arkansas, Inc. 1st Financial Services Corporation 11/14/2008 16.4 Sold First Community Bancshares, Inc 5/15/2009 14.8 Sold Bank of the Carolinas Corporation 4/17/2009 13.2 Sold SouthCrest Financial Group, Inc. 7/17/2009 12.9 Sold Central Virginia Bankshares 1/30/2009 11.4 Sold First Community Bank Corporation of America 12/23/2008 11.0 Sold NCAL Bancorp 12/19/2008 10.0 Sold First Sound Bank 12/23/2008 7.4 Sold Millennium Bancorp, Inc. 4/3/2009 7.3 Sold Central Federal Corporation 12/5/2008 7.2 Sold Community Financial Shares, Inc. 5/15/2009 7.0 Sold Monarch Community Bancorp, Inc 2/6/2009 6.8 Sold Highlands Independent Bancshares, Inc 3/6/2009 6.7 Sold Bank of Currituck 2/6/2009 4.0 Sold Santa Lucia Bancorp 12/19/2008 4.0 Sold Naples Bancorp, Inc. 3/27/2009 4.0 Sold Treaty Oak Bancorp, Inc. 1/16/2009 3.3 Sold FBHC Holding Company 12/29/2009 3.0 Sold Continued on next page 292 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TREASURY RESTRUCTURINGS, RECAPITALIZATIONS, EXCHANGES, & SALES, AS OF 3/31/2015 Investment Date Original Investments Citigroup Inc. 10/28/2008 $2,500.0 Provident Bankshares 11/14/2008 151.5 M&T Bank Corporation 12/23/2008 600.0 Wilmington Trust Corporation Company Combined Investments ($ MILLIONS) (CONTINUED) Investment Status Exchanges Exchanged for common stock/warrants and sold $1,081.5 a Provident preferred stock exchanged for new M&T Bank Corporation preferred stock; Wilmington Trust preferred stock redeemed by M&T Bank Corporation; Sold 12/12/2008 330.0 Popular, Inc. 12/5/2008 935.0 Exchanged for trust preferred securities First BanCorp 1/6/2009 400.0 Exchanged for mandatorily convertible preferred stock Sterling Financial Corporation Pacific Capital Bancorp Central Pacific Financial Corp. 12/5/2008 303.0 Exchanged for common stock, Sold 11/21/2008 195.0 Exchanged for common stock 1/9/2009 135.0 BBCN Bancorp, Inc. 11/21/2008 67.0 Exchanged for common stock Center Financial Corporation 12/12/2008 55.0 First Merchants 2/20/2009 116.0 Metropolitan Bank Group Inc. 6/26/2009 71.5 NC Bancorp, Inc. 6/26/2009 6.9 Exchanged for new preferred stock in Metropolitan Bank Group, Inc. and later sold at loss Hampton Roads Bankshares 12/31/2008 80.3 Exchanged for common stock Independent Bank Corporation 122.0b Exchanged for a like amount of securities of BBCN Bancorp, Inc. Exchanged for trust preferred securities and preferred stock 81.9 c 12/12/2008 72.0 Exchanged for mandatorily convertible preferred stock Superior Bancorp, Inc.d 12/5/2008 69.0 Exchanged for trust preferred securities Standard Bancshares Inc. 4/24/2009 60.0 Exchanged for common stock and securities purchase agreements 1/9/2009 24.9 1/16/2009 17.9 11/14/2008 15.0 Exchanged for common stock 3/6/2009 10.0 Exchanged preferred stock/warrant preferred stock for common stock and sold Fidelity Resources Company 6/26/2009 3.0 Exchanged for preferred stock in Veritex Holding Berkshire Bancorp 6/12/2009 2.9 Exchanged for preferred stock in Customers Bancorp Crescent Financial Bancshares, Inc. ECB Bancorp, Inc. Broadway Financial Corporation Regent Bancorp 42.8e Exchanged for a like amount of securities of Crescent Financial Bancshares, Inc. Notes: Numbers may be affected due to rounding. a M&T Bank Corporation (“M&T”) has redeemed the entirety of the preferred shares issued by Wilmington Trust Corporation plus accrued dividends. In addition, M&T has also repaid Treasury’s original $600 million investment. On August 21, 2012, Treasury sold all of its remaining investment in M&T at par. b The new investment amount of $122 million includes the original investment amount in BBCN Bancorp, Inc. (formerly Nara Bancorp, Inc.) of $67 million and the original investment of Center Financial Corporation of $55 million. c The new investment amount of $81.9 million includes the original investment amount in Metropolitan Bank Group, Inc. of $71.5 million plus the original investment amount in NC Bank Group, Inc. of $6.9 million plus unpaid dividends of $3.5 million. d The subsidiary bank of Superior Bancorp, Inc. failed on April 15, 2011. All of Treasury’s TARP investment in Superior Bancorp is expected to be lost. e The new investment amount of $42.8 million includes the original investment amount in Crescent Financial Bancshares, Inc. (formerly Crescent Financial Corporation) of $24.9 million and the original investment of ECB Bancorp, Inc. of $17.9 million. Source: Treasury, Transactions Report, 4/3/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Overview of CPP Preferred Stock Auctions From March 2012 through March 31, 2015, Treasury has held 27 sets of auctions in which it has sold all of its preferred stock investments in 185 CPP banks.382 For publicly traded banks, Treasury auctioned the shares through a placement agent and the shares were available for purchase by the general public. For private banks, Treasury auctioned the shares directly and the auctions were accessible only to qualified purchasers. The preferred stock for all but 19 of the banks sold at a discounted price and resulted in losses to Treasury.383 In the 27 auction sets, the range of discount on the investments was 1% to 90%.384 When Treasury sells all of its preferred shares of a CPP bank, it forfeits the right to collect missed dividends and interest payments from the bank. Of the 185 banks in which Treasury sold its stock through the auction process, 74 were overdue on payments to Treasury.385 For 24 of the 31 banks that had missed six or more dividends, Treasury gave up its right to appoint up to two directors to the board of directors of the banks. The $53.3 million owed to Treasury for missed payments by these 24 banks will never be recovered.386 As of March 31, 2015, Treasury lost a total of $1.1 billion in the auctions, which includes $812.4 million lost on principal investments sold at a discount and $251.1 million on forfeited missed dividends and interest owed by these institutions.387 Less than a quarter of the banks, 45, bought back some of their shares at the discounted price.388 Table 4.49 shows details for the auctions of preferred stock in CPP banks through March 31, 2015. Buyers of CPP Shares at Treasury Auctions For the most part, the entities who bought at Treasury auctions of its shares in CPP banks are large private fund investors, mostly unknown to the banks and not from the banks’ communities. As of March 31, 2015, more than two-thirds (70%) of Treasury’s auctioned TARP shares in CPP community banks were purchased by private fund investors. Additional successful auction buyers included brokers purchasing shares on behalf of other entities (12%), CPP banks repurchasing their own shares (7%), other banks (5%), institutional investors (3%), and a small number of senior executives and board members of CPP banks (2%). Figure 4.66 shows the percentage of Treasury’s TARP shares in CPP community banks purchased by each category of auction buyer. Private fund investors, including hedge funds and private equity firms, have purchased 70% of Treasury’s total auctioned shares in community banks. These private funds only have an interest in making a profit from these shares, either through dividend and interest payments or by selling the shares at a higher price. Private fund investors successfully bid for shares in 171 of the 185 banks that Treasury auctioned. Three private funds alone purchased nearly half (47%) of all shares in CPP community banks auctioned by Treasury. One capital management company was successful in its bids on 86 banks, and acquired 24% of all TARP shares in CPP community banks auctioned by Treasury. Another capital management company successfully bid on 106 banks, acquiring 13% of all TARP shares in CPP community banks auctioned by Treasury. An additional asset On October 9, 2012, SIGTARP made three recommendations regarding CPP preferred stock auctions, which are discussed in detail in SIGTARP’s October 2012 Quarterly Report, pages 180-183. FIGURE 4.66 PERCENTAGES OF SHARES PURCHASED BY BUYER TYPE 5% 3% 2% 7% 12% 70% Private Funds Brokers CPP Banks Other Banks Institutional Investors Senior Executives and Board Members of CPP Banks Note: Numbers may not total due to rounding. Source: Treasury, response to SIGTARP data call, 4/16/2015. 293 294 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.47 PERCENTAGE OF SHARES REPURCHASED BY CPP BANKS, AS OF 3/31/2015 CPP Banks Percentage 1 0-10% 2 10-20% 5 20-30% 7 30-40% 7 40-50% 7 50-60% 2 60-70% 3 70-80% 3 80-90% 8 90-100% Source: Treasury, response to SIGTARP data call, 4/16/2015. TABLE 4.48 PERCENT OWNERSHIP STAKE IN TARP FUNDS FOR EACH SUCCESSFUL BID, AS OF 3/31/2015 Number of Successful Bids Percentage Ownership Stake in TARP Funds 327 0-5% 160 5-10% 126 10-20% 92 20-30% 64 30-40% 41 40-50% 31 50-60% 27 60-70% 21 70-80% 20 80-90% 26 90-100% Source: Treasury, response to SIGTARP data call, 4/16/2015. management company successfully acquired shares in 40 banks, or 9% of all TARP shares in CPP community banks auctioned by Treasury. In addition, household-name brokers, presumably purchasing shares on behalf of other entities, successfully bid on 23 banks and acquired 12% of all TARP shares in CPP community banks auctioned by Treasury. Just one such broker successfully bid on 15 banks and purchased 4% of all TARP shares in CPP community banks auctioned by Treasury. Some banks tried to buy back all of Treasury’s TARP shares in their banks at auction, but only two banks were successful in doing so. Only 7% of total TARP shares in CPP community banks auctioned by Treasury were repurchased by 45 CPP banks. Only half (53%) of those 45 banks were successful in repurchasing more than half of the outstanding TARP investment in their banks. Other CPP banks may have bid on Treasury’s TARP shares in their banks, but were unsuccessful. The 45 CPP banks that repurchased their own shares at auction did so at discounts as large as 40%. Table 4.47 shows the percent of outstanding TARP shares repurchased by CPP community banks at auction. Other non-TARP banks also wanted to buy TARP shares in banks at auction. Non-CPP banks successfully bid on 33 banks to win 5% of total TARP shares auctioned in CPP community banks. Sixteen of these banks made successful bids in the auctions. One bank was successful on its bids on shares of 14 banks, another was successful on its bids on shares of 12 banks, while the other banks mostly made bids on just one or two banks. Institutional investors successfully bid for 3% of all TARP shares auctioned by Treasury in CPP community banks. This consisted mostly of one large retirement fund that was successful in its bids on 41 banks. An additional four institutional investment funds were successful in purchasing Treasury’s auctioned TARP shares in six CPP community banks. Senior executives, including presidents, CEOs, and members of the board of directors of CPP banks, successfully bid to purchase 2% of total TARP shares in CPP community banks auctioned by Treasury. These shares were purchased by 70 senior executives and board members of 18 CPP banks. While only two CPP banks were able to repurchase 100% of their TARP shares Treasury auctioned, 10 auction buyers bought the full TARP investment in an additional 10 community banks. These buyers include one bank holding company (purchased 100% of TARP shares in two banks in its region), two private fund investors (one purchased 100% of TARP shares in six banks and another in one bank), and one senior executive of a CPP bank who purchased the outstanding TARP shares at his bank. The buyers, who typically lack ties to the communities that these banks serve, have purchased Treasury’s powerful right to place a non-voting director on the board of these banks after six missed dividends. Overall, auction buyers acquired ownership of 50% or more of Treasury’s auctioned TARP shares in 126 community banks, giving them the ability to appoint non-voting directors if a bank misses six or more dividend payments, a right that existed at many banks at the time of auction. Over one-third, or 35%, of successful bids were for ownership stakes in 5% or less SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 295 of Treasury’s TARP shares in CPP community banks. Nearly nine in ten (87%) successful bids were for ownership stakes of less than 50% of Treasury’s auctioned TARP shares in CPP community banks. See Table 4.48 for a breakdown of percent of ownership stake in Treasury’s auctioned TARP shares in community banks for each successful bid. TABLE 4.49 INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 3/31/2015 Institution Auction Date Investment Net Proceeds Percentage of Shares Discount Repurchased Auction Loss Percentage by Institution Number of Missed Dividends Missed Dividends Total Loss from Auction Sales and Missed Dividends Porter Bancorp, Inc. 12/4/2014 $35,000,000 $3,500,000 $31,500,000 90% 13 $6,737,500 $38,237,500 Stonebridge Financial Corp. 3/15/2013 10,973,000 1,879,145 9,093,855 83% 12 1,794,180 10,888,035 AB&T Financial Corporation 11/19/2013 3,500,000 914,215 2,585,785 74% 11 481,250 3,067,035 Bridgeview Bancorp, Inc. 11/19/2013 38,000,000 10,450,000 27,550,000 73% 15 7,766,250 35,316,250 7/2/2014 1,700,000 502,000 1,198,000 70% 7 162,138 1,360,138 Spirit Bank Corp. Inc. 11/19/2013 30,000,000 9,000,000 21,000,000 70% 12 4,905,000 25,905,000 Community First Inc. 4/14/2014 17,806,000 5,350,703 12,455,297 70% 12 2,911,200 15,366,497 Georgia Primary Bank 2/10/2014 4,500,000 1,531,145 2,968,855 66% 18 1,113,163 4,082,018 3/1/2013 73,000,000 25,547,320 47,452,680 65% 10 9,125,000 56,577,680 First Banks, Inc. 8/12/2013 295,400,000 104,749,295 190,650,705 65% 17 64,543,063 255,193,768 Centrue Financial Corporation 10/21/2013 32,668,000 10,631,697 21,186,665 65% 18 6,959,475 28,146,140 Bank of George 10/21/2013 2,672,000 955,240 1,716,760 64% 10 364,150 2,080,910 United American Bank 7/2/2014 8,700,000 3,294,050 5,405,950 62% 21 2,482,702 7,888,652 Village Bank and Trust Financial Corp 11/19/2013 14,738,000 5,672,361 9,065,639 62% 11 2,026,475 11,092,114 Valley Community Bank 10/21/2013 5,500,000 2,296,800 3,203,200 58% 10 749,375 3,952,575 First Priority Financial Corp. 1/29/2013 9,175,000 4,012,094 5,162,906 56% First Intercontinental Bank 8/12/2013 6,398,000 3,222,113 3,175,887 50% 8 697,400 3,873,287 Citizens Bancshares Co. 1/29/2013 24,990,000 12,679,301 12,310,699 49% 12 4,086,000 16,396,699 Maryland Financial Bank Old Second Bancorp, Inc.a 5,162,906 Continued on next page 296 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 3/31/2015 Institution Auction Date Investment Net Proceeds (CONTINUED) Percentage of Shares Discount Repurchased Auction Loss Percentage by Institution Number of Missed Dividends Missed Dividends Total Loss from Auction Sales and Missed Dividends First Financial Service Corporation 4/29/2013 $20,000,000 $10,733,778 $9,266,222 46% 10 $2,500,000 $11,766,222 Dickinson Financial Corporation II 1/29/2013 146,053,000 79,903,245 66,149,755 45% 14 27,859,720 94,009,475 Midtown Bank & Trust Company 11/19/2013 5,222,000 3,133,200 2,088,800 40% 15 1,067,213 3,156,013 Delmar Bancorp 1/29/2013 9,000,000 5,453,900 3,546,100 39% 5 613,125 4,159,225 Virginia Company Bank 8/12/2013 4,700,000 2,843,974 1,856,026 39% 3 185,903 2,041,929 Pacific Commerce Bank 2/10/2014 4,060,000 2,494,961 1,565,039 39% 13 695,771 2,260,810 Lone Star Bank 12/4/2014 3,072,000 1,908,480 1,163,520 38% 23 1,059,242 2,222,762 Franklin Bancorp, Inc. 11/9/2012 5,097,000 3,191,614 1,905,386 37% 1,905,386 12/20/2012 1,552,000 983,800 568,200 37% 568,200 9/12/2012 22,000,000 14,211,450 7,788,550 35% 7,788,550 12/11/2012 20,749,000 13,399,227 7,349,773 35% 2 565,390 7,915,163 Marine Bank& Trust Company 7/2/2014 3,000,000 1,985,000 1,015,000 34% 15 613,125 1,628,125 First Reliance Bancshares, Inc. 3/1/2013 15,349,000 10,327,021 5,021,979 33% 6 1,254,720 6,276,699 Security Bancshares of Pulaski County, Inc. 12/11/2012 2,152,000 1,475,592 676,408 31% First Alliance Bancshares, Inc. 12/20/2012 3,422,000 2,370,742 1,051,258 31% 7/27/2012 35,500,000 25,313,186 10,186,814 29% Parke Bancorp, Inc. 11/30/2012 16,288,000 11,595,735 4,692,265 29% 4,692,265 First Independence Corporation 12/20/2012 3,223,000 2,286,675 936,325 29% 936,325 HMN Financial, Inc. 1/29/2013 26,000,000 18,571,410 7,428,590 29% Farmers Capital Bank Corporation 6/13/2012 30,000,000 21,594,229 8,405,771 28% 8,405,771 Diamond Bancorp, Inc. 7/27/2012 20,445,000 14,780,662 5,664,338 28% 5,664,338 Hyperion Bank First Community Financial Partners, Inc.b The Baraboo Bancorporation, Inc. Marquette National Corporation 100% 676,408 2 93,245 31% 1,144,503 10,186,814 8 2,600,000 10,028,590 Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 3/31/2015 Institution Auction Date Investment Net Proceeds 297 (CONTINUED) Percentage of Shares Discount Repurchased Auction Loss Percentage by Institution Number of Missed Dividends Missed Dividends Total Loss from Auction Sales and Missed Dividends Park Bancorporation, Inc. 7/27/2012 $23,200,000 $16,772,382 $6,427,618 28% Community West Bancshares 12/11/2012 15,600,000 11,181,456 4,418,544 28% Commonwealth Bancshares, Inc. 7/27/2012 20,400,000 15,147,000 5,253,000 26% Trinity Capital Corporation 7/27/2012 35,539,000 26,396,503 9,142,497 26% 9,142,497 TriSummit Bank 11/30/2012 7,002,000 5,198,984 1,803,016 26% 1,803,016 Alliance Financial Services, Inc. 1/29/2013 12,000,000 8,912,495 3,087,505 26% 12 3,020,400 6,107,905 National Bancshares, Inc. 2/7/2013 24,664,000 18,318,148 6,345,852 26% 9 3,024,383 9,370,235 Blue Ridge Bancshares, Inc. 10/31/2012 12,000,000 8,969,400 3,030,600 25% 3,030,600 Peoples Bancshares of TN, Inc. 10/31/2012 3,900,000 2,919,500 980,500 25% 980,500 2/7/2013 17,969,000 13,612,558 4,356,442 24% 4,356,442 Colony Bankcorp, Inc. 1/29/2013 28,000,000 21,680,089 6,319,911 23% F&M Financial Corporation (TN) 9/12/2012 17,243,000 13,443,074 3,799,926 22% 3,799,926 Layton Park Financial Group, Inc. 11/30/2012 3,000,000 2,345,930 654,070 22% 654,070 CoastalSouth Bancshares, Inc. 3/1/2013 16,015,000 12,606,191 3,408,809 21% Seacoast Banking Corporation of Florida 3/28/2012 50,000,000 40,404,700 9,595,300 19% 9,595,300 United Bancorp, Inc. 6/13/2012 20,600,000 16,750,221 3,849,779 19% 3,849,779 Alpine Banks of Colorado 9/12/2012 70,000,000 56,430,297 13,569,703 19% 13,569,703 10/31/2012 2,250,000 1,831,250 418,750 19% 418,750 2/7/2013 10,900,000 8,876,677 2,023,323 19% Congaree Bancshares Inc. 10/31/2012 3,285,000 2,685,979 599,021 18% Corning Savings and Loan Association 11/30/2012 638,000 523,680 114,320 18% KS Bancorp, Inc. 11/30/2012 4,000,000 3,283,000 717,000 18% First Trust Corporation CenterBank Ridgestone Financial Services, Inc. 30% $6,427,618 3 $585,000 26% 5,253,000 4 8 14 35% 5,003,544 1,400,000 1,687,900 2,079,175 7,719,911 5,096,709 4,102,498 599,021 114,320 717,000 Continued on next page 298 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 3/31/2015 Institution Auction Date Investment Net Proceeds (CONTINUED) Percentage of Shares Discount Repurchased Auction Loss Percentage by Institution Number of Missed Dividends Missed Dividends Total Loss from Auction Sales and Missed Dividends DeSoto County Bank 9/25/2013 $2,681,000 $2,196,896 $484,104 18% Meridian Bank 3/17/2014 12,535,000 10,328,152 2,206,848 18% 2,206,848 First Western Financial, Inc.c 7/27/2012 20,440,000 17,022,298 3,417,702 17% 3,417,702 Bank of Commerce 11/30/2012 3,000,000 2,477,000 523,000 17% 3 $122,625 645,625 Carolina Trust Bank 11/30/2012 4,000,000 3,362,000 638,000 16% 3 150,000 788,000 Presidio Bank 12/11/2012 10,800,000 9,058,369 1,741,631 16% 3/1/2013 2,900,000 2,440,379 459,621 16% Timberland Bancorp, Inc. 11/9/2012 16,641,000 14,209,334 2,431,666 15% Worthington Financial Holdings, Inc. 6/24/2013 2,720,000 2,318,851 401,149 15% First Financial Holdings Inc. 3/28/2012 65,000,000 55,926,478 9,073,522 14% 9,073,522 11/30/2012 3,000,000 2,593,700 406,300 14% 406,300 Banner Corporation 3/28/2012 124,000,000 108,071,915 15,928,085 13% 15,928,085 LNB Bancorp Inc. 6/13/2012 25,223,000 21,863,750 3,359,250 13% 3,359,250 Pulaski Financial Corp 6/27/2012 32,538,000 28,460,338 4,077,662 13% 4,077,662 Exchange Bank 7/27/2012 43,000,000 37,259,393 5,740,607 13% First National Corporation 8/23/2012 13,900,000 12,082,749 1,817,251 13% 1,817,251 Taylor Capital Group 6/13/2012 104,823,000 92,254,460 12,568,540 12% 12,568,540 Fidelity Financial Corporation 7/27/2012 36,282,000 32,013,328 4,268,672 12% Yadkin Valley Financial Corporationd 9/12/2012 49,312,000 43,486,820 5,825,180 12% 5,825,180 Three Shores Bancorporation, Inc. 11/9/2012 5,677,000 4,992,788 684,212 12% 684,212 Alaska Pacific Bancshares, Inc. 11/30/2012 4,781,000 4,217,568 563,432 12% 563,432 Fidelity Southern Corporation 6/27/2012 48,200,000 42,757,786 5,442,214 11% 5,442,214 First Citizens Banc Corp 6/27/2012 23,184,000 20,689,633 2,494,367 11% 2,494,367 Southern First Bancshares, Inc. 6/27/2012 17,299,000 15,403,722 1,895,278 11% Santa Clara Valley Bank, N.A. Clover Community Bankshares, Inc. 79% $484,104 1,741,631 12 474,150 933,771 2,431,666 6 47% 58% 6% 222,360 623,509 5,740,607 4,268,672 1,895,278 Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 3/31/2015 Institution Auction Date Investment Net Proceeds 299 (CONTINUED) Percentage of Shares Discount Repurchased Auction Loss Percentage by Institution Number of Missed Dividends Missed Dividends Total Loss from Auction Sales and Missed Dividends Market Street Bancshares, Inc. 7/27/2012 $20,300,000 $18,069,213 $2,230,787 11% 89% $2,230,787 Premier Financial Bancorp, Inc. 7/27/2012 22,252,000 19,849,222 2,402,778 11% 46% 2,402,778 Metro City Bank 10/31/2012 7,700,000 6,861,462 838,538 11% 15% 838,538 BankGreenville Financial Corporation 11/9/2012 1,000,000 891,000 109,000 11% 109,000 FFW Corporation 11/30/2012 7,289,000 6,515,426 773,574 11% 773,574 First Advantage Bancshares, Inc. 12/11/2012 1,177,000 1,046,621 130,379 11% 130,379 FC Holdings, Inc. 2/7/2013 21,042,000 18,685,927 2,356,073 11% 14 $4,013,730 6,369,803 First Southwest Bancorporation, Inc. 3/15/2013 5,500,000 4,900,609 599,391 11% 13 974,188 1,573,579 ColoEast Bankshares, Inc. 7/22/2013 10,000,000 8,947,125 1,052,875 11% 8 1,090,000 2,142,875 WSFS Financial Corporation 3/28/2012 52,625,000 47,435,299 5,189,701 10% CBS Banc-Corp. 7/27/2012 24,300,000 21,776,396 2,523,604 10% Blackhawk Bancorp Inc. 10/31/2012 10,000,000 9,009,000 991,000 10% 991,000 First Gothenburg Banschares, Inc. 10/31/2012 7,570,000 6,822,136 747,864 10% 747,864 Bank Financial Services, Inc. 12/20/2012 1,004,000 907,937 96,063 10% 96,063 3/1/2013 12,900,000 11,587,256 1,312,744 10% 9 1,581,863 2,894,607 Flagstar Bancorp, Inc. 3/15/2013 266,657,000 240,627,277 26,029,723 10% 5 16,666,063 42,695,786 First Capital Bancorp, Inc. 6/13/2012 10,958,000 9,931,327 1,026,673 9% BNC Bancorp SouthCrest Financial Group, Inc. 5,189,701 95% 50% 2,523,604 1,026,673 8/23/2012 31,260,000 28,365,685 2,894,315 9% Germantown Capital Corporation, Inc. 10/31/2012 4,967,000 4,495,616 471,384 9% HomeTown Bankshares Corporation 10/31/2012 10,000,000 9,093,150 906,850 9% 906,850 Oak Ridge Financial Services, Inc. 10/31/2012 7,700,000 7,024,595 675,405 9% 675,405 11/9/2012 8,700,000 7,945,492 754,508 9% First Freedom Bancshares, Inc. 2,894,315 25% 69% 471,384 754,508 Continued on next page 300 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 3/31/2015 Institution Sound Banking Company Auction Date Investment Net Proceeds (CONTINUED) Percentage of Shares Discount Repurchased Auction Loss Percentage by Institution Number of Missed Dividends Missed Dividends Total Loss from Auction Sales and Missed Dividends 11/9/2012 $3,070,000 $2,804,089 $265,911 9% $265,911 Country Bank Shares, Inc. 11/30/2012 7,525,000 6,838,126 686,874 9% 686,874 Bank of Southern California, N.A. 12/20/2012 4,243,000 3,850,150 392,850 9% Farmers & Merchants Financial Corporation 6/24/2013 442,000 400,425 41,575 9% RCB Financial Corporation 9/25/2013 8,900,000 8,073,279 826,721 9% MainSource Financial Group, Inc. 3/28/2012 57,000,000 52,277,171 4,722,829 8% Ameris Bancorp 6/13/2012 52,000,000 47,665,332 4,334,668 8% Peoples Bancorp of North Carolina, Inc. 6/27/2012 25,054,000 23,033,635 2,020,365 8% 50% 2,020,365 Regional Bankshares, Inc. 11/9/2012 1,500,000 1,373,625 126,375 8% 47% 126,375 CBB Bancorp 11/30/2012 4,397,000 4,066,752 330,248 8% 35% 330,248 Central Community Corporation 12/11/2012 22,000,000 20,172,636 1,827,364 8% 1,827,364 Waukesha Bankshares, Inc. 1/29/2013 5,625,000 5,161,674 463,326 8% 463,326 Wilshire Bancorp, Inc. 3/28/2012 62,158,000 57,766,994 4,391,006 7% 97% 4,391,006 Firstbank Corporation 6/27/2012 33,000,000 30,587,530 2,412,470 7% 48% 2,412,470 Capital Pacific Bancorp 11/9/2012 4,000,000 3,715,906 284,094 7% Western Illinois Bancshares, Inc. 11/9/2012 11,422,000 10,616,305 805,695 7% 89% 805,695 Community Bancshares of Mississippi, Inc. 11/30/2012 1,050,000 977,750 72,250 7% 52% 72,250 Community Business Bank 11/30/2012 3,976,000 3,692,560 283,440 7% Hometown Bancshares, Inc. 11/30/2012 1,900,000 1,766,510 133,490 7% 1/29/2013 8,144,000 7,598,963 545,037 7% 545,037 2/7/2013 16,000,000 14,811,984 1,188,016 7% 1,188,016 8/23/2012 11,000,000 10,380,905 619,095 6% 619,095 F & M Bancshares, Inc. Carolina Bank Holdings, Inc. Mackinac Financial Corporation 30% 392,850 41,575 9 37% $1,055,520 1,882,241 4,722,829 4,334,668 284,094 283,440 39% 133,490 Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 3/31/2015 Institution F&M Financial Corporation (NC) Auction Date Investment Net Proceeds 301 (CONTINUED) Percentage of Shares Discount Repurchased Auction Loss Percentage by Institution Number of Missed Dividends Missed Dividends Total Loss from Auction Sales and Missed Dividends 9/12/2012 $17,000,000 $15,988,500 $1,011,500 6% 84% $1,011,500 12/20/2012 2,600,000 2,445,000 155,000 6% 54% 155,000 Commonwealth Business Bank 7/22/2013 7,701,000 7,250,414 450,586 6% 100% Universal Bancorp 8/12/2013 9,900,000 9,312,028 587,972 6% First Defiance Financial Corp. 6/13/2012 37,000,000 35,084,144 1,915,856 5% F&C Bancorp, Inc. 11/9/2012 2,993,000 2,840,903 152,097 5% Farmers Enterprises, Inc. 11/9/2012 12,000,000 11,439,252 560,748 5% Coastal Banking Company, Inc. 3/1/2013 9,950,000 9,408,213 541,787 5% Alliance Bancshares, Inc. 3/15/2013 2,986,000 2,831,437 154,563 5% 154,563 AmFirst Financial Services, Inc. 3/15/2013 5,000,000 4,752,000 248,000 5% 248,000 United Community Banks, Inc. 3/15/2013 180,000,000 171,517,500 8,482,500 5% 8,482,500 Biscayne Bancshares, Inc. 1/29/2013 6,400,000 6,170,630 229,370 4% Guaranty Federal Bancshares, Inc.e 4/29/2013 12,000,000 11,493,900 506,100 4% Intervest Bancshares Corporation 6/24/2013 25,000,000 24,007,500 992,500 4% 25% 992,500 MetroCorp Bancshares, Inc. 6/27/2012 45,000,000 43,490,360 1,509,640 3% 97% 1,509,640 First Community Corporation 8/23/2012 11,350,000 10,987,794 362,206 3% 33% 362,206 The Little Bank, Incorporated 10/31/2012 7,500,000 7,285,410 214,590 3% 63% 214,590 Manhattan Bancshares, Inc. 12/11/2012 2,639,000 2,560,541 78,459 3% 96% 78,459 3/1/2013 12,000,000 11,605,572 394,428 3% BancStar, Inc. 4/29/2013 8,600,000 8,366,452 233,548 3% NewBridge Bancorp 4/29/2013 52,372,000 50,837,239 1,534,761 3% Alarion Financial Services, Inc. 7/22/2013 6,514,000 6,338,584 175,416 3% Crosstown Holding Company 7/22/2013 10,650,000 10,356,564 293,436 3% Community Investors Bancorp, Inc. The Queensborough Company 10 $1,049,250 1,499,836 587,972 45% 1,915,856 152,097 99% 560,748 6 746,250 53% 1,288,037 229,370 506,100 11 1,798,500 12% 2,192,928 233,548 1,534,761 6 532,560 707,976 293,436 Continued on next page 302 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 3/31/2015 Institution Auction Date Investment Net Proceeds (CONTINUED) Percentage of Shares Discount Repurchased Auction Loss Percentage by Institution Number of Missed Dividends Missed Dividends Total Loss from Auction Sales and Missed Dividends Century Financial Services Corporation 12/20/2012 $10,000,000 $9,751,500 $248,500 2% Mountain Valley Bancshares, Inc. 7/22/2013 3,300,000 3,242,000 58,000 2% 10/21/2013 21,750,000 21,263,017 486,983 2% Community First Bancshares, Inc. 2/10/2014 12,725,000 12,446,703 278,297 2% IA Bancorp, Inc. 3/17/2014 5,976,000 5,863,113 112,887 2% 6 472,365 585,252 Plato Holdings Inc. 4/29/2013 2,500,000 2,478,750 21,250 1% 4 207,266 228,516 Fidelity Federal Bancorp 7/22/2013 6,657,000 6,586,509 70,491 1% 14 1,229,924 1,300,415 Omega Capital Corp. 7/22/2013 2,816,000 2,791,000 25,000 1% 15 575,588 600,588 Premier Financial Corp. 7/22/2013 6,349,000 6,270,436 78,564 1% 12 1,597,857 1,676,421 Community Pride Bank Corporation 8/12/2013 4,400,000 4,351,151 48,849 1% 9 803,286 852,135 Chicago Shore Corporation 3/17/2014 7,000,000 6,937,000 63,000 1% Severn Bancorp, Inc. 9/25/2013 23,393,000 23,367,268 25,732 0% Oregon Bancorp, Inc. 10/21/2013 3,216,000 3,216,000 0 0% 78% 0 Freeport Bancshares, Inc. 4/14/2014 301,000 301,000 0 0% 78% 0 Reliance Bancshares, Inc. 9/25/2013 40,000,000 40,196,000 (196,000) 0% BNCCORP, Inc. 3/17/2014 20,093,000 20,114,700 (21,700) 0% (21,700) First United Corporation 12/4/2014 30,000,000 30,060,300 (60,300) 0% (60,300) Tennessee Valley Financial Holdings, Inc 4/29/2013 3,000,000 3,041,330 (41,330) (1%) 13 531,375 490,045 3/1/2013 10,500,000 10,728,783 (228,783) (2%) 12 1,716,750 1,487,967 Madison Financial Corporation 11/19/2013 3,370,000 3,446,196 (76,196) (2%) 15 688,913 612,717 Brogan Bankshares, Inc. 4/29/2013 2,400,000 2,495,024 (95,024) (4%) 7 352,380 257,356 7/2/2014 16,800,000 17,683,309 (883,309) (5%) 14 3,204,600 2,321,291 4/29/2013 11,949,000 12,907,297 (958,297) (8%) 12 1,792,350 834,053 Blue Valley Ban Corp Northwest Bancorporation, Inc. White River Bancshares Company Plumas Bancorp $248,500 91% 58,000 18 $4,893,750 5,380,733 278,297 60% 63,000 6 11 58% 1,754,475 5,995,000 1,780,207 5,799,000 Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 3/31/2015 Auction Date Institution Boscobel Bancorp, Inc. Investment Net Proceeds 303 (CONTINUED) Percentage of Shares Discount Repurchased Auction Loss Percentage by Institution Number of Missed Dividends Missed Dividends Total Loss from Auction Sales and Missed Dividends 3/1/2013 $5,586,000 $6,116,943 ($530,943) (10%) 11 $1,288,716 $757,773 Eastern Virginia Bankshares, Inc. 10/21/2013 24,000,000 26,498,640 (2,498,640) (10%) 11 3,300,000 801,360 Atlantic Bancshares, Inc. 2/10/2014 2,000,000 2,275,000 (275,000) (14%) 11 299,255 24,255 Patriot Bancshares, Inc. 4/14/2014 26,038,000 29,736,177 (3,698,177) (14%) 13 4,612,010 913,833 Security State Bank Holding Company 6/24/2013 10,750,000 12,409,261 (1,659,261) (15%) 10 2,254,985 595,724 Pathway Bancorp 6/24/2013 3,727,000 4,324,446 (597,446) (16%) 15 761,588 164,142 Great River Holding Company 4/14/2014 8,400,000 9,920,988 (1,520,988) (18%) 14 2,466,660 945,672 Royal Bancshares of Pennsylvania, Inc. 7/2/2014 30,407,000 36,337,548 (5,930,548) (20%) 20 7,601,750 1,671,202 Market Bancorporation, Inc. 7/2/2014 2,060,000 2,467,662 (407,662) (20%) 16 449,080 41,418 11/19/2013 16,200,000 19,685,754 (3,485,754) (22%) 18 3,973,050 487,296 Pacific City Financial Corporation Total Auction Losses Total Missed Dividends 38% 53% $812,396,967 $251,108,665 Notes: Numbers may not total due to rounding. a Treasury sold 70,028 of its shares in Old Second in the 3/1/2013 auction and the remaining 2,972 shares in the 3/15/2013 auction. b Treasury additionally sold 1,100 shares of its Series C stock in First Community Financial Partners, Inc. in this auction, but its largest investment in the bank was sold in the auction that closed on 9/12/2012, and the data for the disposition of its investment is listed under the 9/12/2012 auction in this table. c Treasury sold 8,000 of its shares in First Western Financial, Inc. on 7/27/2012 and the remaining 12,440 in the 6/24/2013 auction. d This institution was auctioned separately from the other set that closed on the same date because it is a publicly traded company. e The original investment in Guaranty Federal Bancshares, Inc. was $17 million. The bank had previously paid down $5 million, leaving a $12 million investment remaining. Sources: Treasury, Transactions Report, 4/3/2015; SNL Financial LLC data. 304 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM For a discussion of SIGTARP’s August 20, 2013, recommendation to Treasury regarding the inclusion of SBLF funds as TARP repayments, see SIGTARP’s October 2013 Quarterly Report, pages 281-282. For information on TARP banks that refinanced into SBLF, see SIGTARP’s April 9, 2013, audit report, “Banks that Used the Small Business Lending Fund to Exit TARP.” For a detailed list of CPP banks that refinanced into SBLF, see SIGTARP’s October 2012 Quarterly Report, pages 88-92. For a discussion of the impact of TARP and SBLF on community banks, see SIGTARP’s April 2012 Quarterly Report, pages 145-167. For more information on warrant disposition, see SIGTARP’s audit report of May 10, 2010, “Assessing Treasury’s Process to Sell Warrants Received from TARP Recipients.” Exercise Price: Preset price at which a warrant holder may purchase each share. For warrants in publicly traded institutions issued through CPP, this was based on the average stock price during the 20 days before the date that Treasury granted preliminary CPP participation approval. CPP Banks Refinancing into CDCI and SBLF On October 21, 2009, the Administration announced the Community Development Capital Initiative (“CDCI”) as another TARP-funded program.389 Under CDCI, TARP made $570.1 million in investments in 84 eligible banks and credit unions.390 Qualifying CPP banks applied for the new TARP program, and 28 banks were accepted. The 28 banks refinanced $355.7 million in CPP investments into CDCI.391 For more information on CDCI, see “Community Development Capital Initiative” in this section. On September 27, 2010, the President signed into law the Small Business Jobs Act of 2010 (“Jobs Act”), which created the non-TARP program SBLF for Treasury to make up to $30 billion in