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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 July 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 In this report, SIGTARP shares what it has learned from its investigations about why people who never before committed a crime turned to TARP-related crime, and explains that these defendants had criminal intent. Understanding why these defendants turned to crime helps SIGTARP find hidden crime, and helps others such as bank examiners, auditors, and bank employees know when to ask questions, dig further, and make referrals to law enforcement such as SIGTARP. We also share what we have learned from investigations about the characteristics of bank cultures that allowed crime to seep in and continue unchecked. SIGTARP has found that previously law-abiding citizens who had a sense of ownership or identity tied to something they cared greatly about, such as a bank, which was threatened, like during the crisis, may become so deperate that they are willing to do whatever is necessary to protect against losing that, even commit a crime. Their employees or co-conspirators may be motivated by loyalty to a boss or long-standing customers or out of fear of job loss. One convicted CEO defendant said the bank was a virtual part of his DNA, and he “tried to think outside the box to save his borrowers, his customers, and his bank.” Another convicted CEO was described as, “a gifted leader who succumbed to a criminal impulse while compelled to act in a noble cause: to save an institution and its employees in a time of crisis.” SIGTARP hears the words “his”, “my”, and “mine” often by defendants, showing a sense of ownership. They may convince themselves that their actions were justified and blame the financial crisis, but they knew when they crossed that line of what is legal and what is not. SIGTARP rejects the argument that the financial crisis shields criminal liability. Thousands in banking faced losses during the crisis without turning to crime. The noble cause is following the law during times of crisis. There is a higher calling for all who work in and around the financial industry. We all must ensure that the financial industry is one where the concepts of “we”and “us” mean more than “me” and “mine.” We must ensure that identity and ownership comes from integrity, honesty, and trust. SIGTARP will be unwavering in our pursuit of justice, but law enforcement can only do so much. The rest must come from within and around the financial industry including bankers, advisors, auditors, accountants, and regulators. Long lasting recovery from the crisis and prevention from future harm depends on it. We also report that 70% of homeowners who applied for HAMP got turned down, with JP Morgan Chase, Bank of America, and Citi, each turning down 80% or more and Ocwen denying more than 70% of the homeowners. DA OG RA TARP bailout-related crime must be stopped, every time, without exception, to satisfy four foundations of our justice system: (1) Accountability – No one should be above the law. (2) Taking the profit out of crime – Crime must not pay. SIGTARP’s investigations have returned $1.58 billion to the Government and victims. (3) Deterrence – Breaking the banking laws must not be tolerated. (4) Justice and Crisis Recovery – Justice must be brought to victims hurt by these crimes. Additionally, those who commit TARP bailout crimes must be removed from the financial system so that they are never in a position again to put a bank or the financial industry at risk. CHRISTY L. ROMERO Special Inspector General C INSPE TOR GEN E RA UB LE Already 199 defendants investigated by the Office of the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”) have been convicted of TARP-related crime, and more than 100 of them have been sentenced to prison. Many had no criminal history until they turned to TARP-related crime. Some made no personal profit from the crime. Many argued to the court that they had good intentions of trying to save their company, their bank, their customers, and their community, from the crisis. Their motivation may be different than those whose TARP crime was not their first crime or those who personally profitted from TARP crimes, but it does not mean that they should not be convicted of a crime or sentenced to prison. Their crimes had devastating consequences to their victims, their communities, the Government, employees, small businesses and others. Respectfully, AL TRO Message from the Special Inspector General CI S S E T R E LI E F P R CONTENTS EXECUTIVE SUMMARY Why did the people SIGTARP investigates turn to crime? 3 6 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 SIGTARP Recommended How Treasury Can Make TARP’s Housing Programs More Efficient and Effective Treasury Can Do More to Inform Struggling Homeowners in 10 Underserved States About HAMP’s Opportunities Treasury Can Work With State Housing Finance Agencies Now To Prevent Fraud, Waste, and Abuse In Treasury’s New HHF Down Payment Assistance Program Section 3 17 19 19 20 53 55 56 58 MORTGAGE SERVICERS HAVE DENIED FOUR MILLION HOMEOWNER APPLICATIONS FOR HAMP ASSISTANCE 97 Only 30% of Homeowners Who Applied for HAMP Got In, 70% Were Turned Down by Their Servicer 99 Homeowners Have had a Hard Time Getting Into HAMP 101 Homeowners Living in the Middle of the United States, Including the Great Plains, had the Hardest Time Getting Into HAMP 104 JP Morgan Chase and Bank of America, Historically the Two Largest HAMP Servicers, and Citi Each Turned Down 80% or More of Homeowners Who Applied for HAMP; Ocwen, the Current Largest HAMP Servicer, Turned Down More Than 70% of Homeowners Who Applied for HAMP 106 Over the Last Four Years, Treasury has Found Problems with the Seven Largest Hamp Servicers’ Handling of Homeowners’ HAMP Applications at Various Stages—Including Problems at Five of Them in 2014 Alone 108 The Top Reasons Servicers Report for Turning Down Homeowners for HAMP Attribute Denial to the Conduct of the Homeowner or the Homeowner’s Income, Despite Known Problems With Servicer Misconduct in These Areas Related to HAMP 110 Section 4 TARP OVERVIEW TARP Funds Update TARP Programs Update Cost Estimates TARP Programs Housing Support Programs Treasury Removes Hamp Income Restrictions and Application Requirements for Homeowners Who are 90 Days Delinquent Home Affordable Foreclosure Alternatives (“HAFA”) Update on the Hardest Hit Fund’s Blight Elimination Program 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 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 119 121 124 125 127 132 138 179 194 266 330 336 337 339 340 352 374 377 379 383 558 562 563 564 566 567 568 EXECUTIVE SUMMARY 4 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Already 199 defendants investigated by SIGTARP have been convicted of TARPrelated crime, and more than 100 of them (107) have been sentenced to prison (some still await sentencing). These convictions and prison sentences are important measures of justice, accountability, and deterrence that SIGTARP has brought in its oversight over the TARP bailout. SIGTARP works to protect TARP and taxpayers, first by recommending a fix to Treasury of vulnerabilities to fraud, waste, and abuse in TARP, and second, by enforcing the law where crime seeped into the financial industry related to TARP, leaving the industry safer than we found it during the crisis. Many of these convicted defendants SIGTARP investigated were first time offenders with no criminal history — many were upstanding law abiding citizens until they turned to TARP-related crime during the financial crisis. Some made no personal profit from the crime. Many argued to the court that they are unlike other defendants because they had good intentions of trying to save their company, their bank, their customers, and their community, from harms of the crisis. Their motivation may be different than some other defendants SIGTARP investigates, but it does not mean that they should not have been convicted of a crime or sentenced to prison. Their crimes had devastating consequences, consequences that require law enforcement, justice, and accountability. TARP bailout-related crime must be stopped. Every time. Without exception. Without regard to the TARP institution’s size. SIGTARP is the investigative agency who works with our prosecuting law enforcement partners, to bring cases of TARPrelated crime to satisfy four foundations of our justice system: 1. A ccountability— No one is above the law. SIGTARP and our law enforcement partners held every one of the 199 convicted defendants accountable for their crimes. In addition to the 107 of these convicted defendants who have already been sentenced to prison, 63 convicted defendants investigated by SIGTARP await sentencing. SIGTARP and our law enforcement partners will hold others accountable in the future. There are an additional 67 defendants SIGTARP investigated who have been charged with a crime and await trial (267 defendants SIGTARP investigated have been charged with a crime including the 199 defendants already convicted). SIGTARP is conducting investigations that are not yet at the stage of criminal charges, and we continue to find crime and open new investigations. 2. Taking the profit out of crime— Crime must not pay. SIGTARP’s investigations have already resulted in $1.58 billion in real dollars returned to the Government and victims. SIGTARP works to increase that amount by assisting in recovering money from an additional $6 billion in court orders and Government agreements resulting from SIGTARP investigations that have not yet been recovered. 