capital investments in institutions with less than $10 billion in total assets.392 According to Treasury, it received a total of 935 SBLF applications, of which 320 were TARP recipients under CPP (315) or CDCI (5).393 Treasury accepted 137 CPP participants into SBLF with financing of $2.7 billion. The 137 banks in turn refinanced $2.2 billion of Treasury’s TARP preferred stock with the SBLF investments.394 None of the CDCI recipients were approved for participation. Warrant Disposition As required by EESA, Treasury received warrants when it invested in troubled assets from financial institutions, with an exception for certain small institutions. With respect to financial institutions with publicly traded securities, these warrants gave Treasury the right, but not the obligation, to purchase a certain number of shares of common stock at a predetermined price.395 Because the warrants rise in value as a company’s share price rises, they permit Treasury (and the taxpayer) to benefit from a firm’s potential recovery.396 For publicly traded institutions, the warrants received by Treasury under CPP allowed Treasury to purchase additional shares of common stock in a number equal to 15% of the value of the original CPP investment at a specified exercise price.397 Treasury’s warrants constitute assets with a fair market value that Treasury estimates using relevant market quotes, financial models, and/or third- party valuations.398 As of March 31, 2015, Treasury had not exercised any of these warrants.399 For privately held institutions, Treasury received warrants to purchase additional preferred stock or debt in an amount equal to 5% of the CPP investment. Treasury exercised these warrants immediately.400 Unsold and unexercised warrants expire 10 years from the date of the CPP investment.401 As of March 31, 2015, Treasury had received $8 billion through the sale of CPP warrants obtained by TARP recipients.402 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Repurchase of Warrants by Financial Institutions Upon repaying its CPP investment, a recipient may seek to negotiate with Treasury to buy back its warrants. As of March 31, 2015, 178 publicly traded institutions had bought back $3.9 billion worth of warrants, of which $12 million was purchased this quarter. As of that same date, 291 privately held institutions, the warrants of which had been immediately exercised, bought back the resulting additional preferred shares for a total of $179 million, of which $3.4 million was bought back this quarter.403 Table 4.50 lists publicly traded institutions that repaid TARP and repurchased warrants in the quarter ended March 31, 2015. Table 4.51 lists privately held institutions that had done so in the same quarter.404 TABLE 4.50 CPP WARRANT SALES AND REPURCHASES (PUBLIC) FOR THE QUARTER ENDING 3/31/2015 Repurchase Date Company Number of Warrants Repurchased Amount of Repurchase ($ Thousands) 3/11/2015 First Defiance Financial Corp. 550,595 $11,979,295.0 1/7/2015 Blue Valley Ban Corp 130,977 3,056.0 681,572 $11,982,351.0 Total Notes: Numbers may not total due to rounding. This table represents warrants for common stock issued to Treasury by publicly traded TARP recipients. Treasury may hold one warrant for millions of underlying shares rather than millions of warrants of an individual financial institution. Sources: Treasury, Transactions Report, 4/3/2015; Treasury, responses to SIGTARP data calls, 1/4/2011, 1/7/2011, 4/6/2011, 7/8/2011, 10/7/2011, 10/11/2011, 1/11/2012, 4/5/2012, 7/9/2012, 10/12/2012, 4/12/2013, 7/11/2013, 10/10/2013, 1/8/2014, 4/11/2014, 7/15/2014, 10/10/2014, 1/13/2015, 4/10/2015. TABLE 4.51 CPP WARRANT SALES AND REPURCHASES (PRIVATE) FOR THE QUARTER ENDING 3/31/2015 Number of Warrants Repurchased Amount of Repurchase ($ Thousands) U.S. Century Bank 251,200 $2,512.0 Repurchase Date Company 3/15/2015 1/1/2015 Farmers & Merchants Bancshares, Inc. 550,000 550.0 1/14/2015 Liberty Bancshares, Inc. (TX) 196,000 196.0 2/11/2015 Community Bancshares, Inc. (Mission Bank) Total 116,000 116.0 3,374,000 $3,374.0 Notes: Numbers may not total due to rounding. This table represents the preferred shares held by Treasury as a result of the exercise of warrants issued by non-publicly traded TARP recipients. These warrants were exercised immediately upon the transaction date. Treasury may hold one warrant for millions of underlying shares rather than millions of warrants of an individual financial institution. a S-Corporation Institution: issued subordinated debt instead of preferred stock. Sources: Treasury, Transactions Report, 4/3/2015; Treasury response to SIGTARP data call, 4/10/2015. 305 306 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Treasury Warrant Auctions If Treasury and the repaying institution cannot agree upon the price for the institution to repurchase its warrants, Treasury may conduct a public or private offering to auction the warrants.405 As of March 31, 2015, the combined proceeds from Treasury’s public and private warrant auctions totaled $5.5 billion.406 Public Warrant Auctions In November 2009, Treasury began selling warrants via public auctions.407 Through March 31, 2015, Treasury had held 26 public auctions for warrants it received under CPP, TIP, and AGP, raising a total of approximately $5.4 billion.408 Treasury did not conduct any public warrant auctions this quarter.409 Final closing information for all public warrant auctions is shown in Table 4.52. 307 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 4.52 PUBLIC TREASURY WARRANT AUCTIONS, AS OF 3/31/2015 Auction Date 3/3/2010 Number of Warrants Offered Minimum Bid Price Selling Price Proceeds to Treasury ($ Millions) Bank of America A Auction (TIP)a 150,375,940 $7.00 $8.35 $1,255.6 Bank of America B Auction (CPP)a 121,792,790 1.50 2.55 310.6 Company 12/10/2009 JPMorgan Chase 5/20/2010 Wells Fargo and Company 88,401,697 8.00 10.75 950.3 110,261,688 6.50 7.70 849.0 9/21/2010 4/29/2010 Hartford Financial Service Group, Inc. 52,093,973 10.50 13.70 713.7 PNC Financial Services Group, Inc. 16,885,192 15.00 19.20 324.2 Citigroup A Auction (TIP & AGP) 255,033,142 0.60 1.01 257.6 Citigroup B Auction (CPP)a 210,084,034 0.15 0.26 54.6 a 1/25/2011 9/16/2010 Lincoln National Corporation 13,049,451 13.50 16.60 216.6 5/6/2010 Comerica Inc. 11,479,592 15.00 16.00 183.7 12/3/2009 Capital One 12,657,960 7.50 11.75 148.7 11/29/2012 M&T Bank Corporation 1,218,522 23.50 1.35 32.3 2/8/2011 Wintrust Financial Corporation 1,643,295 13.50 15.80 26.0 6/2/2011 Webster Financial Corporation 3,282,276 5.50 6.30 20.4 SunTrust A Auctionb 6,008,902 2.00 2.70 16.2 SunTrust B Auctionb 11,891,280 1.05 1.20 14.2 1,707,456 5.00 5.00 15.6 595,829 16.00 19.00 11.3 9/22/2011 3/9/2010 Washington Federal, Inc. 3/10/2010 Signature Bank 12/15/2009 TCF Financial 3,199,988 1.50 3.00 9.6 12/5/2012 Zions Bancorporation 5,789,909 23.50 26.50 7.8 3/11/2010 Texas Capital Bancshares, Inc. 2/1/2011 Boston Private Financial Holdings, Inc. 758,086 6.50 6.50 6.7 2,887,500 1.40 2.20 6.4 5/18/2010 Valley National Bancorp 2,532,542 1.70 2.20 5.6 11/30/2011 Associated Banc-Corpc 3,983,308 0.50 0.90 3.6 6/2/2010 First Financial Bancorp 6/9/2010 Sterling Bancshares Inc. Total 465,117 4.00 6.70 3.1 2,615,557 0.85 1.15 3.0 1,090,695,026 $5,446.4 Notes: Numbers may not total due to rounding. a Treasury held two auctions each for the sale of Bank of America and Citigroup warrants. b Treasury held two auctions for SunTrust’s two CPP investments dated 11/14/2008 (B auction) and 12/31/2008 (A auction). c According to Treasury, the auction grossed $3.6 million and netted $3.4 million. Sources: The PNC Financial Services Group, Inc., “Final Prospectus Supplement,” 4/29/2010, www.sec.gov/Archives/edgar/data/713676/000119312510101032/d424b5.htm, accessed 4/1/2015; Valley National Bancorp, “Final Prospectus Supplement,” 5/18/2010, www.sec.gov/Archives/edgar/data/714310/000119312510123896/d424b5.htm, accessed 4/1/2015; Comerica Incorporated, “Final Prospectus Supplement,” 5/6/2010, www.sec.gov/Archives/edgar/data/28412/000119312510112107/d424b5.htm, accessed 4/1/2015; Wells Fargo and Company, “Definitive Prospectus Supplement,” 5/20/2010, www.sec.gov/Archives/edgar/data/72971/000119312510126208/d424b5.htm, accessed 4/1/2015; First Financial Bancorp, “Prospectus Supplement,” 6/2/2010, www.sec.gov/Archives/edgar/data/708955/000114420410031630/v187278_424b5.htm, accessed 4/1/2015; Sterling Bancshares, Inc., “Prospectus Supplement,” 6/9/2010, www.sec.gov/Archives/edgar/data/891098/000119312510136584/dfwp.htm, accessed 4/1/2015; Signature Bank, “Prospectus Supplement,” 3/10/2010, files.shareholder.com/downloads/ SBNY/1456015611x0x358381/E87182B5-A552-43DD-9499-8B56F79AEFD0/8-K Reg_FD_Offering_Circular.pdf, accessed 4/1/2015; Texas Capital Bancshares, Inc., “Prospectus Supplement,” 3/11/2010, www.sec.gov/Archives/edgar/data/1077428/000095012310023800/d71405ae424b5.htm, accessed 4/1/2015; Bank of America, “Form 8-K,” 3/3/2010, www.sec.gov/Archives/edgar/ data/70858/000119312510051260/d8k.htm, accessed 4/1/2015; Bank of America, “Prospectus Supplement,” 3/1/2010, www.sec.gov/Archives/edgar/data/70858/000119312510045775/ d424b2.htm, accessed 4/1/2015; Washington Federal, Inc., “Prospectus Supplement,” 3/9/2010, www.sec.gov/Archives/edgar/data/936528/000119312510052062/d424b5.htm, accessed 4/1/2015; TCF Financial, “Prospectus Supplement,” 12/16/2009, www.sec.gov/Archives/edgar/data/814184/000104746909010786/a2195869z424b5.htm, accessed 4/1/2015; JPMorgan Chase, “Prospectus Supplement,” 12/11/2009, www.sec.gov/Archives/edgar/data/19617/000119312509251466/d424b5.htm, accessed 4/1/2015; Capital One Financial, “Prospectus Supplement,” 12/3/2009, www.sec.gov/Archives/edgar/data/927628/000119312509247252/d424b5.htm, accessed 4/1/2015; Treasury, Transactions Report, 9/30/2013; Hartford Financial Services Group, Prospectus Supplement to Prospectus filed with the SEC 8/4/2010, www.sec.gov/Archives/edgar/data/874766/000095012310087985/y86606b5e424b5.htm, accessed 4/1/2015; Treasury, “Treasury Announces Pricing of Public Offering to Purchase Common Stock of The Hartford Financial Services Group, Inc.,” 9/22/2010, www.treasury.gov/press-center/press-releases/Pages/tg865. aspx, accessed 4/1/2015; Lincoln National Corporation, Prospectus Supplement to Prospectus filed with SEC 3/10/2009, www.sec.gov/Archives/edgar/data/59558/000119312510211941/ d424b5.htm, accessed 4/1/2015; Lincoln National Corporation, 8-K, 9/22/2010, www.sec.gov/Archives/edgar/data/59558/000119312510214540/d8k.htm, accessed 4/1/2015; Treasury, Section 105(a) Report, 1/31/2011; Treasury, “Treasury Announces Public Offerings of Warrants to Purchase Common Stock of Citigroup Inc.,” 1/24/2011, www.treasury.gov/press-center/press- releases/ Pages/tg1033.aspx, accessed 4/1/2015; Citigroup, Prospectus, 1/24/2011, www.sec.gov/Archives/edgar/data/831001/000095012311004665/y89177b7e424b7.htm, accessed 4/1/2015; Citigroup, Prospectus, 1/24/2011, www.sec.gov/Archives/edgar/data/831001/000095012311004665/y89177b7e424b7.htm, accessed 4/1/2015; Boston Private Financial Holdings, Inc., Prospectus, 1/28/2011, www.sec.gov/Archives/edgar/data/821127/000119312511021392/d424b5.htm, accessed 4/1/2015; Boston Private Financial Holdings, Inc. 8-K, 2/7/2011, www.sec. gov/Archives/edgar/data/821127/000144530511000189/tarpwarrant020711.htm, accessed 4/1/2015; Wintrust Financial Corporation, Prospectus, 2/8/2011, www.sec.gov/Archives/edgar/ data/1015328/000095012311011007/c62806b5e424b5.htm, accessed 4/1/2015; Treasury, Section 105(a) Report, 1/31/2011; Treasury, “Treasury Announces Public Offerings of Warrants to Purchase Common Stock of Citigroup Inc.,” 1/24/2011, www.treasury.gov/press-center/press-releases/Pages/tg1033.aspx, accessed 4/1/2015; Treasury, Citigroup Preliminary Prospectus – CPP Warrants, 1/24/2011, www.sec.gov/Archives/edgar/data/831001/000095012311004666/y89178b7e424b7.htm, accessed 4/1/2015; Citigroup, Preliminary Prospectus – TIP & AGP Warrants, 1/24/2011, www.sec.gov/Archives/edgar/data/831001/000095012311004665/y89177b7e424b7.htm, accessed 4/1/2015; Treasury, responses to SIGTARP data call, 4/6/2011, 7/14/2011, 10/5/2011, 10/11/2011, and 1/11/2012; Treasury Press Release, “Treasury Department Announces Public Offerings of Warrants to Purchase Common Stock of SunTrust Banks, Inc.,” 9/21/2011, www.treasury.gov/press-center/press-releases/Pages/tg1300.aspx, accessed 4/1/2015; “Treasury Department Announces Public Offering of Warrants to Purchase Common Stock of Associated Banc-Corp,” 11/29/2011, www.treasury.gov/press-center/press-releases/Pages/tg1372.aspx, accessed 4/1/2015; Treasury, “Treasury Department Announces Public Offering of Warrant to Purchase Common Stock of M&T Bank Corporation,” 12/10/2012, www.treasury.gov/press-center/press-releases/Pages/tg1793.aspx, accessed 4/1/2015; Treasury, “Treasury Department Announces Public Offering of Warrants to Purchase Common Stock of Zions Bancorporation,” 11/28/2012, www.treasury.gov/press-center/press-releases/Pages/tg1782.aspx, accessed 4/1/2015. 308 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Private Warrant Auctions Qualified Institutional Buyers (“QIB”): Institutions that under U.S. securities law are permitted to buy securities that are exempt from registration under investor protection laws and to resell those securities to other QIBs. Generally these institutions own and invest at least $100 million in securities, or are registered brokerdealers that own or invest at least $10 million in securities. Accredited Investors: Individuals or institutions that by law are considered financially sophisticated enough so that they can invest in ventures that are exempt from investor protection laws. Under U.S. securities laws, these include many financial companies, pension plans, wealthy individuals, and top executives or directors of the issuing companies. On November 17, 2011, Treasury conducted a private auction to sell the warrants of 17 CPP institutions for $12.7 million.410 On June 6, 2013, it conducted a second private auction to sell the warrants of 16 banks for $13.9 million.411 Details from both auctions are listed in Table 4.53. Treasury stated that private auctions were necessary because the warrants did not meet the listing requirements for the major exchanges, it would be more cost-effective for these smaller institutions, and that grouping the warrants of several institutions in a single auction would raise investor interest in the warrants.412 The warrants were not registered under the Securities Act of 1933 (the “Act”). As a result, Treasury stated that the warrants were offered only in private transactions to “(1) ‘qualified institutional buyers’ as defined in Rule 144A under the Act, (2) the issuer, and (3) a limited number of ‘accredited investors’ affiliated with the issuer.”413 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 4.53 PRIVATE TREASURY WARRANT AUCTIONS AS OF 3/31/2015 Number of Warrants Offered Proceeds to Treasury Eagle Bancorp, Inc. 385,434 $2,794,422 11/17/2011 Horizon Bancorp 212,188 1,750,551 11/17/2011 Bank of Marin Bancorp 154,908 1,703,984 Date Company 11/17/2011 11/17/2011 First Bancorp (of North Carolina) 616,308 924,462 11/17/2011 Westamerica Bancorporation 246,698 878,256 11/17/2011 Lakeland Financial Corp 198,269 877,557 11/17/2011 F.N.B. Corporation 651,042 690,100 11/17/2011 Encore Bancshares 364,026 637,071 11/17/2011 LCNB Corporation 217,063 602,557 11/17/2011 Western Alliance Bancorporation 787,107 415,000 11/17/2011 First Merchants Corporation 991,453 367,500 11/17/2011 1st Constitution Bancorp 231,782 326,576 11/17/2011 Middleburg Financial Corporation 104,101 301,001 11/17/2011 MidSouth Bancorp, Inc. 104,384 206,557 11/17/2011 CoBiz Financial Inc. 895,968 143,677 11/17/2011 First Busey Corporation 573,833 63,677 11/17/2011 First Community Bancshares, Inc. 88,273 30,600 6/6/2013 Banner Corporation 243,998 134,201 6/6/2013 Carolina Trust Bank 86,957 19,132 6/6/2013 Central Pacific Financial Corp. 6/6/2013 Colony Bankcorp, Inc. 79,288 751,888 500,000 810,000 6/6/2013 Community West Bancshares 521,158 698,351 6/6/2013 Flagstar Bancorp, Inc. 645,138 12,905 6/6/2013 Heritage Commerce Corp 462,963 140,000 6/6/2013 International Bancshares Corporation 1,326,238 4,018,511 6/6/2013 Mainsource Financial Group, Inc. 571,906 1,512,177 6/6/2013 Metrocorp Bancshares, Inc. 771,429 2,087,368 6/6/2013 Old Second Bancorp, Inc. 815,339 106,891 6/6/2013 Parke Bancorp, Inc. 438,906 1,650,288 6/6/2013 S&T Bancorp, Inc. 517,012 527,361 6/6/2013 Timberland Bancorp, Inc. 370,899 1,301,856 6/6/2013 United Community Banks, Inc. 219,908 6,677 6/6/2013 Yadkin Financial Corporation 91,178 55,677 6/6/2013 Yadkin Financial Corporation Total 128,663 20,000 14,613,817 $26,566,831 Sources: “Treasury Announces Completion of Private Auction to Sell Warrant Positions,” 11/18/2011, www.treasury.gov/presscenter/press-releases/Pages/tg1365.aspx, accessed 4/1/2015; “Treasury Completes Auction to Sell Warrants Positions,” 6/6/2013, www.treasury.gov/press-center/press-releases/Pages/jl1972.aspx, accessed 4/1/2015. 