3. Deterrence— Breaking the banking laws must not be tolerated. Crimes against banks deserve significant general deterrence efforts. In some cases, the crime jeopardized the safety and soundness of a bank that applied for or received TARP. In other cases, the crime did not on its own jeopardize the safety and 5 6 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM soundness of the bank, but multiple losses must be deterred to avoid creating a risk to a bank’s safety and soundness. Putting a TARP bank’s assets at risk also puts Treasury’s TARP investment and FDIC-insured bank deposits at risk. 4. Justice and Crisis Recovery— Justice must be brought to victims hurt by these crimes, such as communities, employees, homeowners, small businesses, the Government, and others. Additionally, those defendants willing to commit crime related to the bailout must be removed from the financial system that underpins the economy on which we all rely on so that they are never in a position again to put a bank or TARP program at risk. Understanding how these defendants end up as subjects of a SIGTARP investigation helps SIGTARP know where to look for additional crime and understand the motivation for crime, and can help accountants, auditors, bank examiners, bank employees, and Treasury officials know when to ask more questions, dig further, raise their hand, or make a referral to law enforcement such as SIGTARP. It can be easy to justify not speaking up, or excuse something that does not seem right, just on the basis that the person is a good person, with a solid reputation, or that not all the facts are known. The devastating consequences of these defendants’ crimes could have been stopped earlier or mitigated by someone who could have dug deeper or told someone, but did not. SIGTARP does not expect everyone to know when a crime has been committed. That is law enforcement’s job. But speaking up when something does not seem right can have significant impact. WHY DID THE PEOPLE SIGTARP INVESTIGATES TURN TO CRIME? To understand why many of these defendants turned to crime, SIGTARP relies on facts we have learned in our investigations: what witnesses told us in interviews, facts we read in documents we seized in searches, and facts testified to at trial. The 199 defendants SIGTARP investigated who have been already been convicted knew what they were doing—they had criminal intent—which is what SIGTARP is required to prove under the law. Further, each of the 107 of those 199 convicted defendants who have been sentenced to prison intentionally made a decision that carried the consequence of prison. SIGTARP makes arrests, and courts impose prison sentences, but those are consequences of the decisions made by each of these defendants to step over the line from what is legal to what is not. Each convicted defendant SIGTARP investigated made a choice. They chose to break the law. They may justify their actions, but they knew what they were doing. SIGTARP investigates three general categories of criminal defendants, and although they may be very different, each one turned to crime. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 SIGTARP Defendant Category 1: It is not the first time these defendants have been charged with a crime. They have a criminal record. Although a defendant in this category can be involved in any crime, SIGTARP sees this often with mortgage modification criminal schemes that target homeowners seeking help to lower their mortgage payments through HAMP. These defendants do not operate legitimate businesses – just scams. Their business model: deception. Their phony companies may use fake photos, fake names, fake testimonials, or real Government seals that do not apply to them. Nothing is real – especially their guarantees to help homeowners. When caught by SIGTARP, they often shut down and set up shop somewhere else. They know what they are doing is wrong. They have done wrong before. Category one defendants SIGTARP investigates have criminal intent. Howard Shmuckler was no stranger to the criminal justice system or attorney disciplinary system by the time SIGTARP investigated him for a $2.8 million mortgage modification criminal scheme for which he was sentenced to 7.5 years in prison by a federal court and 7.5 years in prison by a Maryland state court with the sentences to run at the same time. In the early 1990’s Shmuckler pled guilty to bankruptcy fraud and making false statements under oath after concealing assets in bankruptcy, including a $44,400 Jaguar sports car. In 1996, Shmuckler resigned from the California Bar after accepting nearly $2 million as part of a kickback scheme. In July 2009, Shmuckler was disbarred as an attorney in Washington, D.C. In July 2010, Shmuckler was criminally charged for a counterfeit check scheme, for which he would later be convicted. In November 2010, Shmuckler was charged in a Maryland state court following SIGTARP’s investigation. He would also be charged in federal court for the mortgage modification scheme following SIGTARP’s investigation. From June 2008 through March 2009, Shmuckler turned to TARP-related crime taking nearly $2.8 million through a phony mortgage rescue business through which he lured approximately 865 struggling homeowners looking for relief with empty promises. He misrepresented that he was a practicing attorney in Virginia, that his business had restructured hundreds of mortgages, stopped hundreds of foreclosures, and negotiated hundreds of short sales. He was convicted by both the Maryland state court and federal court. SIGTARP Defendant Category 2: Bankers or bank borrowers who use a bank that received or applied for TARP to further their own private interests. Their crimes typically involve self-dealing, personal profit, and are often motivated by greed. They may have never been charged with a crime before, which may be because they have never been caught before or may be because this is their first crime. Category two defendants SIGTARP investigates have criminal intent. SIGTARP uncovered a $2.9 billion fraudulent scheme by the Chairman of Taylor, Bean & Whitaker, Lee Farkas, with seven co-conspirators, including Catherine Kissick, the former senior vice president of TARP-approved Colonial Bank. Farkas lived in the lap of luxury, using proceeds of the fraud to buy a jet, expensive and antique collector cars, including a Rolls Royce, and multiple vacation homes. Farkas had been operating the fraud scheme for 10 years, but had 7 8 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM never been caught until SIGTARP began investigating after Treasury approved Colonial Bank for $550 million in TARP. SIGTARP uncovered the fraudulent scheme and stopped the TARP money from going to the bank. SIGTARP’s Colonial Bank investigation resulted in prison sentences for 8 defendants: Farkas (30 years), TBW’s former treasurer, (Desiree Brown – 6 years), TBW’s former chief financial officer (Delton de Armas – 5 years), TBW’s former chief executive officer (Paul Allen – 3 years and 4 months), TBW’s former President (Raymond Bowman – 2½ years), and a former operations supervisor for Colonial Bank’s Mortgage Warehouse Lending Division (Teresa Kelly – 3 months). SIGTARP also uncovered a fraud scheme at TARP applicant FirstCity Bank by CEO, Chairman and President Mark Conner and Clayton Coe, the bank’s former vice president and senior commercial loan officer. They used First City as their own personal piggy bank, directing, deceiving, and convincing the bank to provide loans for real estate investments where Conner and Coe personally benefited. Conner reaped $7 million from the fraud, including money hidden in an offshore Cayman Islands bank account, hundreds of acres of land, and art worth over $89,000 (including antique furniture, 19th century European oil paintings, bronze and blown glass sculptures, and an $8,000 pair of gilt bronze candelabra). Conner and Coe had been operating their scheme for years but were not caught until the bank applied for TARP funds, bringing their scheme into SIGTARP’s jurisdiction. SIGTARP’s FirstCity investigation resulted in prison sentences for 3 defendants: Conner – 12 years; Coe – 7 years and 3 months; and their co-conspirator, Robert E. Maloney, FirstCity’s former in-house counsel – 3 years 3 months. Most defendants that SIGTARP investigates fall into a third category: SIGTARP Defendant Category 3: First time offenders having never before committed a crime. They may have been upstanding, law-abiding citizens who lived honest lives and performed good deeds. Greed might still motivate them, but their crimes may not involve self-dealing or personal profit beyond keeping their jobs or stock in the bank. Generally, as SIGTARP has learned in its investigations, the motivation of defendants in this third category differs if the person masterminds/orchestrates the criminal scheme (typically a CEO or other high level officer) or is a co-conspirator who carries out the criminal scheme (typically an employee such as a bank loan officer or large bank customer). Both have criminal intent. CEO & Other High Level Officials Who Mastermind/ Orchestrate the Criminal Scheme SIGTARP has learned through its investigations that generally the CEO or other high level officer who masterminds/orchestrates the criminal scheme feels a sense of ownership in – even a sense of identity – tied to something they care about greatly, and when that something is significantly threatened like what happened during the financial crisis, they become so desperate, that they may be more willing to do whatever they think is necessary to protect against losing that. They are willing to do anything to avoid losing the very thing they put their heart and soul SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 into, even if it means committing a crime. This “something” could be the bank they run, reputation, loyalty to long standing clients, employees, or the business they built from scratch. Greed may be present, but is not always their primary motivation, and they may not profit from the crime beyond keeping their job or the value of their company stock. In essence, they are more motivated by the fear of losing something they identify with so much that it would be like losing a part of themselves. They may convince themselves that their actions are justified, because of the loss they would face is a very part of how they define themselves. SIGTARP investigated senior officers of the now-failed Bank of the Commonwealth in Norfolk, Virginia, and with our law enforcement partners found that these bank officers, together with their co-conspirator bank borrowers, committed fraud that caused massive holes on the bank’s books— holes they tried to fill with TARP funds. Although their bank regulator ultimately denied their TARP request, the bank’s application for TARP using a set of false books, brought them within SIGTARP’s jurisdiction. SIGTARP’s investigation led to the convictions of 10 defendants for TARP-related crime, including 4 bank officers; three are serving lengthy prison sentences: Edward Woodard (23 years), Stephen Fields (17 years), and Troy Brandon Woodard (8 years). The fraud contributed to the bank’s failure, the 7th largest in the nation in 2011. Previously a law-abiding citizen, Edward Woodard, the bank’s CEO and Chairman, turned to orchestrating a TARP-related criminal scheme for which a federal jury found him guilty. He is currently serving a 23 year prison sentence. Woodard’s lawyer told the jury at trial “Ed Woodard put his customers and his bank first.” That’s the key word for his motivation…“his.” SIGTARP hears this word “his” used often from defendants, and we hear the words “my” or “mine”—words that show a sense of ownership. But a bank is owned by shareholders. Where Treasury invests TARP dollars, taxpayers, through Treasury, own part of the bank. Some defendants feel a sense of identity. Woodard’s lawyer told the jury, “the bank and its community bank customers were a virtual part of the heart and soul of Ed Woodard, of his very DNA.” Others, not just CEOs, demonstrate this sense of identity. SIGTARP sees the sense of identity with loan officers who identify with the clients they have had for years, clients they care greatly about. SIGTARP investigated Braxton Sadler, a former senior vice president and senior loan officer of TARP recipient