309 310 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM For more information on CDCI institutions that remain in TARP and their use of TARP funds, see the report in SIGTARP’s April 2014 Quarterly Report: “Banks and Credit Unions in TARP’s CDCI Program Face Challenges.” Community Development Financial Institutions (“CDFIs”): Financial institutions eligible for Treasury funding to serve urban and rural low-income communities through the CDFI Fund. CDFIs were created in 1994 by the Riegle Community Development and Regulatory Improvement Act. Community Development Capital Initiative The Administration announced the Community Development Capital Initiative (“CDCI”) on October 21, 2009. According to Treasury, the program was intended to help small businesses obtain credit.414 Under CDCI, TARP made $570.1 million in investments in the preferred stock or subordinated debt of 84 eligible banks, bank holding companies, thrifts, and credit unions certified as Community Development Financial Institutions (“CDFIs”) by Treasury. According to Treasury, these lower-cost capital investments were intended to strengthen the capital base of CDFIs and enable them to make more loans in low and moderate-income communities.415 CDCI was open to certified, qualifying CDFIs or financial institutions that applied for CDFI status by April 30, 2010.416 According to Treasury, CPP-participating CDFIs that were in good standing could exchange their CPP investments for CDCI investments.417 CDCI closed to new investments on September 30, 2010.418 Treasury invested $570.1 million in 84 institutions under the program — 36 banks or bank holding companies and 48 credit unions.419 Of the 36 investments in banks and bank holding companies, 28 were conversions from CPP (representing $363.3 million of the total $570.1 million); the remaining eight were not CPP participants. Treasury provided an additional $100.7 million in CDCI funds to 10 of the banks converting CPP investments. Only $106 million of the total CDCI funds went to institutions that were not in CPP. Status of Funds As of March 31, 2015, 64 institutions remained in CDCI. Eighteen institutions have fully repaid Treasury and have exited CDCI. Four institutions have partially repaid and remain in the program. One CDCI credit union merged with another CDCI credit union, leaving only one of the credit unions remaining in the program. Premier Bancorp, Inc., Wilmette, Illinois, previously had its subsidiary bank fail and almost all of Treasury’s $6.8 million investment was lost.420 As of March 31, 2015, taxpayers were still owed $462.2 million related to CDCI.421 According to Treasury, it had realized losses of $6.7million in the program that will never be recovered, leaving $455.5 million outstanding.422 According to Treasury, $107.9 million of the CDCI principal (or 19%) had been repaid as of March 31, 2015.423 As of March 31, 2015, Treasury had received approximately $47.9 million in dividends and interest from CDCI recipients.424 Tables 4.54 through 4.60 show banks and credit unions remaining in CDCI by region and state as of March 31, 2015. Table 4.61 lists the current status of all CDCI investments as of March 31, 2015. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 4.54 BANKS AND CREDIT UNIONS WITH CDCI PRINCIPAL REMAINING, BY REGION, AS OF 3/31/2015 Original Number of Participants Remaining Number of Participants Remaining Investment Remaining Number of Banks Remaining Number of Credit Unions Mid-Atlantic/Northeast 24 20 $67,151,000 5 15 Southeast 22 17 281,813,000 15 2 West 14 12 25,799,000 2 10 Southwest/South Central 11 7 54,765,000 2 5 Midwest 11 8 25,940,000 4 4 Mountain West/Plains Total 2 0 0 0 0 84 64 $455,468,400 28 36 Source: Treasury, Transactions Report, 4/3/2015. FIGURE 4.67 AMOUNT OF CDCI PRINCIPAL INVESTMENT REMAINING, BY REGION, AS OF 3/31/2015 AK MOUNTAIN WEST/ PLAINS $0 WA MT OR ID WEST $26 MILLION GU HI CA NV ND WY MN AZ WI SD CO IL KS OK NM MO AR NY OH IN PA WV VA KY ME MID-ATLANTIC/ NORTHEAST $67 MILLION NH MA CT RI NJ DE MD NC TN MS AL TX VT MI IA NE UT MIDWEST $26 MILLION SC GA SOUTHEAST $282 MILLION LA FL SOUTHWEST/ SOUTH CENTRAL $55 MILLION WEST MOUNTAIN WEST/PLAINS SOUTHWEST/SOUTH CENTRAL MIDWEST MID-ATLANTIC/NORTHEAST SOUTHEAST PR 311 312 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Mid-Atlantic/Northeast TABLE 4.55 BANKS AND CREDIT UNIONS WITH CDCI PRINCIPAL REMAINING, BY STATE, AS OF 3/31/2015 ME VT NH MA NY CT NJ DE MD DC PA WV VA WV RI Original Number of Participants Remaining Number of Participants Remaining Investment Remaining Number of Banks Remaining Number of Credit Unions CT 1 1 $7,000 0 1 DC 3 3 13,303,000 2 1 NJ 2 1 31,000 0 1 NY 13 11 42,660,000 2 9 PA 1 1 100,000 0 1 VA 3 2 9,959,000 1 1 VT MID-ATLANTIC/ NORTHEAST >$10 million $1 million-$10 million $1-$1 million $0 Principal investment remaining in CDCI banks Total 1 1 1,091,000 0 1 24 20 $67,151,000 5 15 Source: Treasury, Transactions Report, 4/3/2015. Southeast TABLE 4.56 BANKS AND CREDIT UNIONS WITH CDCI PRINCIPAL REMAINING, BY STATE, AS OF 3/31/2015 NC TN MS AL SC GA PR FL SOUTHEAST Principal investment remaining in CDCI banks >$10 million $1 million-$10 million $1-1 million $0 Original Number of Participants Remaining Number of Participants Remaining Investment Remaining Number of Banks Remaining Number of Credit Unions AL 3 3 $16,698,000 2 1 GA 2 1 11,841,000 1 0 MS 12 10 216,744,000 9 1 NC 3 1 11,735,000 1 0 SC 1 1 22,000,000 1 0 TN 1 1 2,795,000 1 0 22 17 $281,813,000 15 2 Total Source: Treasury, Transactions Report, 4/3/2015. 313 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 West TABLE 4.57 BANKS AND CREDIT UNIONS WITH CDCI PRINCIPAL REMAINING, BY STATE, AS OF 3/31/2015 WA AK OR Original Number of Participants Remaining Number of Participants Remaining Investment Remaining Number of Banks Remaining Number of Credit Unions AK 1 1 $1,600,000 0 1 CA 9 7 20,503,000 2 5 GU 1 1 2,650,000 0 1 HI 2 2 971,000 0 2 WA GU Total CA 1 1 75,000 0 1 14 12 $25,799,000 2 10 Source: Treasury, Transactions Report, 4/3/2015. HI WEST Principal investment remaining in CDCI banks >$10 million $1 million-$10 million $1-$1 million $0 Southwest/South Central TABLE 4.58 BANKS AND CREDIT UNIONS WITH CDCI PRINCIPAL REMAINING, BY STATE, AS OF 3/31/2015 AZ OK NM TX AR LA Original Number of Participants Remaining Number of Participants Remaining Investment Remaining Number of Banks Remaining Number of Credit Unions AR 1 1 $33,800,000 1 0 AZ 1 1 2,500,000 0 1 LA 6 4 18,204,000 1 3 TX 3 1 261,000 0 1 11 7 $54,765,000 2 5 Total SOUTHWEST/ SOUTH CENTRAL Principal investment remaining in CDCI banks >$10 million $1 million-$10 million $1-$1 million $0 Source: Treasury, Transactions Report, 4/3/2015. 314 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Midwest TABLE 4.59 BANKS AND CREDIT UNIONS WITH CDCI PRINCIPAL REMAINING, BY STATE, AS OF 3/31/2015 MN WI MI IA OH IN IL MO Remaining Number of Participants Remaining Investment Remaining Number of Banks Remaining Number of Credit Unions IL 7 6 $25,193,000 4 2 IN 2 2 747,400 0 2 MN 1 0 0 0 0 WI 1 0 0 0 0 11 8 $25,940,400 4 4 Total KY MIDWEST Original Number of Participants Source: Treasury, Transactions Report, 4/3/2015. >$10 million $1 million -$10 million $1-$1 million $0 Principal investment remaining in CDCI banks Mountain West/Plains TABLE 4.60 BANKS AND CREDIT UNIONS WITH CDCI PRINCIPAL REMAINING, BY STATE, AS OF 3/31/2015 MT ID NV ND WY MT SD NE UT CO MOUNTAIN WEST/ PLAINS Principal investment remaining in CDCI banks Original Number of Participants Remaining Number of Participants Remaining Investment Remaining Number of Banks Remaining Number of Credit Unions 1 0 $0 0 0 WY 1 0 0 0 0 Total 2 0 $0 0 0 Source: Treasury, Transactions Report, 4/3/2015. KS >$10 million $1 million-$10 million $1-$1 million $0 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 4.61 CDCI INVESTMENT SUMMARY, AS OF 3/31/2015 Institution Amount from CPP Additional Investment Total CDCI Investment $50,400,000 $30,514,000 $80,914,000 Institutions Remaining in CDCI BancPlus Corporation Community Bancshares of Mississippi, Inc. 54,600,000 Southern Bancorp, Inc. 11,000,000 22,800,000 33,800,000 Security Federal Corporation 18,000,000 4,000,000 22,000,000 Carver Bancorp, Inc 18,980,000 Security Capital Corporation 17,910,000 The First Bancshares, Inc. 5,000,000 54,600,000 18,980,000 17,910,000 12,123,000 17,123,000 First American International Corp. 17,000,000 17,000,000 State Capital Corporation 15,750,000 15,750,000 Guaranty Capital Corporation 14,000,000 14,000,000 Citizens Bancshares Corporation M&F Bancorp, Inc. 7,462,000 4,379,000 11,735,000 11,841,000 11,735,000 Liberty Financial Services, Inc. 5,645,000 5,689,000 11,334,000 Mission Valley Bancorp 5,500,000 4,836,000 10,336,000 United Bancorporation of Alabama, Inc. IBC Bancorp, Inc. 10,300,000 4,205,000 10,300,000 3,881,000 Fairfax County Federal Credit Union 8,044,000 The Magnolia State Corporation First Eagle Bancshares, Inc. 8,086,000 7,922,000 7,875,000 7,875,000 Carter Federal Credit Union* 6,300,000 First Vernon Bancshares, Inc. 6,245,000 6,245,000 IBW Financial Corporation 6,000,000 6,000,000 CFBanc Corporation 5,781,000 American Bancorp of Illinois, Inc. Lafayette Bancorp, Inc. 5,457,000 4,551,000 4,551,000 Hope Federal Credit Union Community Bank of the Bay 4,520,000 1,747,000 Kilmichael Bancorp, Inc. PGB Holdings, Inc. 2,313,000 4,060,000 3,154,000 3,000,000 3,000,000 Santa Cruz Community Credit Union 2,828,000 Cooperative Center Federal Credit Union 2,799,000 Tri-State Bank of Memphis Community First Guam Federal Credit Union 2,795,000 2,795,000 2,650,000 Continued on next page 315 316 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM CDCI INVESTMENT SUMMARY, AS OF 3/31/2015 Institution Amount from CPP (CONTINUED) Additional Investment Total CDCI Investment Institutions Remaining in CDCI Shreveport Federal Credit Union $2,646,000 Pyramid Federal Credit Union 2,500,000 Alternatives Federal Credit Union 2,234,000 Virginia Community Capital, Inc. 1,915,000 Southern Chautauqua Federal Credit Union 1,709,000 Tongass Federal Credit Union 1,600,000 D.C. Federal Credit Union 1,522,000 Vigo County Federal Credit Union 1,229,000 Lower East Side People’s Federal Credit Union1 1,193,000 Opportunities Credit Union 1,091,000 Independent Employers Group Federal Credit Union 698,000 Bethex Federal Credit Union 502,000 Community Plus Federal Credit Union 450,000 Liberty County Teachers Federal Credit Union* 435,000 Tulane-Loyola Federal Credit Union 424,000 Northeast Community Federal Credit Union 350,000 North Side Community Federal Credit Union 325,000 Genesee Co-op Federal Credit Union 300,000 Brooklyn Cooperative Federal Credit Union 300,000 Neighborhood Trust Federal Credit Union 283,000 Prince Kuhio Federal Credit Union 273,000 Phenix Pride Federal Credit Union 153,000 Buffalo Cooperative Federal Credit Union 145,000 Hill District Federal Credit Union 100,000 Episcopal Community Federal Credit Union 100,000 Thurston Union of Low-Income People (TULIP) Cooperative Credit Union 75,000 Renaissance Community Development Credit Union 31,000 Faith Based Federal Credit Union 30,000 Fidelis Federal Credit Union 14,000 Union Baptist Church Federal Credit Union 10,000 Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 CDCI INVESTMENT SUMMARY, AS OF 3/31/2015 Amount from CPP Institution (CONTINUED) Additional Investment Total CDCI Investment Institutions Remaining in CDCI East End Baptist Tabernacle Federal Credit Union Total $7,000 $299,700,000 $90,535,000 $462,334,000 Institutions Fully Repaid First M&F Corporation $30,000,000 University Financial Corp, Inc. 11,926,000 PSB Financial Corporation $30,000,000 $10,189,000 9,734,000 22,115,000 9,734,000 Freedom First Federal Credit Union 9,278,000 BankAsiana 5,250,000 First Choice Bank 5,146,000 5,146,000 Bainbridge Bancshares, Inc. 3,372,000 Bancorp of Okolona, Inc. 3,297,000 Border Federal Credit Union 3,260,000 Atlantic City Federal Credit Union 2,500,000 Gateway Community Federal Credit Union 1,657,000 Southside Credit Union 1,100,000 Brewery Credit Union 1,096,000 Butte Federal Credit Union 1,000,000 First Legacy Community Credit Union 1,000,000 UNO Federal Credit Union 743,000 Greater Kinston Credit Union 350,000 UNITEHERE Federal Credit Union (Workers United Federal Credit Union) 57,000 Total $56,806,000 $10,189,000 $100,955,000 Bankrupt or with Failed Subsidiary Banks Premier Bancorp, Inc. Total Overall Total $6,784,000 $6,784,000 $6,784,000 $6,784,000 $363,290,000 $100,724,000 $570,073,000 Notes: Numbers may not total due to rounding. * Institution has made a partial payment on Treasury’s investment. 1 ower East Side People’s Federal Credit Union merged with another CDCI credit union, Union Settlement Federal Credit Union. On L October 31, 2014, Treasury exchanged $295,000 of Union Settlement Federal Credit Union investment for a similar investment in Lower East Side People’s Federal Credit Union. Source: Treasury, Transactions Report, 4/3/2015. 317 318 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Missed Dividends As of March 31, 2015, two institutions still in CDCI had unpaid dividend or interest payments to Treasury totaling $118,125.425 As a result of a bankrupt institution that exited CDCI without remitting its interest payments, the total value of all missed payments equals $434,749. Treasury has the right to appoint two directors to the board of directors of institutions that have missed eight dividends and interest payments, whether consecutive or nonconsecutive.426 As of March 31, 2015, Treasury had not appointed directors to the board of any CDCI institution.427 Treasury has sent an observer to the board meetings of one institution, First Vernon Bancshares, Inc., Vernon, Alabama, however no observer is currently attending board meetings of this institution.428 Treasury made a request to send an observer to the board meetings of First American International Corp., Brooklyn, New York, in February 2013, but the institution, which remains in TARP as of March 31, 2015, rejected Treasury’s request.429 Table 4.62 lists CDCI institutions that are not current on dividend or interest payments. TABLE 4.62 CDCI-RELATED MISSED DIVIDEND AND INTEREST PAYMENTS, AS OF 3/31/2015 Institution Dividend or Payment Type Number of Missed Payments Value of Missed Payments Premier Bancorp, Inc.* Tri-State Bank of Memphis Interest 6 $316,624 Non-Cumulative 3 97,825 Community Bank of the Bay Non-Cumulative 1 20,300 Total Notes: Numbers may not total due to rounding. * On 3/23/2012, the subsidiary bank of Premier Bancorp, Inc. failed. Source: Treasury, Dividends and Interest Report, 4/10/2015. $434,749 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Institutions with Enforcement Actions Banks and credit unions participating in CDCI continue to be subject to oversight by Federal regulators. In January 2015, a bank and a credit union that participate in CDCI were each the subject of enforcement actions by their respective Federal regulators. On January 13, 2015, the National Credit Union Administration (“NCUA”) issued an order of assessment of civil money penalty to Santa Cruz Community Credit Union, Santa Cruz, California.430 On January 29, 2015, the Federal Deposit Insurance Corporation (“FDIC”) issued a consent order to TriState Bank of Memphis, Memphis, Tennessee.431 Terms for Senior Securities and Dividends An eligible bank, bank holding company, or thrift could apply to receive capital in an amount up to 5% of its risk-weighted assets. A credit union (which is a memberowned, nonprofit financial institution with a capital and governance structure different from that of for-profit banks) could apply for Government funding of up to 3.5% of its total assets — roughly equivalent to the 5% of risk-weighted assets for banks.432 Participating credit unions and S corporations issued subordinated debt to Treasury in lieu of the preferred stock issued by other CDFI participants.433 Many CDFI investments have an initial dividend rate of 2%, which increases to 9% after eight years. Participating S corporations pay an initial rate of 3.1%, which increases to 13.8% after eight years.434 A CDFI participating in CPP had the opportunity to request to convert those shares into CDCI shares, thereby reducing the annual dividend rate it pays the Government from 5% to as low as 2%.435 According to Treasury, CDFIs were not required to issue warrants because of the de minimis exception in EESA, which grants Treasury the authority to waive the warrant requirement for qualifying institutions in which Treasury invested $100 million or less. If during the application process a CDFI’s primary regulator deemed it to be undercapitalized or to have “quality of capital issues,” the CDFI had the opportunity to raise private capital to achieve adequate capital levels. Treasury would match the private capital raised on a dollar-for-dollar basis, up to a total of 5% of the financial institution’s risk-weighted assets. In such cases, private investors had to agree to assume any losses before Treasury.436 Risk-Weighted Assets: Risk-based measure of total assets held by a financial institution. Assets are assigned broad risk categories. The amount in each risk category is then multiplied by a risk factor associated with that category. The sum of the resulting weighted values from each of the risk categories is the bank’s total risk-weighted assets. 