TNBank, who was convicted of willfully misapplying bank funds. For 14 years, Sadler processed loans for a husband and wife bank customer and their business DeBord, acting in essence as their personal banker. Sadler even invested his own money in their business and loaned money, both of which he hid from the bank. He issued new loans to purportedly a different borrower, but allowed the proceeds to be applied to DeBord’s loans. For example, he approved a bank loan to another borrower for legal and medical expenses, and allowed DeBord to use the proceeds of that new loan for their failed construction 9 10 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM project. He allowed DeBord’s account to be overdrawn by $90,000. He cared about these customers. He turned to crime. Edward Woodard cared greatly about the Bank of the Commonwealth, its reputation, and about its biggest borrowers. It was Woodard’s decision in 2006 to double the size of the bank aggressively to a billion dollar bank by becoming so concentrated in certain commercial real estate borrowers that he put the bank at risk. Woodard’s lawyer described one loan as, “if the project failed, not only would the borrower go under, but they could have pulled the whole bank under with them, and it was Ed Woodard’s duty to try to avoid it.” So rather than try to avoid that fate by avoiding great risk in the first place when expanding, Woodard started down a slippery slope. He took, or directed others to take, one criminal action followed by another, then another, to make past due loans appear current. He used straw borrowers to evade the legal lending limit. He made new loans for a new stated purpose, but used those funds to make past due loans look current. He made sweetheart deals for favored borrowers. These borrowers drove up bids at auctions for the banks’ repossessed properties. Woodard had the bank fund those bids but concealed it, by lending not to his favored borrowers, but to their secretary or affiliated company. In exchange, Woodard engaged in criminal conduct to make it look like these favored borrowers were current on their business loans, even though they were past due. The bank’s books were not truthful, books the bank used to apply for TARP. Woodard blamed the financial crisis, other defendants have too. SIGTARP rejects the argument that the financial crisis shields criminal liability. The financial crisis becomes too easy an excuse for bankers or their co-conspirators who crossed the line, and knew that they crossed the line. Judges and juries have rejected that argument too. The financial crisis was a crossroad for many bankers. Thousands in banking faced losses without turning to crime. They told the truth in the bank’s books. When loans went past due, or collateral for the loans declined in value, they truthfully reserved for losses. When loans went bad, they charged them off. And they suffered the consequences. Some lost their jobs, some lost significant money, and some saw their bank fail or be acquired or lose reputation and customers. But others SIGTARP investigates walked up to that line drawn in the sand, that line that defines what is legal and what is a crime, and made a decision to cross that line. They knew that they crossed the line. They may have justified it, but they knew. They had criminal intent. The defendants SIGTARP investigates who are first time offenders may convince themselves that their actions are justified because of the loss they would face—losing what they feel is theirs or a very part of how they define themselves— but they committed a crime. SIGTARP sees a pattern in many of our investigations that the loss these defendants faced during the crisis was a consequence of excessive risk-taking they took before the crisis, with the defendants turning to crime to avoid the consequences. The thing about risk is that if times had remained good, the risk may pay off with a handsome upside. But, when good times turn bad, the downside SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 for a bank can be treacherous. These consequences include for example, increasing numbers of non-performing bank loans that should be reserved for losses or charged off, loans without sufficient collateral, or too many foreclosed properties on the bank’s books, all of which threaten the health of the bank, and all of which must be recorded truthfully in the bank’s books. Once a banker chooses to conduct one criminal act, it can snowball, turning one crime into a criminal scheme. A banker may commit the first crime of making a false entry into a bank’s books, then commit additional crimes by lying to the regulator who asks about the entry, and including that fraudulent entry in call reports and financial statements sent to regulators (and Treasury to apply for TARP) and sent to investors including Treasury (for TARP banks). They can commit the crime of conspiracy by bringing in others to the scheme. So why do these bankers that SIGTARP investigates think they are so different than those who also may lose so much but still tell the truth? Edward Woodard’s lawyer described the motivation as, “he tried to think outside the box,” “to save his borrowers, his customers, and his bank.” SIGTARP also investigated Jerry Williams who built Orion Bank and served as its President, CEO, and Chairman, and is now serving a six-year prison sentence. His lawyer explained Williams’ motivation as, “a gifted leader who succumbed to a criminal impulse while compelled to act in a noble cause: to save an institution and its employees in a time of crisis.” The bankers who tell the truth and face the consequences also care greatly. These bankers who acted within the law know that they may not be able to save customers or save the bank. They know, however, that they must tell the truth in the bank’s books, no matter how much they care about those customers or the bank. That is the noble cause—following the law during times of crisis. This is what we do at SIGTARP; we enforce the law for actions taken related to the Government’s response to the financial crisis. We ensure that those who step over that line pay for their crime. We hold them accountable. We ensure they are never again in a position to decide whether to step over that line and damage a bank, its customers, or its community. The Co-conspirators who carry out the criminal scheme SIGTARP investigates co-conspirators because without the co-conspirators, many of these criminal schemes could not have been committed. Typically, coconspirators may be bank officers or other employees who work for those who mastermind/orchestrate the criminal scheme or may be large borrowers of the bank (who may be not current on their loan). They may make false entries in the bank’s books, hide from auditors, accountants or regulators current appraisals showing that collateral has decreased in value, lie to a regulator, send false bank records to regulators or take any number of actions to carry out the criminal scheme. Each of these co-conspirators faced the same line in the sand and also chose to cross it. They often have a different motivation than those who mastermind/ orchestrate the scheme. Co-conspirators may be motivated to turn to crime because of loyalty to their boss, or fear of losing their job, particularly during a time of crisis. 11 12 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP investigated Stephen Fields, former vice president and commercial loan officer at TARP-applicant Bank of the Commonwealth, who was sentenced to prison for 17 years. Stephen Fields carried out CEO Edward Woodard’s fraudulent scheme. According to Fields attorney, “Stephen did not steal or embezzle funds, hide them in a foreign country, or use them to fund a lavish lifestyle—the classic fraudster behavior…Nor is there any indication that he was motivated by such desires. He did not use the bank to amass a personal fortune….” Instead, his attorney argued that Fields had a “character flaw,” quoting a former Bank of Commonwealth colleague Fields supervised: “he was too trusting and loyal to his supervisors without questioning them.” Fields was a former bank examiner, but rather than report the fraud or refuse to participate, Fields actively engaged in the fraud, including lying to bank examiners. SIGTARP also investigated former vice-president of TARP-applicant Appalachian Community Bank Rusty Beamon, who was sentenced to prison for 3½ years for bank fraud. Beamon’s lawyer told the court that the bank president Tracy Newton was his mentor and, “Rusty Beamon followed the directions he received from Tracy Newton to the letter each time.” Beamon told the court the bank president told him of a plan to find creative ways to dispose of foreclosed properties in order to save the bank. Beamon’s lawyer explained, “the thrust of the idea was for Beamon to assist in efforts to save the bank.” His lawyer justified Beamon’s actions: “but for the financial crisis of 2007, and but for Rusty Beamon’s dependence and trust in Tracy Newton’s leadership, he would not be before the Court at all.” SIGTARP investigated Orion Bank executive vice presidents Thomas Hebble and Angel Guerzon as conspirators who carried out the criminal scheme that the bank CEO, President and Chairman Jerry Williams orchestrated. They falsified the bank’s books and records, disguising the bank’s low capital level by creating illusions of legitimate capital infusions through a roundtrip transaction and made non-performing loans appear performing, to deceive State and Federal regulators. According to their attorneys, Hebble and Guerzon were motivated for their own reasons. According to his attorney, Hebble, “did not seek to, nor did he, personally profit from the offense conduct. He was not motivated by personal gain… Mr. Hebble thought that this transaction would help the financially troubled bank which was in need of capital. He had recruited many co-workers from the bank he and they used to work for and he did not want their jobs to be in jeopardy.” Similarly, Guerzon’s attorney explained that at all times Guerzon worked at the direction of Williams or Hebble, under the stress and duress of being terminated. He added that Guerzon was not offered, and did not anticipate or seek, any financial gain from his part in the fraud. Cultures that allowed crime to seep in and continue unchecked SIGTARP sees some of the same characteristics in the cultures of banks where crime seeped in and went unchecked. Because these cultures may exist outside SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 of SIGTARP’s jurisdiction of TARP-related banks, SIGTARP is warning of these characteristics to help others change culture to create a safer banking system. Understanding the cultures that allowed crime to seep in and continue unchecked can help regulators know where and how to look in the bank’s books and can help other law enforcement agencies find bank fraud and other crimes. Understanding these cultures can help banks and bank regulators fix parts of their culture that may allow crime to seep in or continue unchecked. Excessive risk-taking and lack of accountability for consequences of that risk-taking SIGTARP has uncovered cultures where crime seeps in and continues unchecked where there is a lack of accountability for the consequences of excessive risktaking. Often this culture is set at the top of the organization. Sometimes the crime is committed during the aggressive growth strategy such as bankers that commit illegal accounting short cuts, elude internal controls, and violate underwriting laws such as legal lending limits designed to keep a bank’s risk related to any one borrower in check. Other times a bank may have taken excessive risk without violating the laws, but bank officers use fraudulent accounting tricks to conceal the bank’s true financial condition, and to delay and avoid reporting the bank’s impaired loans and true loan losses to the public. Bank officers may falsify the bank’s books and records by overinflating the value of the bank’s loan collateral, committing fraud to take repossessed assets off of the bank’s books, and committing extend and pretend schemes to make past-due loans appear current, among other schemes. Bank officers cause the bank to issue materially false and misleading reports to regulators and investors. From 2006 to 2009, Bank of the Commonwealth executives began an aggressive expansion outside of Virginia, and to double assets to be a $1 billion bank. They took excessive risk beyond industry standards and the bank’s own internal controls. By 2008, the consequences of that risk led to significant pastdue loans. The bank officers avoided the consequences of that risk taking through crime. Heavy concentration of lending in favorite customers SIGTARP has uncovered cultures where crime seeps in and continues unchecked where banks are heavily concentrated in sizable loans held by a few favorite customers. This created a dangerous interdependence. If one of these favorite borrowers failed, the bank could or will fail. CEOs often maintain direct control of the relationships and accounts, eliminating the checks and balances designed to prevent excessive risk taking and fraud. Bank officers still give the borrowers money, violating legal lending limits, by using straw borrowers. Eric Hranowskyj and George Menden were favored customers of Bank of the Commonwealth. Hranowskyj and Menden leveraged such control that Bank of the Commonwealth employees called it the ‘Bank of Eric and George.” Hranowskyj acted like he owned the bank, calling himself “Big Daddy” to bank 13 14 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM employees, overdrawing his accounts by $600,000, and demanding that the bank “lower his rates ASAP” and cash his employees’ paychecks even though his account was delinquent. If the bank did not do what he wanted, he threatened to stop participating in the bank insiders’ criminal scheme. Eric and George owed their bank nearly $41 million, contributing to its ultimate failure. SIGTARP’s investigation revealed that in exchange for favorable bank loans, they helped the bank make past-due loans appear current, bid up bank-owned repossessed property at auction using the bank’s own money, and made fraudulent construction draws, among other crimes. These co-conspirators were sentenced to prison for 14 and 11½ years. CEO Maintains Control Including Over The Board of Directors SIGTARP has uncovered cultures where crime has seeped in and continued unchecked where the CEO has power and control of the bank including over the board of directors. The CEO may also be chairman of the board and/or the board of directors may be overly deferential to the CEO without conducting sufficient inquiry or due diligence. This culture lacks checks and balances that could protect the bank by deterring or catching crime. Banks with CEOs who built the bank or have held the position for a long time may be particularly vulnerable. Where the board members lack the CEO’s skills or knowledge, do not understand banking’s complex laws and rules, or do not ask the hard questions or challenge the CEOs about risky decisions, crime can seep in or continue unchecked. At community banks, board members often work outside the banking industry, but that should not mean that they defer all decisions to their CEOs. As the President, CEO, and Chairman of TARP-applicant Orion Bank, Jerry Williams orchestrated a complex criminal conspiracy to falsify the bank’s capital to mislead state and federal regulators about the bank’s true financial condition. Williams directed his executives to conduct a roundtrip transaction by loaning money to straw borrowers on behalf of borrower and co-conspirator Frank Mileto, creating the illusion that Orion Bank’s capital position had improved by $15 million. Williams knew that banking laws prohibited the bank from financing the purchase of its own stock. Even after top bank executives discovered that Mileto had submitted fraudulent documents to support the loans, Williams directed the bank to issue the loans as the only one with authority to approve loans over $2 million for submission to the loan committee. Holding criminals accountable and deterring future crime It has taken six years for SIGTARP’s work to result in 199 convictions, and more than 100 prison sentences, which is not a long time, particularly given the complexity and importance of the cases we have brought. Law enforcement related to the financial crisis is a challenge and SIGTARP must adhere to the foundation of the American judicial system: innocent until proven guilty. We cannot, and do not, rush to judgment or target individuals based on their titles or how much SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 money their company received in the TARP bailout. Instead, we search for everyone who committed a crime at or against a TARP recipient or program. SIGTARP will be unwavering in our pursuit of justice and accountability for crimes related to TARP. That is true whether the defendant worked inside or outside the bank, whether this was their first crime, or one in a long list of crimes. That work contributes to long-term recovery from the financial crisis. We encourage others to join the fight. Our law enforcement partners, other agencies, regulators, victims who talk to SIGTARP, and the public can help. There is something more to own and identify with. That something more is a higher calling for anyone who works in or around the financial industry. Communities look to those who work in and around the industry for trust and stability. That is what everyone must take ownership of. We all must ensure that the financial industry is one where the words “us” and “we” mean more than “me” and “mine.” We all must ensure that DNA—that heart and soul—that identity and feeling of ownership comes from integrity, honesty and trust. SIGTARP can only do so much through law enforcement. The rest must come from within and around the financial industry, including bankers, gatekeepers, advisors, auditors, accountants, and regulators. Long lasting recovery from the financial crisis, and prevention from future harm, depends on it. 15 16 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SECT IO N 1 THE OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR THE TROUBLED ASSET RELIEF PROGRAM 18 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 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 June 30, 2015, SIGTARP had 145 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 June 30, 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 June 30, 2015, there have been 323,602 page views.i From July 1, 2012, through June 30, 2015, there have been 21,301 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. 19 20 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 revised spend plan of $40.9 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 $40.9 MILLION) Other Services $1.7, 4% Advisory Services $2.3 Interagency Agreements 25% $10.1 Communications with Congress 6% 63% Salaries and $25.9 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 176 recommendations as of June 30, 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 June 30, 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. 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: SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 • criminal chargesiii against 267 individuals, including 171 senior officers (CEOs, owners, founders, or senior executives) of their organizations • criminal convictions of 199 defendants (others are awaiting trial) • prison sentences for 107 defendants (others are awaiting sentencing) • civil cases and other actions against 67 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 95 individuals from working in the banking or financial industry, working as a contractor with the Federal Government, working as a licensed attorney, or other types of businesses • orders of restitution and forfeiture and civil judgments and other orders entered for $7.5 billion. This includes restitution orders entered for $4.3 billion, forfeiture orders entered for $263.6 million, and civil judgments and other orders entered for $2.95 billion. Although the ultimate recovery of these amounts is not known, as of June 30, 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.iv These investigations have resulted in charges against defendants holding a variety of jobs, including 171 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. FIGURE 1.3 CRIMINAL CHARGES FROM SIGTARP INVESTIGATIONS RESULTING IN PRISON SENTENCES 2% 1% 3% 3% 4% 10% 6% 33% 7% 13% 18% 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% 4% 2% 8% 13% 64% iii Criminal charges are not evidence of guilt. A defendant is presumed innocent until proven guilty. iv The prosecutors partnered with SIGTARP ultimately decided which criminal charges to bring resulting from SIGTARP’s investigations. Senior Executive MMS/MHA Scam Bank Employee Straw Borrower/Investor Individual Other Attorney Note: Numbers may not total due to rounding. 