319 320 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM For more on SIGTARP’s September 2012 recommendation to Treasury and the Federal Reserve regarding AIG’s designation as a systemically important financial institution, see SIGTARP’s July 2013 Quarterly Report, pages 201-203. For more information on AIG and how the company changed while under TARP, see SIGTARP’s July 2012 Quarterly Report, pages 151-167. Special Purpose Vehicle (“SPV”): A legal entity, often off-balancesheet, that holds transferred assets presumptively beyond the reach of the entities providing the assets, and that is legally isolated from its sponsor or parent company. For a more detailed description of the AIG Recapitalization Plan, see SIGTARP’s January 2014 Quarterly Report, pages 219-220. For more information on Treasury’s sales of AIG common shares and AIG’s buybacks of shares, see SIGTARP’s July 2013 Quarterly Report, page 131. For more information on Treasury’s Equity Ownership Interest in AIG, see SIGTARP’s January 2014 Quarterly Report, page 220. Systemically Significant Failing Institutions Program According to Treasury, the Systemically Significant Failing Institutions (“SSFI”) program was established to “provide stability and prevent disruptions to financial markets from the failure of a systemically significant institution.”437 Through SSFI, between November 2008 and April 2009, Treasury invested $67.8 billion in TARP funds in American International Group, Inc. (“AIG”), the program’s sole participant.438 AIG also received bailout funding from the Federal Reserve Bank of New York (“FRBNY”). In January 2011, FRBNY and Treasury restructured their agreements with AIG to use additional TARP funds and AIG funds to pay off amounts owed to FRBNY and transfer FRBNY’s common stock and its interests to Treasury.439 AIG has repaid the amounts owed to both Treasury and FRBNY. Treasury’s investment in AIG ended on March 1, 2013.440 According to Treasury, taxpayers have received full payment on FRBNY’s loans, plus interest and fees of $6.8 billion; full repayment of the loans to two special purpose vehicles (“SPVs”), called Maiden Lane II and Maiden Lane III, plus $8.2 billion in gains from securities cash flows and sales and $1.3 billion in interest; and full payment of the insurance-business SPVs, plus interest and fees of $1.4 billion.441 Treasury’s books and records reflect only the shares of AIG that Treasury received in TARP, reflecting that taxpayers have recouped $54.4 billion of the $67.8 billion in TARP funds spent and realized losses on the sale of TARP shares from an accounting standpoint of $13.5 billion.442 However, because TARP funds paid off amounts owed to FRBNY in return for stock, Treasury’s position is that the Government has made $4.1 billion selling AIG common shares and $959 million in dividends, interest, and other income.443 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Targeted Investment Program Treasury invested a total of $40 billion in two financial institutions, Citigroup Inc. (“Citigroup”) and Bank of America Corp. (“Bank of America”), through the Targeted Investment Program (“TIP”). Treasury invested $20 billion in Citigroup on December 31, 2008, and $20 billion in Bank of America on January 16, 2009, in return for preferred shares paying quarterly dividends at an annual rate of 8% and warrants from each institution.444 According to Treasury, TIP’s goal was to “strengthen the economy and protect American jobs, savings, and retirement security [where] the loss of confidence in a financial institution could result in significant market disruptions that threaten the financial strength of similarly situated financial institutions.”445 Both banks repaid TIP in December 2009.446 On March 3, 2010, Treasury auctioned the Bank of America warrants it received under TIP for $1.24 billion.447 On January 25, 2011, Treasury auctioned the Citigroup warrants it had received under TIP for $190.4 million.448 Asset Guarantee Program Under the Asset Guarantee Program (“AGP”), Treasury, the Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve, and Citigroup agreed to provide loss protection on a pool of Citigroup assets valued at approximately $301 billion. In return, as a premium, the Government received warrants to purchase Citigroup common stock and $7 billion in preferred stock. The preferred stock was subsequently exchanged for trust preferred securities (“TRUPS”).449 Treasury received $4 billion of the TRUPS and FDIC received $3 billion.450 Although Treasury’s asset guarantee was not a direct cash investment, it exposed taxpayers to a potential TARP loss of $5 billion. On December 23, 2009, in connection with Citigroup’s TIP repayment, Citigroup and Treasury terminated the AGP agreement. Although at the time of termination the asset pool suffered a $10.2 billion loss, this number was below the agreed-upon deductible and the Government suffered no loss.451 At that time, Treasury agreed to cancel $1.8 billion of the TRUPS issued by Citigroup, reducing the premium it received from $4 billion to $2.2 billion, in exchange for the early termination of the loss protection. FDIC retained all of its $3 billion in securities.452 Pursuant to that termination agreement, on December 28, 2012, FDIC transferred $800 million of those securities to Treasury because Citigroup’s participation in FDIC’s Temporary Liquidity Guarantee Program closed without a loss.453 On February 4, 2013, Treasury exchanged the $800 million of securities it received from FDIC into Citigroup subordinated notes, which it then sold for $894 million.454 Separately, on September 29, 2010, Treasury entered into an agreement with Citigroup to exchange the remaining $2.2 billion in Citigroup TRUPS that it then held under AGP for new TRUPS. Because the interest rate necessary to receive par value was below the interest rate paid by Citigroup to Treasury, Citigroup increased the principal amount of the securities sold by Treasury by an additional $12 million, thereby enabling Treasury to receive an additional $12 million in Trust Preferred Securities (“TRUPS”): Securities that have both equity and debt characteristics created by establishing a trust and issuing debt to it. For a discussion of the basis of the decision to provide Federal assistance to Citigroup, see SIGTARP’s audit report, “Extraordinary Financial Assistance Provided to Citigroup, Inc.,” dated January 13, 2011. 321 322 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM proceeds from the $2.2 billion sale of the Citigroup TRUPS, which occurred on September 30, 2010.455 On January 25, 2011, Treasury auctioned the Citigroup warrants it had received under AGP for $67.2 million.456 In addition to recovering the full bailout amount, taxpayers have received $13.4 billion over the course of Citigroup’s participation in AGP, TIP, and CPP, including dividends, other income, and warrant sales.457 Bank of America announced a similar asset guarantee agreement with respect to approximately $118 billion in Bank of America assets, but the final agreement was never executed. Bank of America paid $425 million to the Government as a termination fee.458 Of this $425 million, $276 million was paid to Treasury, $92 million was paid to FDIC, and $57 million was paid to the Federal Reserve.459 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 AUTOMOTIVE INDUSTRY SUPPORT PROGRAMS During the financial crisis, Treasury, through TARP, launched three automotive industry support programs: the Automotive Industry Financing Program (“AIFP”), the Auto Supplier Support Program (“ASSP”), and the Auto Warranty Commitment Program (“AWCP”). According to Treasury, these programs were established “to prevent the collapse of the U.S. auto industry, which would have posed a significant risk to financial market stability, threatened the overall economy, and resulted in the loss of one million U.S. jobs.”460 On December 19, 2014, Treasury sold its remaining 54.9 million shares of the AIFP’s final participant, Ally Financial Inc. (“Ally Financial,” formerly GMAC, Inc.), bringing to an end both its investment in Ally Financial and the six-year TARP auto bailout.461 Overall, taxpayers lost $2.5 billion on the TARP investment in Ally Financial.462 Treasury initially obligated approximately $86.3 billion in TARP funds through the three auto assistance programs to General Motors (“GM”), Ally Financial, Chrysler LLC (“Chrysler”), and Chrysler Financial Services Americas LLC (“Chrysler Financial”).463 As of July 1, 2009, Treasury deobligated $1.5 billion of ASSP funds, reducing the total obligation to $84.8 billion and, following the Dodd-Frank Act, the obligation was further reduced to $81.8 billion.464 Ultimately, Treasury spent $79.7 billion in TARP funds on the auto bailout after $2.1 billion in loan commitments to Chrysler were never drawn down, and all available funding for the ASSP program was not used.465 As of March 31, 2015, taxpayers had lost $16.6 billion from TARP investments under the AIFP program, including write-offs and losses on sales of common stock, which will never be repaid.466 In addition to the loss on Ally Financial, Treasury sold its last holdings of GM common stock on December 9, 2013, and subsequently wrote off an additional $826 million claim in GM’s bankruptcy, bringing taxpayers’ total loss on GM to $11.2 billion.467 Taxpayers also lost $2.9 billion on Treasury’s investment in Chrysler, which exited TARP in 2011.468 A fourth company, Chrysler Financial, repaid all its TARP money in 2009. AWCP and ASSP were terminated in July 2009, and April 2010, respectively.469 Treasury’s investments in AIFP and the two related programs and the companies’ principal repayments are summarized in Table 4.63. 323 324 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.63 TARP AUTOMOTIVE PROGRAM INVESTMENTS AND PRINCIPAL REPAYMENTS AND RECOVERIES, AS OF 3/31/2015 ($ BILLIONS) General Motorsa Ally Financial Inc.b Chryslerc $49.5 $17.2 $10.5 $1.5 $78.6 38.3 14.7 7.6 1.5 62.1 Chrysler Financial Total Automotive Industry Financing Program Treasury Investment Principal Repaid/ Recovered Auto Supplier Support Program Treasury Investment 0.3 0.1 0.4 Principal Repaid/ Recovered 0.3 0.1 0.4 Treasury Investment 0.4 0.3 0.6 Principal Repaid/ Recovered 0.4 0.3 0.6 Auto Warranty Commitment Program Total Treasury Investment $50.2 $17.2 $10.9 $1.5 $79.7 Total Principal Repaid/ Recovered $38.9 $14.7 $8.0 $1.5 $63.1 Still Owed to Taxpayers $11.2d $2.5 $2.9 $0.0 $16.6 ($11.2d) ($2.5) ($2.9) Realized Loss on Investment ($16.6) Notes: Numbers may not total due to rounding. a Principal repaid includes a series of debt payments totaling $160 million recovered from GM bankruptcy. b Investment includes an $884 million Treasury loan to GM, which GM invested in GMAC in January 2009. c Principal repaid includes $560 million Fiat paid in July 2011 for Treasury’s remaining equity stake in Chrysler and for Treasury’s rights under an agreement with the UAW retirement trust related to Chrysler shares. d Realized loss on investment and amount still owed to taxpayers include the $826 million claim in GM’s bankruptcy, which Treasury wrote off in the first quarter of 2014. Sources: Treasury, Transactions Report, 4/3/2015; Treasury, response to SIGTARP data call, 4/6/2015; Treasury, Monthly TARP Update, 4/1/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Automotive Industry Financing Program AIFP, the largest of the three auto bailout programs, has not expended any TARP funds for the automotive industry since December 30, 2009.470 Of AIFP-related loan principal repayments and recoveries, as of March 31, 2015, Treasury had recovered approximately $38.3 billion related to its GM investment, $14.7 billion related to its Ally Financial/GMAC investment, $7.6 billion related to its Chrysler investment, and $1.5 billion related to its Chrysler Financial investment.471 In addition to principal repayments, Treasury had received approximately $5.6 billion in dividends and interest as of March 31, 2015.472 As of March 31, 2015, losses from GM, Chrysler and Ally are $16.6 billion.473 GM Between September 26, 2013 and December 9, 2013, Treasury sold its remaining 101.3 million shares of GM common stock. As of March 31, 2015, taxpayers had lost $11.2 billion on the investment in GM.474 Treasury provided approximately $49.5 billion to GM through AIFP, the largest of the automotive rescue programs.475 As a result of GM’s bankruptcy, Treasury’s investment was converted to a 61% common equity stake in GM, $2.1 billion in preferred stock in GM, and a $7.1 billion loan to GM ($6.7 billion through AIFP and $360.6 million through AWCP). Debt Repayments As of March 31, 2015, GM had made approximately $756.7 million in dividend and interest payments to Treasury under AIFP.476 GM repaid the $6.7 billion loan provided through AIFP with interest, using a portion of the escrow account that had been funded with TARP funds. What remained in escrow was released to GM with the final debt payment by GM.477 Sales of GM Stock In November and December 2010, GM successfully completed an initial public offering (“IPO”) in which GM’s shareholders sold 549.7 million shares of common stock and 100 million shares of Series B mandatorily convertible preferred shares (“MCP”) for total gross proceeds of $23.1 billion.478 As part of the IPO priced at $33 per share, Treasury sold 412.3 million common shares for $13.5 billion in net proceeds, reducing its number of common shares to 500.1 million and its ownership in GM from 61% to 33%.479 On December 15, 2010, GM repurchased Treasury’s Series A preferred stock (83.9 million shares) for total proceeds of $2.1 billion and a capital gain to Treasury of approximately $41.9 million.480 In early 2011, Treasury further diluted its ownership from 33% to 32% when GM contributed 61 million of its common shares to fund GM’s pension plans.481 After that, Treasury continued to sell GM stock, both directly to GM and in the public markets. On December 21, 2012, Treasury sold 200 million common shares to GM at $27.50 per share, for total proceeds of $5.5 billion.482 On January 18, 2013, Treasury announced the first of four pre-arranged written trading plans For more on the results of GM’s November 2010 IPO, see SIGTARP’s January 2011 Quarterly Report, page 163. 