21 22 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TARP-Related Investigations Activity Since the April 2015 Quarterly Report Kentucky Businessman Sentenced to 12 Years in Federal Prison for $53 Million Tax Scheme and Massive Fraud Involving Bribery of Senior Executives at TARP Applicant Bank – Wilbur Anthony Huff (Park Avenue Bank) On June 4, 2015, Wilbur Anthony Huff, a businessman of Caneyville and Louisville, Kentucky, was sentenced in the United States District Court for the Southern District of New York, to 12 years in federal prison and ordered to pay more than $108 million in restitution for committing various tax crimes that caused more than $50 million in losses to the Internal Revenue Service (“IRS”) and more than $4.8 million in losses to the Federal Deposit Insurance Corporation (“FDIC”); and for a massive fraud that involved bribery of bank officials, the fraudulent purchase of an insurance company, and the defrauding of insurance regulators and an investment bank. The sentence followed Huff’s guilty plea to related charges in December 2014. In addition to the prison sentence Huff was sentenced to three years of supervised release, and ordered to forfeit $10.8 million to the United States. As previously reported in October 2010, Charles J. Antonucci, Sr., the President and Chief Executive Officer of TARP applicant Park Avenue Bank (and one of Huff’s co-conspirators) pleaded guilty to securities fraud in connection with his attempt to fraudulently obtain more than $11 million in TARP funds, becoming the first individual convicted of attempting to steal from TARP. Antonucci is scheduled to be sentenced on August 20, 2015. In addition, as previously reported, Matthew L. Morris, Senior Vice President of Park Avenue Bank, and Allen Reichman, an executive at an investment bank and financial services company, pled guilty for their roles in the above-described offenses on October 17, 2013, and February 20, 2015, respectively. Reichman is scheduled to be sentenced late July 2015, and Morris is scheduled to be sentenced on August 19, 2015. As part of a corrupt relationship between Huff and the bank executives, Huff, Morris, Antonucci, and others conspired to defraud various entities and regulators during the relevant time period. Specifically, Huff conspired with Morris and Antonucci to falsely bolster Park Avenue Bank’s capital to prevent Park Avenue Bank from being designated as “undercapitalized” by regulators by orchestrating a series of fraudulent “round-trip” transactions to make it appear that Park Avenue Bank had received an outside infusion of $6.5 million from Antonucci when, in actuality, the $6.5 million was part of the bank’s pre-existing capital. This was done so the bank could continue engaging in certain banking transactions it would otherwise have been prohibited from doing and to put the bank in a better position to receive over $11 million in TARP funds. To conceal their unlawful financial maneuvering, Huff (a) created, or directed the creation of, documents falsely suggesting Antonucci had earned the $6.5 million through a bogus transaction with another company Antonucci owned; and (b) stole $2.3 million from a SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 publicly-traded temporary staffing company to pay Park Avenue Bank back for funds used in the $6.5 million round trip transaction. The case is being investigated by SIGTARP, the Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigation Division, the New York State Department of Financial Services, Immigration and Customs Enforcement’s Homeland Security Investigations, and the Federal Deposit Insurance Corporation Office of Inspector General. The U.S. Attorney’s Office for the Southern District of Florida assisted the investigation. The case is being prosecuted by the U.S. Attorney’s Office for the Southern District of New York Complex Frauds and Cybercrime Unit and the U.S. Department of Justice’s Tax Division, and was brought in coordination with President Obama’s Financial Fraud Enforcement Task Force. Former President and CEO of TARP Applicant Bank Pleads Guilty to Bank Fraud Conspiracy – Poppi Metaxas, Gateway Bank On April 30, 2015, Poppi Metaxas, of Hillsborough, California, former president and chief executive officer of TARP applicant Gateway Bank, FSB (“Gateway”) pled guilty to conspiracy to commit bank fraud in the United States District Court for the Eastern District of New York for her role in defrauding Gateway of more than $1.8 million in the aftermath of the financial crisis. At sentencing, scheduled for October 15, 2015, Metaxas faces up to five years in federal prison. According to court records and facts presented at the plea hearing, between 2009 and 2010, Metaxas engaged in a scheme to defraud Gateway in connection with Gateway’s sale of non-performing assets and mortgage loans to three entities in exchange for $15 million. Specifically, Metaxas caused Gateway to enter into a sham loan agreement with Lend America, a Long Island mortgage lender and Gateway’s largest mortgage lending client. Through a series of wire transfers, Metaxas and her co-conspirators then used the proceeds of that sham loan to satisfy the 25 percent down payment that the three entities owed to Gateway in connection with the sale of the non-performing assets and loans. To conceal the fraudulent “round trip” nature of the loan funds, Metaxas deceived the board of directors of Gateway and, in October 2009, she provided false testimony to bank regulators when asked about the source of the down payment. Additionally, as previously reported, on January 15, 2015, the United States District Court for the Eastern District of New York unsealed plea proceedings in which Robert Savitsky, an attorney for Lend America, pleaded guilty to conspiracy to commit bank fraud for his role in defrauding Gateway. At sentencing, Savitsky faces up to five years in Federal prison. In addition to Savitsky and Metaxas, 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 United States Attorney’s Office for the Eastern District of New York, the Federal Bureau of Investigation, and the 23 24 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM U.S. Department of Housing and Urban Development Office of Inspector General. The prosecution was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Former Chief Credit Officer and Former Controller at TARP Recipient Bank Indicted for False Statements to Regulators – William North & Kevyn Rakowski, Wilmington Trust Company On May 6, 2015, William North, of Bryn Mawr, Pennsylvania, and Kevyn Rakowski, of Lakewood, Florida, the former Chief Credit Officer and former controller of TARP recipient, Wilmington Trust Company (“Wilmington Trust”), respectively, were charged in the United States District Court for the District of Delaware in a four-count indictment for their respective roles in making false statements to agencies of the United States government. If convicted, North and Rakowski each face up to five years in Federal prison on each of the four counts. According to the indictment, North and Rakowski made false statements to the Securities and Exchange Commission (“SEC”) and the Federal Reserve in connection with their involvement in concealing from the market, the SEC, and the Federal Reserve, the total quantity of past due loans on the bank’s books during October and November 2009. Further, Wilmington Trust was required to report in its quarterly filings with the SEC and its quarterly and monthly filings with the Federal Reserve the complete quantity of loans for which payment was past due for 90 days or more, a metric that investors and bank regulators consider in evaluating the health of the bank’s loan portfolio. Notwithstanding the requirement that the Bank report its loans that were 90 days or more past due, and the value of this metric to investors and regulators, North and Rakowski allegedly participated in Wilmington Trust’s concealment of a material quantity of past due loans from its quarterly filings. As the bank’s chief credit officer, North approved the exclusion or “waiver” of such loans from internal reports that he knew would be used to generate the bank’s external financial reports. Rakowski, as controller, approved the bank’s filings with the SEC and the Federal Reserve, knowing that those reports did not include past due loans that had been waived. Wilmington Trust received $330 million in TARP funds in December 2008 which remained outstanding until 2011 when Wilmington Trust was acquired by TARP recipient bank, M&T Bank Corporation (“M&T”), at a steep discount of approximately 46 percent from the bank’s share price the prior trading day. M&T itself also received more than $750 million in TARP funds in 2008. Additionally, on the same day, the SEC filed civil charges against North and Rakowski, together with Wilmington Trust’s former Chief Financial Officer, David Gibson, and its former President and Chief Operating Officer, Robert Harra, with disclosure fraud in connection with the same scheme to conceal from public reports the bank’s actual quantity of past due loans, among other allegations. This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Delaware, the Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigation Division, and the Office of Inspector General for the Board of Governors of the Federal Reserve System. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Illinois Businessman Sentenced to Federal Prison for Making False Statements to a TARP Bank – Steven J. Moorhouse & Old Second National Bank On May 20, 2015, Steven J. Moorhouse, a former Sandwich, Illinois, business owner was sentenced to 21 months in Federal prison in the United States District Court for the Northern District of Illinois for making a false statement to TARP recipient Old Second National Bank (“OSNB”), of Aurora, Illinois, having pled guilty on January 12, 2015. Moorhouse also was ordered to pay restitution of $881,012 to OSNB and, following his prison sentence, to serve a three-year term of supervised release. In addition, as a special condition of his supervised release, Moorhouse is prohibited from accepting any employment which requires him to possess or exercise control over any third party’s monetary assets or their equivalent. According to the plea agreement, during July 2009, Moorhouse, who was president and majority owner of Jefsco Manufacturing, Inc. (“Jefsco”), a manufacturing business, sought a lender to make business loans to Jefsco and began to provide Jefsco’s financial information to OSNB. Further, on December 4, 2009, Moorhouse provided OSNB with a document that falsely inflated the value of the account receivables owed to Jefsco by hundreds of thousands of dollars. Moorhouse admitted that he was aware that the amount of loan proceeds that OSNB would disburse would be, in part, determined by the amount of receivables. In January 2009, Old Second Bancorp. Inc., the parent company of OSNB, received $73 million in TARP funds. The bank was unable to repay the TARP investment, and Treasury sold its stake in the bank at auction for a loss of more than $56 million. This case was investigated by SIGTARP, the United States Attorney’s Office for the Northern District of Illinois, and the Federal Bureau of Investigation, and the prosecution was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Former TARP Bank Senior Vice President Sentenced to Federal Prison for Bailout-Related Crime – David Weimert, AnchorBank On June 16, 2015, David Weimert, of Madison, Wisconsin, former Senior Vice President at TARP recipient AnchorBank, was sentenced in the United States District Court for the Western District of Wisconsin to 18 months in Federal prison following his April 3, 2015, conviction on wire fraud charges after a weeklong jury trial in federal court in Madison, Wisconsin. In addition to prison time, the sentencing judge imposed