325 326 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM to divest its remaining shares.483 Under the first trading plan, which ended April 17, 2013, Treasury sold 58.4 million shares at an average share price of $28.05 for total proceeds of $1.6 billion.484 During Treasury’s second trading plan that ended on September 13, 2013, it sold 110.3 million shares at an average share price of $34.65, for total proceeds of $3.8 billion.485 In Treasury’s third trading plan, ending on November 20, 2013, 70.2 million GM shares sold at an average share price of $36.51, for proceeds of $2.6 billion.486 In the fourth and final trading plan, between November 21, 2013, and December 9, 2013, Treasury sold its remaining 31.1 million GM shares for an average price of $38.82 per share, for proceeds of $1.2 billion.487 In addition to the trading plans, on June 12, 2013, Treasury sold 30 million shares of common stock at $34.41 per share in a public equity offering that raised $1 billion.488 As of March 31, 2015, taxpayers had realized losses from an accounting standpoint of $10.3 billion on all GM common shares sold from November 2010 through December 9, 2013, according to Treasury.489 The losses are due to Treasury’s sales of GM common shares at prices below its cost basis of $43.52 per share. In addition, Treasury’s write-off of an $826 million claim in GM’s bankruptcy, brought the total loss to taxpayers to $11.2 billion.490 For a discussion of the history and financial condition of Ally Financial, see SIGTARP’s January 2013 Quarterly Report, pages 147-164. For more details on Treasury’s investments in Ally Financial while in TARP, see SIGTARP’s January 28, 2015 Quarterly Report, pages 289292. Ally Financial, formerly known as GMAC On December 19, 2014, Treasury sold its remaining 54.9 million shares of Ally Financial’ s common stock for $23.25 per share, ending taxpayer ownership of Ally and closing the door on the last component of the auto industry bailout. According to Treasury, it received proceeds of $1.3 billion from this sale, which brought taxpayers’ total realized loss on their investment to $2.5 billion.491 Through a series of transactions during 2014, including a private placement, an initial public offering (“IPO”), two written trading plans and the final sale on December 19, 2014, Treasury reduced taxpayers’ holdings of Ally Financial common stock from 63% to zero, recovering an aggregate of $6.5 billion of taxpayers’ investment in Ally Financial from these sales.492 Between December 2008 and December 2009, Ally Financial received $17.2 billion in multiple TARP-funded capital injections, including senior preferred equity, warrants, debt in GMAC, trust preferred securities, and mandatorily convertible preferred shares. Over time, Treasury investments were converted to GMAC common stock, ultimately increasing its common equity ownership to 74%.493 On May 10, 2010, GMAC changed its name to Ally Financial Inc.494 Ally Financial Stock Sales In November 2013, Ally Financial closed two transactions, a private placement of common stock and a repurchase of preferred shares, that reduced Treasury’s stake in the company from 74% to 63%.495 In January 2014, Treasury sold 410,000 shares of Ally Financial common stock for approximately $3 billion, reducing Treasury’s ownership stake to 37%.496 In April and May 2014, Treasury sold approximately 82.3 million shares of common stock in Ally Financial’s IPO, plus an additional 7.2 million over-allotment SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 shares, at the IPO price of $25, reducing Treasury’s ownership stake to approximately 16%.497 Treasury subsequently conducted two predefined trading plans between September and December 2014, which reduced its common stock ownership stake to approximately 11%.498 On December 19, 2014, Treasury sold its remaining 54.9 million shares of Ally Financial, the final transaction of the AIFP and of the government’s ownership of auto-related companies.499 As of March 31, 2015, through stock sales and repayments taxpayers had recovered $14.7 billion of the initial investment in Ally Financial.500 The company also had paid a total of $3.7 billion in quarterly dividends to Treasury through March 31, 2015, as required by the terms of the preferred stock that Ally Financial issued to Treasury.501 Chrysler Taxpayers suffered a $2.9 billion loss on the TARP investment in Chrysler. Through October 3, 2010, Treasury made approximately $12.5 billion available to Chrysler: $4 billion before bankruptcy to CGI Holding LLC, parent of Chrysler and Chrysler Financial; $1.9 billion in financing to Chrysler during bankruptcy; and $6.6 billion to Chrysler afterwards, in exchange for 10% of Chrysler common equity.502 In 2010, following the bankruptcy court’s approval of Chrysler’s liquidation plan, the $1.9 billion loan was extinguished without repayment.503 As of March 31, 2015, Treasury had recovered approximately $57.4 million from asset sales during bankruptcy.504 Of the $4 billion lent to Chrysler’s parent company, CGI Holding LLC, $500 million of the debt was assumed by Chrysler while the remaining $3.5 billion was held by CGI Holding LLC.505 Treasury later accepted $1.9 billion in full satisfaction of the $3.5 billion loan.506 In spring 2011, Chrysler used the proceeds from a series of refinancing transactions and an equity call option exercised by Fiat North America LLC (“Fiat”) to repay the loans from Treasury.507 In mid-2011, Treasury sold to Fiat for $500 million Treasury’s remaining equity ownership interest in Chrysler. Treasury also sold to Fiat for $60 million Treasury’s rights to receive proceeds under an agreement with the United Auto Workers (“UAW”) retiree trust pertaining to the trust’s shares in Chrysler.508 As of July 21, 2011, the Chrysler entities had made approximately $1.2 billion in interest payments to Treasury under AIFP.509 Chrysler Financial On July 14, 2009, Chrysler Financial fully repaid a Treasury loan of $1.5 billion, in addition to approximately $7.4 million in interest payments.510 Additionally, on May 14, 2010, Treasury accepted $1.9 billion in full satisfaction of a $3.5 billion loan to CGI Holding LLC, relinquishing any claim on Chrysler Financial.511 On December 21, 2010, TD Bank Group agreed to purchase Chrysler Financial from Cerberus, the owner of CGI Holding LLC, for approximately $6.3 billion completing its acquisition on April 1, 2011.512 327 328 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Auto Supplier Support Program (“ASSP”) and Auto Warranty Commitment Program (“AWCP”) On March 19, 2009, Treasury committed $5 billion to ASSP to “help stabilize the automotive supply base and restore credit flows,” with loans to GM ($290 million) and Chrysler ($123.1 million) fully repaid in April 2010.513 AWCP guaranteed Chrysler and GM vehicle warranties during the companies’ bankruptcy, with Treasury obligating $640.8 million — $360.6 million for GM and $280.1 million for Chrysler, both fully repaid to Treasury.514 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 ASSET SUPPORT PROGRAMS Three TARP programs have focused on supporting markets for specific asset classes: the Term Asset-Backed Securities Loan Facility (“TALF”), the Unlocking Credit for Small Businesses (“UCSB”) program, and the Public-Private Investment Program (“PPIP”). TALF TALF was designed to support asset-backed securities (“ABS”) transactions by providing eligible borrowers $71.1 billion in loans through the Federal Reserve Bank of New York (“FRBNY”) to purchase non-mortgage-backed ABS and commercial mortgage-backed securities (“CMBS”).515 As of February 6, 2013, all TARP funding for TALF was either deobligated or recovered.516 Of the $71.1 billion in TALF loans, none defaulted and no loans remained outstanding as of March 31, 2015.517 Additionally, Treasury has received $671.1 million in income on the asset disposition facility it set up with the program through March 31, 2015.518 For detailed discussion of TALF, see SIGTARP’s July 2014 Quarterly Report, pages 258-261. UCSB Through the UCSB loan support initiative to encourage banks to increase small business lending, Treasury purchased $368.1 million in 31 Small Business Administration 7(a) securities, which are securitized small-business loans.519 According to Treasury, on January 24, 2012, Treasury sold its remaining securities and ended the program with a total investment gain of about $9 million for all the securities, including sale proceeds and payments of principal, interest, and debt.520 For more information on the UCSB, see SIGTARP’s October 2014 Quarterly Report, page 320. PPIP According to Treasury, the purpose of the Public-Private Investment Program (“PPIP”) was to purchase legacy securities, through Public-Private Investment Funds (“PPIFs”).521 Treasury selected nine fund management firms to establish PPIFs to invest in mortgage-backed securities using equity capital from privatesector investors combined with TARP equity and debt.522 As of March 31, 2015, the entire PPIP portfolio had been liquidated, and all PPIP funds had been legally dissolved.523 All $18.6 billion in TARP funding that was drawn down was fully repaid by PPIP fund managers.524 Treasury also received approximately $3.5 billion in gross income payments and capital gains and warrants that it sold for $87 million.525 Legacy Securities: Real estate-related securities originally issued before 2009 that remained on the balance sheets of financial institutions because of pricing difficulties that resulted from market disruption. Equity: Investment that represents an ownership interest in a business. For more information on the selection of PPIP managers, see SIGTARP’s October 7, 2010, audit report entitled “Selecting Fund Managers for the Legacy Securities Public-Private Investment Program.” For more information on PPIP, including information on the securities purchased, see SIGTARP’s April 2014 Quarterly Report, pages 231-244. Debt: Investment in a business that is required to be paid back to the investor, usually with interest. 329 330 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SECT ION 5 TARP OPERATIONS AND ADMINISTRATION 332 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 Under the Emergency Economic Stabilization Act of 2008 (“EESA”), Congress authorized the Secretary of the Treasury (“Treasury Secretary”) to create the operational and administrative mechanisms to carry out the Troubled Asset Relief Program (“TARP”). EESA established the Office of Financial Stability (“OFS”) within the U.S. Department of the Treasury (“Treasury”). OFS is responsible for administering TARP.526 Treasury has authority to establish program vehicles, issue regulations, directly hire or appoint employees, enter into contracts, and designate financial institutions as financial agents of the Government.527 In addition to using permanent and interim staff, OFS relies on contractors and financial agents for legal services, investment consulting, accounting, and other key services. TARP ADMINISTRATIVE AND PROGRAM OPERATING EXPENDITURES As of March 31, 2015, Treasury has obligated $447.8 million for TARP administrative costs and $1.3 billion in programmatic operating expenditures for a total of $1.7 billion since the beginning of TARP. Of that, $133.6 million has been obligated in the year since March 31, 2014. According to Treasury, as of March 31, 2015, it had spent $398.2 million on TARP administrative costs and $1.1 billion on programmatic operating expenditures, for a total of $1.5 billion since the beginning of TARP. Of that, $162.1 million has been spent in the year since March 31, 2014.528 Much of the work on TARP is performed by private vendors rather than Government employees. Treasury reported that as of March 31, 2015, it employs 28 career civil servants, 48 term appointees, and 21 reimbursable detailees, for a total of 97 full-time employees.529 Between TARP’s inception in 2008 and March, 31, 2015, Treasury had retained 156 private vendors — 21 financial agents and 135 contractors — to help administer TARP.530 According to Treasury, as of March 31, 2015, 50 private vendors were active — 7 financial agents and 43 contractors, some with multiple contracts.531 The number of private-sector staffers who provide services under these agreements dwarfs the number of people working for OFS. According to Fannie Mae and Freddie Mac, as of December 31, 2014, together they had about 461 people dedicated to working on their TARP contracts.532 According to Treasury, as of December 31, 2014, or March 31, 2015 — the latest numbers available vary due to reporting cycles — at least another 147 people were working on other active OFS contracts, including financial agent and legal services contracts, for a total of approximately 608 private-sector employees working on TARP.533 Table 5.1 provides a summary of the expenditures and obligations for TARP administrative and programmatic operating costs through March 31, 2015. The administrative costs are categorized as “personnel services” and “non-personnel services.” Table 5.2 provides a summary of OFS service contracts, which include costs to hire financial agents and contractors, and obligations through March 31, 333 334 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 2015, excluding costs and obligations related to personnel services, travel, and transportation. TABLE 5.1 TARP ADMINISTRATIVE AND PROGRAMMATIC OBLIGATIONS AND EXPENDITURES Budget Object Class Title Obligations for Period Expenditures for Period Ending 3/31/2015 Ending 3/31/2015 Administrative Personnel Services Personnel Compensation & Benefits Total Personnel Services $140,614,256 $140,614,256 $140,614,256 $140,614,256 $2,610,371 $2,588,411 11,960 11,960 720,575 720,575 459 459 301,444,483 251,932,771 2,123,048 2,118,863 Non-Personnel Services Travel & Transportation of Persons Transportation of Things Rents, Communications, Utilities & Misc. Charges Printing & Reproduction Other Services Supplies & Materials Equipment 246,699 246,699 Land & Structures — — Investments & Loans — — Grants, Subsidies & Contributions — — Insurance Claims & Indemnities — — Dividends and Interest Total Non-Personnel Services Total Administrative 640 640 $307,158,235 $257,620,378 $447,772,491 $398,234,634 Programmatic $1,262,421,561 $1,148,190,999 Total Administrative and Programmatic $1,710,194,052 $1,546,425,633 Notes: Numbers may not total due to rounding. The cost associated with “Other Services” under TARP Administrative Expenditures and Obligations are composed of administrative services including financial, administrative, IT, and legal (non-programmatic) support. Amounts are cumulative since the beginning of TARP. Source: Treasury, response to SIGTARP data call, 4/6/2015. FINANCIAL AGENTS EESA requires SIGTARP to provide biographical information for each person or entity hired to manage assets acquired through TARP.534 Treasury hired no new financial agents in the quarter ended March 31, 2015.535 335 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 TABLE 5.2 OFS SERVICE CONTRACTS Date Vendor Purpose 10/10/2008 Simpson Thacher & Bartlett LLP Legal services for the implementation of TARP 10/11/2008 Ennis Knupp & Associates Inc.1 10/14/2008 10/16/2008 Type of Transaction Obligated Value Expended Value Contract $931,090 $931,090 Investment and Advisory Services Contract 2,635,827 2,635,827 The Bank of New York Mellon Corporation Custodian Financial Agent 60,864,185 59,240,435 PricewaterhouseCoopers, LLP Internal control services Contract 34,980,857 33,505,992 10/17/2008 Turner Consulting Group, Inc.2 For process mapping consultant services Interagency Agreement 9,000 — 10/18/2008 Ernst & Young LLP Accounting Services Contract 13,640,626 13,640,626 10/29/2008 Hughes Hubbard & Reed LLP Legal services for the Capital Purchase Program Contract 2,835,357 2,835,357 10/29/2008 Squire Sanders & Dempsey LLP Legal services for the Capital Purchase Program Contract 2,687,999 2,687,999 10/31/2008 Lindholm & Associates, Inc. Human resources services Contract 614,963 614,963 11/7/2008 Sonnenschein Nath & Rosenthal LLP4 Legal services related to auto industry loans Contract 1,834,193 1,834,193 11/9/2008 Internal Revenue Service Detailees Interagency Agreement 97,239 97,239 11/17/2008 Internal Revenue Service CSC Systems & Solutions LLC2 Interagency Agreement 8,095 8,095 11/25/2008 Department of the Treasury — Departmental Offices Administrative Support Interagency Agreement 16,131,121 16,131,121 12/3/2008 Trade and Tax Bureau — Treasury IAA — TTB Development, Mgmt & Operation of SharePoint Interagency Agreement 67,489 67,489 12/5/2008 Washington Post3 Subscription Interagency Agreement 395 — 12/10/2008 Sonnenschein Nath & Rosenthal LLP4 Legal services for the purchase of asset-backed securities Contract 2,702,441 2,702,441 12/10/2008 Thacher Proffitt & Wood4 Admin action to correct system issue Contract — — 12/15/2008 Office of Thrift Supervision Detailees Interagency Agreement 164,823 164,823 12/16/2008 Department of Housing and Urban Development Detailees Interagency Agreement — — 12/22/2008 Office of Thrift Supervision Detailees Interagency Agreement — — 12/24/2008 Cushman and Wakefield of VA Inc. Painting Services for TARP Offices Contract 8,750 8,750 1/6/2009 Securities and Exchange Commission Detailees Interagency Agreement 30,416 30,416 1/7/2009 Colonial Parking Inc. Lease of parking spaces Contract 275,217 244,017 Continued on next page 336 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM OFS SERVICE CONTRACTS (CONTINUED) Date Vendor Purpose Type of Transaction 1/27/2009 Cadwalader Wickersham & Taft LLP Bankruptcy Legal Services 1/27/2009 Whitaker Brothers Bus Machines Inc. 1/30/2009 Obligated Value Expended Value Contract $409,955 $409,955 Paper Shredder Contract 3,213 3,213 Office of the Comptroller of the Currency Detailees Interagency Agreement 501,118 501,118 2/2/2009 Government Accountability Office IAA — GAO required by P.L. 110343 to conduct certain activities related to TARP IAA Interagency Agreement 1,112,488 340,339 2/3/2009 Internal Revenue Service2 Detailees Interagency Agreement 242,499 242,499 2/9/2009 Pat Taylor & Associates, Inc. Temporary Services for Document Production, FOIA assistance, and Program Support Contract 692,108 692,108 2/12/2009 Locke Lord Bissell & Liddell LLP Initiate Interim Legal Services in support of Treasury Investments under EESA Contract 272,225 272,225 2/18/2009 Fannie Mae Homeownership Preservation Program Financial Agent 534,005,036 493,394,891 2/18/2009 Freddie Mac Homeownership Preservation Program Financial Agent 379,146,199 341,771,126 2/20/2009 Financial Clerk U.S. Senate Congressional Oversight Panel Interagency Agreement 3,394,348 3,394,348 2/20/2009 Office of Thrift Supervision Detailees Interagency Agreement 189,533 189,533 2/20/2009 Simpson Thacher & Bartlett MNP LLP Capital Assistance Program (I) Contract 1,530,023 1,530,023 2/20/2009 Venable LLP Capital Assistance Program (II) Legal Services Contract 1,394,724 1,394,724 2/26/2009 Securities and Exchange Commission Detailees Interagency Agreement 18,531 18,531 2/27/2009 Pension Benefit Guaranty Corporation Financial Advisory Services Related to Auto Program Interagency Agreement 7,750,000 7,750,000 3/6/2009 The Boston Consulting Group Inc. Management Consulting relating to the Auto industry Contract 991,169 991,169 3/16/2009 Earnest Partners Small Business Assistance Program Financial Agent 2,947,780 2,947,780 3/30/2009 Bingham McCutchen LLP5 SBA Initiative Legal Services — Contract Novated from TOFS09-D-0005 with McKee Nelson Contract 273,006 143,893 3/30/2009 Cadwalader Wickersham & Taft LLP Auto Investment Legal Services Contract 17,392,786 17,392,786 3/30/2009 Haynes and Boone, LLP Auto Investment Legal Services Contract 345,746 345,746 3/30/2009 McKee Nelson LLP5 SBA Initiative Legal Services — Contract Novated to TOFS-10-D-0001 with Bingham McCutchen LLP Contract 149,349 126,631 Continued on next page 337 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 OFS SERVICE CONTRACTS (CONTINUED) Date Vendor Purpose Type of Transaction 3/30/2009 Sonnenschein Nath & Rosenthal LLP4 Auto Investment Legal Services 3/31/2009 FI Consulting Inc. 4/3/2009 Obligated Value Expended Value Contract $102,769 $102,769 Credit Reform Modeling and Analysis Contract 4,867,118 4,058,275 American Furniture Rentals Inc.3 Furniture Rental 1801 Interagency Agreement 37,238 25,808 4/3/2009 The Boston Consulting Group Inc. Management Consulting relating to the Auto industry Contract 4,100,195 4,099,923 4/17/2009 Bureau of Engraving and Printing Detailee for PTR Support Interagency Agreement 45,822 45,822 4/17/2009 Herman Miller Inc. Aeron Chairs Contract 53,799 53,799 52,311,878 51,207,458 4/21/2009 AllianceBernstein LP Asset Management Services Financial Agent 4/21/2009 FSI Group, LLC Asset Management Services Financial Agent 27,438,003 27,438,003 4/21/2009 Piedmont Investment Advisors, LLC Asset Management Services Financial Agent 12,896,927 12,896,927 4/30/2009 State Department Detailees Interagency Agreement — — 5/5/2009 Federal Reserve Board Detailees Interagency Agreement 48,422 48,422 5/13/2009 Department of the Treasury — U.S. Mint “Making Home Affordable” Logo search Interagency Agreement 325 325 5/14/2009 Knowledgebank Inc.2 Executive Search and recruiting Services — Chief Homeownership Officer Contract 124,340 124,340 5/15/2009 Phacil Inc. Freedom of Information Act (FOIA) Analysts to support the Disclosure Services, Privacy and Treasury Records Contract 90,304 90,304 5/20/2009 Securities and Exchange Commission Support Services for Mark-tomarket study and FinSOB Interagency Agreement 430,000 430,000 5/22/2009 Department of Justice — ATF Detailees Interagency Agreement 243,772 243,772 5/26/2009 Anderson, McCoy & Orta Legal services for work under Treasury’s Public-Private Investment Funds (PPIF) program Contract 2,286,996 2,286,996 5/26/2009 Simpson Thacher & Bartlett MNP LLP Legal services for work under Treasury’s Public-Private Investment Funds (PPIF) program Contract 7,849,026 3,526,454 6/9/2009 Financial Management Service (FMS) Development of an Information Management Plan (IMP) Interagency Agreement 89,436 89,436 6/29/2009 Department of the Interior Federal Consulting Group (Foresee) Interagency Agreement 49,000 49,000 7/17/2009 Korn/Ferry International Executive search services for the OFS Chief Investment Officer position Contract 74,023 74,023 Continued on next page 338 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM OFS SERVICE CONTRACTS (CONTINUED) Date Vendor Purpose Type of Transaction 7/30/2009 Cadwalader Wickersham & Taft LLP Restructuring Legal Services 7/30/2009 Debevoise & Plimpton LLP 7/30/2009 Obligated Value Expended Value Contract $1,278,696 $1,278,696 Restructuring Legal Services Contract 1,650 1,650 Fox, Hefter, Swibel, Levin & Carol, LLP Restructuring Legal Services Contract 26,493 26,493 8/10/2009 Department of Justice Detailees Interagency Agreement 54,569 54,679 8/10/2009 National Aeronautics and Space Administration (NASA) Detailees Interagency Agreement 140,889 140,889 8/18/2009 Mercer (US) Inc. Executive Compensation Data Subscription Contract 3,000 3,000 8/25/2009 Department of Justice Detailees Interagency Agreement 63,248 63,248 9/2/2009 Knowledge Mosaic Inc. SEC filings subscription service Contract 5,000 5,000 9/10/2009 Equilar, Inc. Executive Compensation Data Subscription Contract 59,990 59,990 9/11/2009 PricewaterhouseCoopers, LLP PPIP compliance Contract 3,559,089 3,559,089 9/18/2009 Department of Treasury-ARC Administrative Resource Center Interagency Agreement 436,054 436,054 9/30/2009 Immixtechnology Inc.3 EnCase eDiscovery ProSuite Interagency Agreement 18,000 — 9/30/2009 Immixtechnology Inc.3 Guidance Inc. Interagency Agreement 210,184 — 9/30/2009 NNA INC. Newspaper Delivery Contract 8,220 8,220 9/30/2009 SNL Financial LC SNL Unlimited, a web-based financial analytics service Contract 460,000 460,000 11/9/2009 Department of the Treasury — Departmental Offices Administrative Support Interagency Agreement 18,239,373 17,772,584 12/16/2009 Internal Revenue Service Detailees Interagency Agreement — — 12/22/2009 Avondale Investments, LLC Asset Management Services Financial Agent 772,657 772,657 12/22/2009 Bell Rock Capital, LLC Asset Management Services Financial Agent 2,815,292 2,815,292 12/22/2009 Hughes Hubbard & Reed LLP Contract 2,992,244 1,404,031 12/22/2009 KBW Asset Management, Inc. Asset Management Services Financial Agent 4,937,433 4,937,433 12/22/2009 Lombardia Capital Partners, LLC Asset Management Services Financial Agent 3,217,866 3,217,866 12/22/2009 Paradigm Asset Management Co., LLC Asset Management Services Financial Agent 5,025,792 4,979,250 12/22/2009 Raymond James (f/k/a Howe Barnes Hoefer & Arnett, Inc.) Asset Management Services Financial Agent 432,068 432,068 12/23/2009 Howe Barnes Hoefer & Arnett, Inc. Asset Management Services Financial Agent 3,124,094 3,124,094 Continued on next page 339 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 OFS SERVICE CONTRACTS Date (CONTINUED) Type of Transaction Vendor Purpose 1/14/2010 Government Accountability Office IAA — GAO required by P.L.110343 to conduct certain activities related to TARP Obligated Value Expended Value Interagency Agreement $7,459,049 $7,459,049 1/15/2010 Association of Government Accountants CEAR Program Application Contract 5,000 5,000 2/16/2010 Internal Revenue Service Detailees Interagency Agreement 52,742 52,742 2/16/2010 The MITRE Corporation FNMA IR2 assessment — OFS task order on Treasury MITRE Contract Contract 730,192 730,192 2/18/2010 Department of Treasury-ARC Administrative Resource Center Interagency Agreement 1,221,140 1,221,140 3/8/2010 Qualx Corporation FOIA Support Services Contract 3/12/2010 Department of the Treasury — Departmental Offices Administrative Support Interagency Agreement 68,006 68,006 671,731 671,731 3/22/2010 Financial Management Service (FMS) IT Executives signature license Interagency Agreement 73,750 73,750 3/26/2010 Federal Maritime Commission (FMC) Detailees Interagency Agreement 158,600 158,600 3/29/2010 Morgan Stanley & Co. Incorporated Disposition Agent Services Financial Agent 16,685,290 16,685,290 4/2/2010 Financial Clerk U.S. Senate Congressional Oversight Panel Interagency Agreement 4,797,556 4,797,556 4/8/2010 Squire Sanders & Dempsey LLP Housing Legal Services Contract 1,229,350 918,224 4/12/2010 Hewitt EnnisKnupp, Inc. Investment Consulting Services Contract 5,468,750 4,242,591 4/22/2010 Digital Management Inc. Data and Document Management Consulting Services Contract — — 4/22/2010 MicroLink LLC Data and Document Management Consulting Services Contract 19,199,985 16,567,660 4/23/2010 RDA Corporation Data and Document Management Consulting Services Contract 10,460,608 9,817,886 5/4/2010 Internal Revenue Service Detailees Interagency Agreement 1,320 1,320 5/17/2010 Lazard Fréres & Co. LLC Transaction Structuring Services Financial Agent 14,222,312 14,222,312 6/24/2010 Reed Elsevier Inc (dba LexisNexis) Accurint subscription service for one year — 4 users Contract 8,208 8,208 6/30/2010 The George Washington University Financial Institution Management & Modeling — Training course (J.Talley) Contract 5,000 5,000 7/21/2010 Navigant Consulting Inc. Program Compliance Support Services Contract 5,613,246 2,528,842 7/21/2010 Regis & Associates PC Program Compliance Support Services Contract 1,933,557 1,217,249 7/22/2010 Ernst & Young LLP Program Compliance Support Services Contract 11,083,520 7,063,304 1 Continued on next page 340 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM OFS SERVICE CONTRACTS Date (CONTINUED) Vendor Purpose 7/22/2010 PricewaterhouseCoopers, LLP Program Compliance Support Services 7/22/2010 Schiff Hardin LLP 7/27/2010 Type of Transaction Obligated Value Expended Value Contract — — Housing Legal Services Contract $97,526 $97,526 West Publishing Corporation Subscription Service for 4 users Contract 6,664 6,664 8/6/2010 Alston & Bird LLP Omnibus procurement for legal services Contract 232,482 232,482 8/6/2010 Cadwalader Wickersham & Taft LLP Omnibus procurement for legal services Contract 7,124,142 3,845,957 8/6/2010 Fox, Swibel, Levin & Carol, LLP Omnibus procurement for legal services Contract 150,412 150,412 8/6/2010 Haynes and Boone, LLP Omnibus procurement for legal services Contract 200,000 6,792 8/6/2010 Hughes Hubbard & Reed LLP Omnibus procurement for legal services Contract 2,053,503 1,094,495 8/6/2010 Love & Long LLP Omnibus procurement for legal services Contract — — 8/6/2010 Orrick, Herrington, & Sutcliffe LLP Omnibus procurement for legal services Contract — — 8/6/2010 Paul, Weiss, Rifkind, Wharton & Garrison LLP Omnibus procurement for legal services Contract 13,317,829 7,222,915 8/6/2010 Perkins Coie LLP Omnibus procurement for legal services Contract — — 8/6/2010 Seyfarth Shaw LLP Omnibus procurement for legal services Contract — — 8/6/2010 Shulman, Rogers, Gandal, Pordy & Ecker, PA Omnibus procurement for legal services Contract 213,317 213,347 8/6/2010 Sullivan Cove Reign Enterprises JV Omnibus procurement for legal services Contract — — 8/6/2010 Venable LLP Omnibus procurement for legal services Contract 1,150 960 8/12/2010 Knowledge Mosaic Inc. SEC filings subscription service Contract 5,000 5,000 8/30/2010 Department of Housing and Urban Development Detailees Interagency Agreement 29,915 — 9/1/2010 CQ-Roll Call Inc. One-year subscription (3 users) to the CQ Today Breaking News & Schedules, CQ Congressional & Financial Transcripts, CQ Custom Email Alerts Contract 7,500 7,500 9/17/2010 Bingham McCutchen LLP5 SBA 7(a) Security Purchase Program Contract 11,177 11,177 Davis Audrey Robinette Program Operations Support Services to include project management, scanning and document management and correspondence Contract 4,869,164 4,240,779 9/27/2010 Continued on next page 341 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 OFS SERVICE CONTRACTS Date (CONTINUED) Type of Transaction Vendor Purpose 9/30/2010 CCH Incorporated GSA Task Order for procurement books — FAR, T&M, Government Contracts Reference, World Class Contracting Obligated Value Expended Value Contract $2,430 $2,430 10/1/2010 Department of the Treasury — Departmental Offices Administrative Services Interagency Agreement 660,601 660,601 10/1/2010 Financial Clerk U.S. Senate Congressional Oversight Panel Interagency Agreement 5,200,000 2,777,752 10/8/2010 10/8/2010 Management Concepts Inc. Training Course — 11107705 Contract 995 995 Management Concepts Inc. Training Course — CON 217 Contract 1,025 1,025 10/8/2010 Management Concepts Inc. Training Course — CON 216 Contract 1,025 1,025 10/8/2010 Management Concepts Inc. Training Course — CON 217 Contract 1,025 1,025 10/8/2010 Management Concepts Inc. Training Course — Analytic Boot Contract 1,500 1,500 10/8/2010 Management Concepts Inc. Training Course — CON 218 Contract 2,214 2,214 10/8/2010 Management Concepts Inc. Training Course — CON 218 Contract 2,214 2,214 10/8/2010 Management Concepts Inc. Training Course — CON 218 Contract 2,214 2,214 10/14/2010 Hispanic Association of Colleges & Universities Ratification - Internship program for Aug – Dec 2009 Contract 12,975 12,975 10/26/2010 Government Accountability Office IAA — GAO required by P.L. 110343 to conduct certain activities related to TARP Interagency Agreement 7,304,722 7,304,722 11/8/2010 The MITRE Corporation FNMA IR2 assessment — OFS task order on Treasury MITRE Contract for cost and data validation services related to HAMP FA Contract 2,288,166 1,850,677 11/18/2010 Greenhill & Co., Inc. Structuring and Disposition Services Financial Agent 6,139,167 6,139,167 12/2/2010 Addx Corporation Acquisition Support Services — PSD TARP (action is an order against BPA) Contract 1,299,002 1,299,002 12/29/2010 Reed Elsevier Inc. (dba LexisNexis) Accurint subscription services one user Contract 684 684 1/5/2011 Canon U.S.A. Inc. Administrative Support Interagency Agreement 12,013 12,013 1/18/2011 Perella Weinberg Partners & Co. Structuring and Disposition Services Financial Agent 5,542,473 5,542,473 1/24/2011 Department of Treasury-ARC Administrative Support Interagency Agreement 1,090,859 1,090,860 1/26/2011 Association of Government Accountants CEAR Program Application Contract 5,000 5,000 2/24/2011 ESI International Inc. Mentor Program Training (call against IRS BPA) Contract 6,563 6,563 2/28/2011 Department of the Treasury — Departmental Offices Administrative Services Interagency Agreement 13,523,880 13,001,815 3/3/2011 Equilar, Inc. Executive Compensation Data Subscription Contract 59,995 59,995 Continued on next page 342 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM OFS SERVICE CONTRACTS Date (CONTINUED) Vendor Purpose 3/10/2011 Mercer (US) Inc. Executive Compensation Data Subscription 3/22/2011 Harrison Scott Publications Inc. 4/20/2011 Type of Transaction Obligated Value Expended Value Contract $7,425 $3,600 Subscription Service Contract 5,894 5,894 Federal Reserve Bank of New York (FRBNY) HR FRBNY monitoring and reporting on financial conditions of AIG Interagency Agreement 1,300,000 1,004,063 4/26/2011 PricewaterhouseCoopers, LLP Financial Services Omnibus Contract 5,804,710 4,863,595 4/27/2011 ASR Analytics LLC Financial Services Omnibus Contract 8,136,003 3,433,638 4/27/2011 Ernst & Young LLP Financial Services Omnibus Contract 1,746,470 687,199 4/27/2011 FI Consulting, Inc. Financial Services Omnibus Contract 5,130,206 4,084,123 4/27/2011 Lani Eko & Company CPAs LLC Financial Services Omnibus Contract 50,000 — 4/27/2011 MorganFranklin Corporation Financial Services Omnibus Contract 1,772,714 718,103 4/27/2011 Oculus Group, Inc. Financial Services Omnibus Contract 4,437,946 3,150,204 4/28/2011 Booz Allen Hamilton, Inc. Financial Services Omnibus Contract 2,781,821 862,978 4/28/2011 KPMG LLP Financial Services Omnibus Contract 50,000 — 4/28/2011 Office of Personnel Management (OPM) — Western Management Development Center Leadership Training Interagency Agreement 21,300 — 5/31/2011 Reed Elsevier Inc (dba LexisNexis) Accurint subscriptions by LexisNexis for 5 users Contract 10,260 10,260 5/31/2011 West Publishing Corporation Five (5) user subscriptions to CLEAR by West Government Solutions Contract 7,515 7,515 6/2/2011 ESI International Inc. Project Leadership, Management and Communications Workshop Contract 20,758 20,758 6/9/2011 CQ-Roll Call Inc. One year subscription to the CQ Today Breaking News & Schedules, CQ Congressional & Financial Transcripts, CQ Custom Email Alerts Contract 7,750 7,750 6/17/2011 Winvale Group LLC Anti-Fraud Protection and Monitoring Subscription Services Contract 174,067 118,322 7/28/2011 Internal Revenue Service — Procurement Detailee Interagency Agreement 84,234 84,234 9/9/2011 Financial Management Service NAFEO Internship Program Interagency Agreement 22,755 22,755 9/12/2011 ADC LTD NM MHA Felony Certification Background Checks (BPA) Contract 339,489 339,489 9/15/2011 ABMI — All Business Machines, Inc 4 Level 4 Security Shredders and Supplies Contract 4,392 4,392 9/29/2011 Department of the Interior Administrative Services Interagency Agreement 78,000 78,000 9/29/2011 Knowledge Mosaic Inc. Renewing TD010-F-249 SEC filings Subscription Service Contract 4,200 4,200 10/4/2011 Internal Revenue Service Detailees Interagency Agreement 168,578 84,289 Continued on next page 343 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 OFS SERVICE CONTRACTS (CONTINUED) Date Vendor Purpose 10/20/2011 ABMI — All Business Machines, Inc. 4 Level 4 Security Shredders and Supplies 11/18/2011 Qualx Corporation 11/29/2011 Type of Transaction Obligated Value Expended Value Contract $4,827 $4,827 FOIA Support Services Contract 549,518 549,518 Houlihan Lokey, Inc. Transaction Structuring Services Financial Agent 14,250,000 13,862,500 12/20/2011 The Allison Group LLC Pre-Program and Discovery Process Team Building Contract 19,065 19,065 12/30/2011 Department of the Treasury Administrative Support Interagency Agreement 901,433 899,268 12/30/2011 Department of the Treasury — Departmental Offices Administrative Services Interagency Agreement 15,098,746 10,127,276 1/4/2012 Government Accountability