a $25,000 fine as well as a term of three years of supervised release. At the trial, the government showed that from December 2008, until March 31, 2009, Weimert, while working at Anchor BanCorp Wisconsin, Inc. (“ABCW”) as a senior vice president in lending administration and as the president of Investment Directions, Inc. (“IDI”), a wholly-owned subsidiary of ABCW, devised and participated in a scheme to defraud IDI and obtain money by means of fraudulent pretenses. Specifically, the evidence at trial established that Weimert devised a 25 26 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM scheme to defraud IDI by lying and omitting material facts in an effort to obtain an ownership interest in Chandler Creek, a joint venture partnership formed to develop an industrial park in Round Rock, Texas, and in an effort to obtain a four percent commission fee as part of the sale of Chandler Creek. As a result of Weimert’s misrepresentations and omissions, Weimert induced the IDI board of directors to accept an offer to purchase Chandler Creek (valued at $800,000), with Weimert receiving a 4.875 percent ownership interest as part of the deal and a four percent commission fee to Weimert, which totaled $311,680. In January 2009, ABCW, the parent company of AnchorBank, received $110 million in TARP funds. In August 2013, the bank filed for bankruptcy reorganization and, as a result, the federal government later suffered a loss of $104 million on the investment in addition to losing more than $23 million the bank owed as a result of holding TARP funds. In imposing the sentence, the sentencing judge informed Weimert that Weimert had committed an extreme act of dishonesty which required significant punishment. The judge further explained that AnchorBank and IDI were entitled to Weimert’s loyalty and Weimert’s criminal scheme reflected an ability to compartmentalize his criminal conduct and bring a different level of morality to his fiduciary duty to his employer. The case was investigated by SIGTARP, the United States Attorney’s Office for the Western District of Wisconsin, and the Federal Bureau of Investigation and the prosecution was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Three Californians Convicted of Operating Multi-Million Dollar Mortgage Modification Scam – Christopher Paul George, Crystal Taiwana Buck, Albert DiRoberto & 21st Century Legal Services, Inc. On June 9, 2015, after a three-week trial in the United States District Court for the Central District of California, a federal jury convicted Christopher Paul George, of Rancho Cucamonga, California, Crystal Taiwana Buck, of Long Beach, California, and Albert DiRoberto, of Fullerton, California, each of whom worked at 21st Century Legal Services, Inc. (“21st Century”), a Rancho Cucamonga telemarketing operation business that offered bogus loan modification programs to thousands of financially distressed homeowners who lost more than $7 million when they paid for services, including loan modifications, that were never provided. Known under a series of names, 21st Century bilked more than 4,000 homeowners across the nation, many of whom lost their homes to foreclosure. According to court records, George, a co-owner of 21st Century, was found guilty of one count of mail fraud affecting a financial institution, three counts of wire fraud, two counts of wire fraud affecting a financial institution, and one count of conspiracy to commit mail and wire fraud. Buck, a sales “closer” for the company, was convicted of mail fraud. DiRoberto, who handled both sales and marketing, which included making a commercial for 21st Century and preparing talking points to respond to negative publicity, was found guilty of one count of SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 mail fraud affecting a financial institution and two counts of wire fraud affecting a financial institution. As a result of the guilty verdicts, George faces a statutory maximum sentence of 170 years in federal prison, Buck faces a statutory maximum sentence of 60 years in federal prison, and DiRoberto faces a statutory maximum sentence of 90 years in federal prison. All three defendants are scheduled to be sentenced on August 31, 2015 in the United States District Court for the Central District of California. According to court documents, during an 18-month period that began in the middle of 2008, Andrea Ramirez, also of Rancho Cucamonga, California, who previously pleaded guilty to conspiracy to commit mail fraud and wire fraud, operated 21st Century, which defrauded financially distressed homeowners by making false promises and guarantees regarding 21st Century’s ability to negotiate loan modifications for homeowners. Employees of 21st Century made numerous misrepresentations to victims during the course of the scheme, including falsely telling victims that 21st Century was operating a loan modification program sponsored by the United States government. Victims were generally instructed to stop communicating with their mortgage lenders and to cease making their mortgage payments. George, co-owner Ramirez, and the other 21st Century employees contacted distressed homeowners through cold calls, newspaper ads, and mailings, and the company controlled websites that advertised loan modification services. Once they contacted the distressed homeowners, according to the evidence presented at trial, Ramirez and other 21st Century employees often falsely told clients that the company was operating through a federal government program, that they would be able to obtain new mortgages with specific interest rates and reduced payments, and that attorneys would negotiate loan modifications with their lenders. Ramirez and other 21st Century employees regularly instructed financially distressed homeowners to cease making mortgage payments to their lenders and to cut off all contact with their lenders because they were being represented by 21st Century. On some occasions, Ramirez and other 21st Century employees would tell homeowners that 21st Century was using the fees paid by the homeowner to make mortgage payments when, in fact, Ramirez, George, and their co-defendants were simply pocketing the homeowners’ money. With these guilty verdicts, a total of 11 defendants linked to 21st Century have been convicted of federal fraud charges. In addition to Ramirez, since July 2013, the following seven California residents also have pled guilty: • • • • • • • Michael Bruce Bates, of Moreno Valley; Michael Lewis Parker, of Pomona; Catalina Deleon, of Glendora; Hamid Reza Shalviri, of Montebello; Yadira Garcia Padilla, of Rancho Cucamonga; Mindy Sue Holt, of San Bernardino; and Iris Melissa Pelayo, of Upland. 27 28 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Ramirez, Bates, Parker, Deleon, Shalviri, Padilla, Holt, and Pelayo, are each scheduled to be sentenced by the United States District Court for the Central District of California over the coming months. This case was investigated by SIGTARP, the United States Attorney’s Office for the Central District of California, the Federal Bureau of Investigation, the Internal Revenue Service-Criminal Investigation, the United States Postal Inspection Service, and the Federal Housing Finance Agency, Office of Inspector General. Additionally, the prosecution was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Businessman Pleads Guilty to Money Laundering in Connection with Scheme to Defraud TARP Recipient Bank – Albert Solaroli/One Bank & Trust, N.A. (“Onebanc”); Former OneBanc Vice President & Controller Sentenced for Money Laundering of Embezzled Funds – Matthew D. Sweet On April 10, 2015, Alberto Solaroli, of Jacksonville, Florida, a customer of One Bank & Trust, N.A. (“Onebanc”), of Little Rock, Arkansas, pleaded guilty to money laundering in the United States District Court for the Eastern District of Arkansas for a $120,000 wire transfer from Onebanc to Solaroli’s bank account in Florida as part of Solaroli’s scheme to obtain a $1.5 million loan from Onebanc by falsifying financial information. As part of the application process, in April 2007, Solaroli fraudulently claimed assets of $170 million and misrepresented his personal net worth to be more than $169 million. Solaroli eventually received the entire $1.5 million but never made a single payment on the loan. In 2008, Onebanc sued Solaroli and received a civil judgment in Florida for $1.5 million which Solaroli had not paid. In later efforts by the bank to collect on a judgment against Solaroli, Solaroli admitted under oath that the financial statement he submitted to Onebanc was false. At sentencing, which is scheduled for November 23, 2015, Solaroli faces up to ten years in federal prison, three years of supervised release and a $250,000 fine. In addition, on April 28, 2015, Matthew D. Sweet, of Timbo, Arkansas, a Onebanc former Vice President and Controller, was sentenced in the United States District Court for the Eastern District of Arkansas to one year of probation, including six months of home detention, following his guilty plea 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 then mailed 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”), 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. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 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 TARP Bank Loan Officer Sentenced to Federal Prison – Brian W. Harrison & Farmers Bank and Trust On June 8, 2015, Brian W. Harrison, of Great Bend, Kansas, a former loan officer at TARP recipient Farmers Bank and Trust, was sentenced in the United States District Court for the District of Kansas to six months in federal prison followed by three years of supervised release (including six months home detention), following his March 23, 2015, guilty plea to bank fraud. As a special condition of his supervised release, Harrison is prohibited from being employed in any capacity in which he has discretion authority over financial matters. Harrison also was ordered to pay more than $124,000 in restitution to his victims and $50,000 in a personal forfeiture judgment. According to court records, Harrison’s duties included reviewing, approving, and disbursing loans. In furtherance of a scheme to defraud the bank and to hide the poor performance of various loans he made, Harrison made or caused to be made false statements to the bank. Harrison’s false statements were intended to deflect questions from bank officers about problems with his loans. Furthermore, Harrison falsified credit and loan applications, promissory notes, and security agreements on behalf of a purported debtor without the debtor’s proper authority. In June 2009, Farmers Enterprises, Inc., of Great Bend, Kansas, the parent company of Farmers Bank and Trust, received $12 million in TARP funds. In November 2012, the bank exited TARP by purchasing the Treasury Department’s stake in the company at a discount, resulting in a loss of $560,748 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, pleaded 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 was investigated by SIGTARP, the United States Attorney’s Office for the District of Kansas, and the Federal Bureau of Investigation, and the prosecution was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Seven Californians Indicted for Defrauding TARP Banks in $3 Million Mortgage Fraud Conspiracy – Jyoteshna Karan, Pravan Singh, Mahendra Prasad, Phul Singh, Sunita Singh, Nani Isaac & Martin Bahrami On June 26, 2015, the United States District Court for the Eastern District of California unsealed a fifteen count indictment against seven residents of California, 29 30 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM charging them with conspiracy to commit mail fraud and bank fraud, mail fraud and aiding and abetting, and making false statements to a bank in connection with a years-long, multi-million dollar mortgage fraud scheme. Specifically, on June 26, 2015, Jyoteshna Karan and Praveen Singh, both of Modesto, California, and Mahendra Prasad, of Fremont, California, were arrested by SIGTARP agents and their law enforcement partners and charged; other defendants who were charged in the indictment and received summonses were: Phul and Sunita Singh, both of Modesto, California, Nani Isaac, of Ceres, California, and Martin Bahrami, of Turlock, California. According to court documents, the defendants conspired to defraud mortgage lending companies and financial institutions, including (among others) TARP recipients, Bank of America, N.A, JPMorgan Chase, and Wells Fargo, N.A., by making false statements on loan applications and short-sale applications in order to obtain properties under their names and the names of others. The false statements included statements relating to the defendants’ employment, their familial relationship, income, and their intent to occupy the home as their primary residence. Further, according to the indictment, the conspiracy spanned at least 25 properties from Sacramento to Modesto, California, and lenders lost in excess of $3 million as a result. If convicted, each defendant faces up to 30 years in federal prison on each count. This case was investigated by SIGTARP, the United States Attorney’s Office for the Eastern District of California, the Federal Bureau of Investigation, the Federal Housing Finance Agency-Office of Inspector General, the Federal Deposit Insurance Corporation-Office of Inspector General, and the Stanislaus County District Attorney’s Office. The prosecution is being brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Three Men Charged in Multi-Million Dollar Scheme to Deceive Homeowners Into Selling Their Homes, Defendants Acting Through an Organization That Advertised Help to Those Seeking Home Loan Modifications to Avoid Foreclosure – Mario Alvarenga, Rajesh Maddiwar & Amir Meiri / Launch Development LLC & Homeowners Assistance Service of New York (“HASNY”) On May 21, 2015, Mario Alvarenga, Rajesh Maddiwar, and Amir Meiri were arrested and charged by criminal complaint with conspiracy to commit wire fraud in the United States District Court for the Southern District of New York, for participating in a scheme to fraudulently induce distressed homeowners to sell their homes to a company associated with defendants, Launch Development, LLC (“Launch Development”). If convicted, each defendant faces up to 20 years in federal prison. According to the allegations in the complaint: Since at least 2013, Alvarenga, Maddiwar, and Meiri have defrauded distressed homeowners throughout the Bronx, Brooklyn, and Queens, New York. Alvarenga, Maddiwar, and Meiri falsely represented to these homeowners – some of whom were elderly or in poor health – that they could assist the homeowners with a loan modification or similar relief from foreclosure that would allow the homeowners SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 to save their homes. But, rather than actually assisting these homeowners, the defendants deceived them into selling their homes to Launch Development, a forprofit real estate company also affiliated with the defendants. Alvarenga, Maddiwar, and Meiri lured victims through the Homeowners Assistance Service of New York (“HASNY”), which purported to provide assistance to homeowners who were seeking to avoid foreclosure of their homes. As part of the scheme, Meiri directed employees of Launch Development, a company owned in part by Meiri, to solicit owners of distressed properties and invite them to meet with HASNY representatives so that they could learn more about avoiding foreclosure and saving their homes. When a homeowner arrived at the HASNY office, he or she met with Alvarenga, who typically advised the homeowner that HASNY could assist him or her with a loan modification. In still other cases, Alvarenga advised the homeowner that a loan modification could not be completed, but that the homeowner could engage in a type of short sale in which the homeowner would sell the property to a third party, Launch Development, and then within approximately 90 days arrange for a relative of the homeowner to repurchase the property from Launch Development. Alvarenga typically explained that the homeowner could remain in his or her home throughout the entire process. Alvarenga then typically scheduled a closing at which the homeowner would meet with Maddiwar, who was described as the homeowner’s attorney for the transaction. At the closing, a homeowner who had been led to believe that he or she was about to receive a loan modification or transfer his or her property to a trusted relative was encouraged to sign documents presented by Maddiwar, which in some cases were blank. Unbeknownst to the homeowners, by signing the documents, they were selling to Launch Development the homes they had hoped to save. Homeowners often were then forced to vacate their homes soon thereafter. This case is being investigated by SIGTARP, the United States Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the New York State Department of Financial Services. The prosecution is being brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. California Man Sentenced to Prison for Defrauding Homeowners in HAMP Loan Modification Scheme – Duy Khac Nguyen, “HAMP Resources” On April 3, 2015, Duy Khac Nguyen, of Garden Grove, California, was sentenced in the Superior Court of California, Orange County, to one year imprisonment in county jail followed by five years of supervised release, after having pled guilty on January 30, 2015, to 36 felony counts, including grand theft and theft from an elder, in connection with a mortgage modification scam. Additionally, Nguyen was ordered to pay restitution to his victims. According to documents in the public record, between February and July 2010, Nguyen owned and operated a fraudulent loan modification company called “HAMP Resources,” in Garden Grove, California, through which Nguyen falsely claimed to be affiliated with the Home Affordable Modification Program 31 32 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM (“HAMP”), one of the government’s official housing programs funded by TARP program, in order to swindle distressed homeowners, including elderly homeowners. Specifically, Nguyen admitted to promising loan modifications to his victims, taking upfront fees and guaranteeing a refund if they were not eligible for the purported modification program. In reality, however, Nguyen failed to provide promised loan modifications or refunds to his victims and, instead, Nguyen withdrew the money from the “HAMP Resources” business account and deposited it in his own personal accounts. Nguyen’s victims deposited checks into an officialsounding “HAMP Resources” business account after being lured through local television advertisements in Hawaii and in several additional states by mail flyers and Nguyen’s website. Soon after perpetrating his scheme, Nguyen closed his business, shutting down his website and moving out of Orange County. This case was investigated by SIGTARP and the United States Postal Inspection Service and was prosecuted by the Orange County District Attorney’s Office, Major Fraud Unit. Perpetrator of Multi-Million Dollar, Nationwide Loan Modification Scam Pleads Guilty to Mail Fraud and Aggravated Identity Theft – Najia Jalan On July 1, 2015, Najia Jalan, aka “Poh Yee Neo”, aka “Korina Taylor”, aka “Sarah Adams”, aka “Sarah Johnson”, aka “Sarah St. John”, aka “Sarah Kim”, aka “Sarah Parker”, aka “Tiffany Abeyta” (collectively “Jalan”), of Orange County, California, pleaded guilty in the United States District Court for the Central District of California to one count of mail fraud and two counts of aggravated identity theft in connection with a long-running loan modification scam which preyed on distressed homeowners nationwide. At sentencing, scheduled for October 5, 2015, Jalan faces up to twenty years in federal prison for the mail fraud count and a minimum of two years imprisonment on each of the aggravated identity theft counts, for a total of up to 24 years in federal prison. According to court filings, Jalan admitted that from December 2012 to October 18, 2014, she operated a number of businesses including National Legal Help Center (“NLHC”), United National Mortgage Protection Center – National Consumer Assistance Center Business Trust, aka Bank & Trust, (“UNMPC”), OC NonProfit, American Consumer Law Center (“ACLC”), and The US Litigation Firm, aka The US Law Firm (“USLF”), through which she perpetrated a scheme falsely promising mortgage assistance relief services to distressed homeowners in exchange for illegal up-front fees. Specifically, to dupe homeowners Jalan, among other things: (i) falsely promised mortgage modifications that would substantially reduce homeowners’ mortgage payments or interest rates, or help them avoid foreclosure; (ii) falsely claimed that her services were subject to a money back guarantee; (iii) falsely claimed to be a law firm; (iv) impersonated the identities of licensed attorneys; and (v) failed to disclose that she had been prohibited from offering mortgage relief services by a temporary restraining order and preliminary injunction issued by the United States District Court for the Central District of California, and, as previously reported, a December 3, 2012, civil complaint and motion for a temporary restraining order filed by the Consumer Financial SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Protection Bureau (“CFPB”) alleging that Jalan, NLHC, and NLHC’s chief financial officer fraudulently marketed and sold mortgage assistance relief services. Jalan also misled homeowners by claiming that her companies were working with or were affiliated with the U.S. Government or Government programs, including the U.S. Treasury Department, and the TARP-funded Home Affordable Modification Program (“HAMP”). For instance, on the USLF website Jalan suggested that purchasing a “mortgage fraud investigation” or “initial investigation” from