Office IAA — GAO required by P.L. 110343 to conduct certain activities related to TARP IAA Interagency Agreement 5,600,000 3,738,195 1/5/2012 Office of Personnel Management (OPM) — Western Management Development Center Frontline Leadership Training for OFS Managers (7/25/117/29/11) Interagency Agreement 31,088 — 2/2/2012 Moody’s Analytics Inc. ABS/MBS Data Subscription Services Contract 2,575,713 2,575,712 2/7/2012 Greenhill & Co., LLC Structuring and Disposition Services Financial Agent 1,680,000 1,680,000 2/14/2012 Association of Goverment Accountants CEAR Program Application Contract 5,000 5,000 2/27/2012 Diversified Search LLC CPP Board Placement Services Contract 346,104 296,104 3/6/2012 Integrated Federal Solutions, Inc. TARP Acquisition Support (BPA) Contract 3,551,388 3,350,183 3/14/2012 Department of Interior Federal Consulting Group Interagency Agreement 25,000 — 3/30/2012 Department of the Treasury — Departmental Offices WCF Administrative Support – Shared infrastructure, financial systems, OPA and DO by all employees Interagency Agreement 1,137,451 1,137,451 3/30/2012 E-Launch Multimedia, Inc. Subscription Service Contract — — 4/2/2012 Cartridge Technology, Inc. Maintenance Agreement for Canon ImageRunner Contract 23,538 20,268 5/10/2012 Equilar Inc. Executive Compensation Data Subscription Contract 44,995 44,995 6/12/2012 Department of Justice Litigation support for No. 10-647 (Fed.Cl.) and No. 11-100 (Fed. Cl.) Interagency Agreement 1,459,000 8,546 6/15/2012 Qualx Corporation FOIA Support Services Contract 104,112 104,112 6/30/2012 West Publishing Corporation Subscription for Anti Fraud Unit to Perform Background Research Contract 8,660 8,660 7/26/2012 Knowledge Mosaic Inc. SEC filings subscription service Contract 4,750 4,750 COR Training Interagency Agreement 4,303 4,303 8/1/2012 Internal Revenue Service Continued on next page 344 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM OFS SERVICE CONTRACTS Date (CONTINUED) Type of Transaction Vendor Purpose 8/3/2012 Harrison Scott Publications Inc. Subscription to Commercial Mortgage Alert Online Service Obligated Value Expended Value Contract $3,897 $3,897 9/19/2012 Department of the TreasuryARC Administrative Resource Center (ARC) Interagency Agreement 826,803 826,803 9/28/2012 SNL Financial LC Data Subscription Services for Financial, Regulatory, and Market Data and Services Contract 180,000 180,000 11/19/2012 Government Accountability Office Oversight services Interagency Agreement 2,500,000 2,475,937 12/13/2012 Association of Government Accountants CEAR Program Application Contract 5,000 5,000 12/19/2012 Department of the Treasury — Departmental Offices Administrative support services for FY 2013 Interagency Agreement 12,884,241 10,797,738 1/1/2013 Lazard Fréres & Co. LLC Transaction Structuring Services Financial Agent 2,708,333 2,708,333 1/1/2013 Lazard Fréres & Co. LLC Transaction Structuring Services Financial Agent 6,060,484 6,060,484 2/13/2013 Mercer (US) Inc. Executive Compensation Data Subscription Contract 4,050 4,050 3/4/2013 Department of the Treasury — Departmental Offices WCF Administrative Support Interagency Agreement 1,159,268 1,159,268 3/7/2013 Department of Housing and Urban Development Research and Analysis Services Interagency Agreement 499,348 444,381 3/26/2013 Bloomberg Finance L.P. Subscription Contract 5,400 5,400 3/27/2013 IRS - Treasury Acquisition Institute COR Training - TAI Interagency Agreement — — 5/1/2013 Internal Revenue Service Legal Services Interagency Agreement 88,854 88,854 5/10/2013 Equilar Inc. Executive Compensation Data Subscription Contract 45,995 45,995 6/13/2013 West Publishing Corporation Monthly subscription for 4 users Contract 16,668 16,668 8/1/2013 Evolution Management Inc. Outplacement Services for OFS Contract 85,238 41,542 8/20/2013 Knowledge Mosaic Inc Subscription service utilized by the Chief Counsel’s Office for OFS-related matters Contract 4,500 4,500 9/25/2013 Department of the TreasuryARC Administrative Support Interagency Agreement 644,988 644,998 9/27/2013 SNL Financial Financial Data Subscription Services — Information Technology Contract 420,000 420,000 11/22/2013 Department of the Treasury — Departmental Offices Administrative Support Interagency Agreement 1,452,898 264,760 11/22/2013 Internal Revenue Service Legal Services Interagency Agreement 107,185 107,185 11/27/2013 Department of the TreasuryDepartment Offcies-WCF Administrative Support Interagency Agreement 1,886,578 1,884,147 Continued on next page 345 SIGTARP QUARTERLY REPORT TO CONGRESS I APRIL 29, 2015 OFS SERVICE CONTRACTS (CONTINUED) Date Vendor Purpose Type of Transaction 12/12/2013 Association of Government Accountants CEAR Program Application Contract 12/18/2013 Department of Justice Litigation Services 3/5/2014 Department of Justice 3/12/2014 Obligated Value Expended Value $5,000 $5,000 Interagency Agreement 1,737,884 285,834 Litigation Services Interagency Agreement 2,000,000 1,751,032 Department of the Treasury — DO OCIO Administrative Support Interagency Agreement 2,705,893 2,394,154 3/24/2014 Mercer (US) Inc. On-line Subscription Service Executive Compensation Data Contract 4,472 — 4/14/2014 Bloomberg Finance L.P. Administrative Support Contract 5,700 5,700 6/13/2014 Winvale Group LLC Administrative Support Contract 711,698 708,273 10/1/2014 Internal Revenue Services Administrative Support Interagency Agreement 142,262 71,131 10/29/2014 Department of the Treasury — DO OCIO Administrative Support Interagency Agreement 1,959,191 979,597 11/6/2014 Department of the Treasury — DO OCIO Administrative Support Interagency Agreement 9,453,973 8,092,671 11/7/2014 Department of the Treasury —ARC Administrative Support Interagency Agreement 641,859 320,929 11/17/2014 Department of the Treasury — DO OCIO Administrative Support Interagency Agreement 6,250,789 1,710,306 11/25/2014 Government Accountability Office Administrative Support Interagency Agreement 5,400,000 3,909,052 1/26/2015 Department of the Interior Administrative Support Interagency Agreement 112,500 112,500 $1,569,244,771 $1,415,680,465 Total Notes: Numbers may not total due to rounding. Table 5.2 includes all vendor contracts administered under Federal Acquisition Regulations, interagency agreements, and financial agency agreements entered into in support of OFS since the beginning of the program. The table does not include salary, benefits, travel, and other non-contract related expenses. For some contracts, $0 is obligated if no task orders have been awarded and so those contracts are not reflected in this table. 1 EnnisKnupp Contract TOFS-10-D-0004, was novated to Hewitt EnnisKnupp (TOFS-10-D-0004). 2 Awarded by other agencies on behalf of OFS and are not administered by PSD. 3 Awarded by other branches within the PSD pursuant to a common Treasury service level and subject to a reimbursable agreement with OFS. 4 Thacher Proffitt & Wood, Contract TOS09-014B, was novated to Sonnenschein Nath & Rosenthal (TOS09-014C). 5 McKee Nelson Contract, TOFS-09-D-0005, was novated to Bingham McCutchen. Source: Treasury, response to SIGTARP data call, 4/16/2015. ENDNOTES 346 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. Treasury Press Release, “Relief for Responsible Homeowners One Step Closer Under New Treasury Guidelines,” 3/4/2009, www.treasury.gov/ press-center/press-releases/Pages/tg48.aspx, accessed 1/5/2015. Treasury, “Home Affordable Modification Program: Overview,” no date, www.hmpadmin.com/portal/programs/hamp.jsp, accessed 4/9/2015. Treasury, “FHA & RD HAMP Trial Starts – Program Summary – December 2014,” accessed 1/22/2015; “HAMP 1MP: Program Volumes Program Summary - December 2014,” accessed 1/22/2015. CoreLogic foreclosures include foreclosures completed between October 1, 2008 and December 1, 2014, as well as mortgages in active foreclosure as of December 31, 2014. 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Treasury, “Public-Private Investment Program,” 3/23/2009, www.treasury.gov/press-center/press-releases/Documents/ppip_whitepaper_032309. pdf, accessed 4/1/2015. Treasury Press Release, “Treasury Department Provides Updated Guidance,” 4/6/2009, www.treasury.gov/press-center/press-releases/Pages/tg82. aspx, accessed 4/1/2015. Treasury, response to SIGTARP data call, 4/6/2015. Treasury, Transactions Report, 4/3/2015, www.treasury.gov/initiatives/financial-stability/reports/Documents/04-03-15%20Transactions%20 Report%20as%20of%2004-01-15_INVESTMENT.pdf, accessed 4/3/2015. Treasury, response to SIGTARP data call, 4/6/2015. Emergency Economic Stabilization Act of 2008, P.L. 110-343, 10/3/2008. Emergency Economic Stabilization Act of 2008, P.L. 110-343, 10/3/2008. Treasury, response to SIGTARP data call, 4/6/2015 and 4/10/2015. Treasury, response to SIGTARP data call, 4/6/2015. Treasury, response to SIGTARP data call, 4/6/2015. Treasury, response to SIGTARP data call, 4/6/2015. Fannie Mae, response to SIGTARP data call, 4/6/2015; Freddie Mac, response to SIGTARP data call, 4/13/2015. Treasury, response to SIGTARP data call, 4/6/2015. Emergency Economic Stabilization Act of 2008, P.L. 110-343, 10/3/2008. Treasury, response to SIGTARP data call, 4/16/2015. 365 366 APPENDIX A I GLOSSARY I APRIL 29, 2015 GLOSSARY This appendix provides a glossary of terms that are used in the context of this report. Accredited Investors: Individuals or institutions that by law are considered financially sophisticated enough so that they can invest in ventures that are exempt from investor protection laws. Under U.S. securities laws, these include many financial companies, pension plans, wealthy individuals, and top executives or directors of the issuing companies. Asset-Backed Securities (“ABS”): Bonds backed by a portfolio of consumer or corporate loans (e.g., credit card, auto, or small business loans). Financial companies typically issue ABS backed by existing loans in order to fund new loans for their customers. Collateral: Asset pledged by a borrower to a lender until a loan is repaid. Generally, if the borrower defaults on the loan, the lender gains ownership of the pledged asset and may sell it to satisfy the debt. In TALF, the ABS or CMBS purchased with the TALF loan is the collateral that is posted with FRBNY. Commercial Mortgage-Backed Securities (“CMBS”): Bonds backed by one or more mortgages on commercial real estate (e.g., office buildings, rental apartments, hotels). Common Stock: Equity ownership entitling an individual to share in corporate earnings and voting rights. Community Development Financial Institutions (“CDFIs”): Financial institutions eligible for Treasury funding to serve urban and rural low-income communities through the CDFI Fund. CDFIs were created in 1994 by the Riegle Community Development and Regulatory Improvement Act. Cumulative Redefault Rate: The total number of HAMP permanent modifications that have redefaulted (as of a specific date) divided by the total number of HAMP permanent modifications started (as of the same specific date). Debt: Investment in a business that is required to be paid back to the investor, usually with interest. Deed-in-Lieu of Foreclosure: Instead of going through foreclosure, the homeowner voluntarily surrenders the deed to the home to the investor as satisfaction of the unpaid mortgage balance. Deobligations: An agency’s cancellation or downward adjustment of previously incurred obligations. Due Diligence: Appropriate level of attention or care a reasonable person should take before entering into an agreement or a transaction with another party. In finance, it often refers to the process of conducting an audit or review of the institution before initiating a transaction. Equity: Investment that represents an ownership interest in a business. Exercise Price: Preset price at which a warrant holder may purchase each share. For warrants in publicly traded institutions issued through CPP, this was based on the average stock price during the 20 days before the date that Treasury granted preliminary CPP participation approval. Government-Sponsored Enterprises (“GSEs”): Private corporations created and chartered by the Government to reduce borrowing costs and provide liquidity in the market, the liabilities of which are not officially considered direct taxpayer obligations. On September 7, 2008, the two largest GSEs, the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), were placed into Federal conservatorship. They are currently being financially supported by the Government. HAMP Modification “Waterfall”: Steps HAMP servicers apply to reduce homeowners principal and interest payments. The HAMP Tier 1 waterfall uses a series of incremental steps to obtain a targeted post modification payment. The HAMP Tier 2 waterfall is a consistent set of actions that are applied to the loan to get it within a targeted post modification payment range. Investors: Owners of mortgage loans or bonds backed by mortgage loans who receive interest and principal payments from monthly mortgage payments. Servicers manage the cash flow from homeowners’ monthly payments and distribute them to investors according to Pooling and Servicing Agreements (“PSAs”). Legacy Securities: Real estate-related securities originally issued before 2009 that remained on the balance sheets of financial institutions because of pricing difficulties that resulted from market disruption. GLOSSARY I APPENDIX A I APRIL 29, 2015 Loan Recast: Re-amortization of the loan using the existing interest rates and remaining term, but reduced unpaid principal balance. This results in excess principal payments made prior to or concurrent with the recast being used to reduce the minimum monthly payment rather than to pay the loan off early. Loss Mitigation Application (“LMA”): Four-part documentation package that homeowners must submit to servicers to be evaluated for MHA and other loss mitigation options: a completed “request for mortgage assistance” (“RMA”) form; copies of the most recent Federal tax returns (or transcript requests); paystubs or other income verification documentation; and a “Dodd-Frank certification” attesting that the homeowner has not been convicted of a real estaterelated crime within the past 10 years. Mortgage Servicers: Companies that perform administrative tasks on monthly mortgage payments until the loan is repaid. These tasks include billing, tracking, and collecting monthly payments; maintaining records of payments and balances; allocating and distributing payment collections to investors in accordance with each mortgage loan’s governing documentation; following up on delinquencies; and initiating foreclosures. Net Present Value (“NPV”) Test: Compares the money generated by modifying the terms of the mortgage with the amount an investor can reasonably expect to recover in a foreclosure sale. Non-Agency Residential Mortgage-Backed Securities (“non-agency RMBS”): Financial instrument backed by a group of residential real estate mortgages (i.e., home mortgages for residences with up to four dwelling units) not guaranteed or owned by a Government-sponsored enterprise (“GSE”) or a Government agency. Non-Recourse Loan: Secured loan in which the borrower is relieved of the obligation to repay the loan upon surrendering the collateral. Obligations: Definite commitments that create a legal liability for the Government to pay funds. Preferred Stock: Equity ownership that usually pays a fixed dividend before distributions for common stock owners but only after payments due to debt holders. It typically confers no voting rights. Preferred stock also has priority over common stock in the distribution of assets when a bankrupt company is liquidated. Qualified Institutional Buyers (“QIB”): Institutions that under U.S. securities law are permitted to buy securities that are exempt from registration under investor protection laws and to resell those securities to other QIBs. Generally these institutions own and invest at least $100 million in securities, or are registered broker-dealers that own or invest at least $10 million in securities. Risk-Weighted Assets: Risk-based measure of total assets held by a financial institution. Assets are assigned broad risk categories. The amount in each risk category is then multiplied by a risk factor associated with that category. The sum of the resulting weighted values from each of the risk categories is the bank’s total risk-weighted assets. Senior Preferred Stock: Shares that give the stockholder priority dividend and liquidation claims over junior preferred and common stockholders. Senior Subordinated Debentures: Debt instrument ranking below senior debt but above equity with regard to investors’ claims on company assets or earnings. Servicing Advances: If borrowers’ payments are not made promptly and in full, mortgage servicers are contractually obligated to advance the required monthly payment amount in full to the investor. Once a borrower becomes current or the property is sold or
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