USLF was the first step in the HAMP application process. In reality, however, neither Jalan nor any of her entities were affiliated with or working with any government agency. Furthermore, Jalan claimed that, by calling the number advertised on the USLF website, homeowners could reach the official not-for-profit “Homeowner’s HOPE Hotline” to speak with a HUD-approved housing counselor when, in actuality, the telephone number was a number for USLF. As previously reported, on October 16, 2014, Jalan met with law enforcement to discuss potential criminal charges against her relating to the scheme, and, less than 48 hours later, was arrested by SIGTARP agents and their law enforcement partners at Los Angeles International Airport just before boarding a flight to Afghanistan (via Dubai) on a one-way ticket. The investigation is being conducted by SIGTARP, the U.S. Attorney’s Office for the Central District of California and the Federal Housing Finance Agency Office of Inspector General. The civil case was brought in coordination with a multi-agency effort with the CFPB and Treasury to investigate, combat, and shut down HAMP-related mortgage modification scams and to provide awareness to vulnerable homeowners. Former DEA Agent Arrested at Los Angeles Airport on Fraud Charges, Conspired With Conman and Former “America’s Most Wanted” Fugitive – David Garcia Herrera & Jerome Arthur Whittington On June 11, 2015, David Garcia Herrera, a former special agent with the Drug Enforcement Administration (“DEA”), of Torrance, California, was arrested at Los Angeles International Airport and charged in an indictment returned on June 5, 2015, with two counts of conspiracy to commit wire fraud, six counts of wire fraud, and one count of a false statement in a passport application in connection with two fraudulent schemes (the “June 2015 Indictment”). Additionally, Jerome Arthur Whittington, aka Jerry Whittington, of La Quinta, California—who, in 1989, was featured on the television show “America’s Most Wanted” having been a fugitive for three years for impersonation and transportation of stolen property (among other crimes)—was also charged in the June 2015 Indictment with Herrera for his role in the schemes. If convicted on each of the nine counts, Whittington and Herrera would each face up to 170 years in federal prison. According to the June 2015 Indictment, posing as an attorney and an active FBI special agent, respectively, Whittington and Herrera falsely promised the victim they could help him recover losses in fraudulent schemes related to two companies, Pacific Property Assets and Medical Capital Corporation. Whittington and Herrera told the victim that they could seize assets from the two fraudulent companies, 33 34 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM so long as the victim provided money that would be used to “post bonds” that were required prior to seizing the assets. After Whittington claimed that he had obtained a $4 million judgment for the victim, Whittington told the victim that representatives from the companies and other victims were very angry and that the victim should leave the country to avoid confrontations and harassment. The victim paid Whittington approximately $290,000 for help in recovering his losses, but Whittington simply used the money for his own person expenses, which included making payments to other victims of his scheme and to Herrera. In the second scheme discussed in the June 2015 indictment, Whittington once again posed as an attorney and Herrera told the victim that he was an investigator with the FBI and that Whittington was a former federal prosecutor. Based on these and other false statements and promises, the victim retained Whittington and paid approximately $8,500 for assistance in his wife’s immigration case – help that was never provided. According to the June 2015 Indictment, Whittington routed victims’ funds through TARP recipient banks including Bank of America, U.S. Bank, and First Citizens Bank in connection with both schemes. As previously reported, Whittington was indicted in June 2014 in the United States District Court for the Central District of California on two counts of wire fraud (the “June 2014 Indictment”) which alleged that that Whittington used lies and misrepresentations – including pretending to be an attorney – to convince one victim to invest in a real estate deal and another to put money into a business venture involving an Internet browser, both of which were fraudulent. Whittington faces a maximum of 30 additional years in Federal prison and a maximum fine of $1 million on each count. As a result of the two schemes outlined in the June 2014 indictment, the two victims lost approximately $165,000 and, in both cases, Whittington once again is alleged to have routed victims’ funds through TARP recipient banks including Bank of America and U.S. Bank. This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Central District of California, and the Federal Bureau of Investigation, with substantial assistance provided by the Bossier Parish Sherrif’s Office in Bossier City, Louisiana, and the Ventura County Sherriff’s Department, of Ventura, California. Two Executives Sentenced to Prison for Life Insurance Fraud Conspiracy – Robert Wertheim, Abraham Kirschenbaum & Imperial Holdings, Inc. On May 28, 2015, Robert Wertheim and Abraham Kirschenbaum, each of New York, New York, were sentenced in the United States District Court for the District of New Hampshire to eighteen months in federal prison, having pled guilty in 2013 to conspiracy to commit mail and wire fraud, in connection with their roles in an insurance fraud scheme orchestrated through Premium Finance Group (“Premium”), a company formed by Wertheim. Kirschenbaum also was ordered to forfeit $1,000,000. In addition on May 22, 2015, co-conspirator Maurice Kirschenbaum entered into a deferred prosecution agreement. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 According to court filings and other documents in the public record, Wertheim and the Kirschenbaums admitted to conspiring with others to target elderly individuals interested in purchasing high value life insurance policies at no cost for a limited period. Wertheim and the Kirschenbaums would undertake to finance the policies through Imperial Holdings Inc. (“Imperial”), of Boca Raton, Florida, with the intent that the policies would later be sold to third parties. Once a potential applicant was found, the defendants and their co-conspirators materially altered the life insurance applications, including by inflating the assets and net worth of the insureds so that the insurance companies would issue the highest valued policies. Together with Imperial, Wertheim and the Kirschenbaums also concealed the insureds’ intent to finance the cost of the substantial premiums associated with the policies (which likely would prevent the insurance company from issuing the policy), and whether the insureds planned to assign the beneficial interest in the policy to third parties. Premium, Imperial, Wertheim and the Kirschenbaums would all profit from the commissions paid by insurance companies on the policies. After about two years, the policies would go into default when payments had not been made. Imperial would then market the defaulted policies to a third party in order to recoup the financed amount along with the associated interest and fees. TARP recipient American International Group, Inc. (“AIG”) and Lexington Insurance Company (“Lexington”), a subsidiary of AIG, provided lender protection insurance to Imperial. Once the policies started to default, Imperial turned to AIG and Lexington for payment. Additionally, as previously reported, on April 30, 2012, Imperial entered into an agreement with the United States Attorney’s Office for the District of New Hampshire which required Imperial pay $8 million to resolve allegations relating to its fraudulent misrepresentations on applications and also make significant corporate changes including: terminating the business line in which the fraud occurred; accepting the resignation of a senior officer; and terminating the senior sales staff involved in the fraud. This case was investigated by SIGTARP, the United States Attorney’s Office for the District of New Hampshire, the Federal Bureau of Investigation, the Secret Service, and the United States Postal Inspection Service. Four Admit Role in TARP-Related Scheme to Sell Properties from Federal Government’s HomePath Program – Carla Lee Miller, Xue Heu, Mark Steven Thompson, Thomas Dickey Price & Greenfield Advisors, LLC On April 2, 2015, Carla Lee Miller pleaded guilty to one count of conspiracy to commit wire fraud in the United States District Court for the Western District of Texas for her role in a fraud scheme designed to sell government-owned properties as official “TARP partners,” when, in reality, and as Miller and her co-defendants well knew, no such designation existed. Additionally, on May 20, 2015, Xue Heu pleaded guilty to one count of aiding and abetting wire fraud in the U.S. District Court for the Eastern District of California for his role in the TARP fraud scheme. At sentencing, which is scheduled for August 5, 2015, Miller faces up to 20 years in federal prison. Heu, who, on March 20, 2015, pleaded guilty in the United 35 36 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM States District Court for the Eastern District of California to two counts of wire fraud in connection with an unrelated scheme, faces up to 20 years imprisonment on each count when he is sentenced. Together, Heu and Miller each agreed to pay restitution of more than $762,000 to the victims of their TARP fraud scheme. According to court documents, between October and December 2013, Miller and Heu (and it is alleged that Mark Steven Thompson and Thomas Dickey Price) created fake identities in order to contact real estate investment firms and misrepresent that their affiliated companies, Greenfield Advisors, LLC, and Escrow Professionals, Inc., were authorized by TARP to sell U.S. Government-held properties through a legitimate federal government program called HomePath. Through Greenfield Advisors, defendants entered into contracts with individuals purporting to purchase properties from the HomePath program when, in fact, defendants had no authority to enter into such contracts. Further, Miller admitted having (and Price is alleged to have) directed investors to funnel the money – intended as earnest money and property payments – through Escrow Professionals, Inc., the escrow company for the sale, and into bank accounts controlled Thompson and ultimately used by all of the defendants for their own personal benefit. To further the scheme, a real estate closing would purportedly occur, and, if pressed, Hue would create documents falsely purporting to be the deeds. In reality, however, no actual transfer of properties took place because none of the defendants had the actual authority to sell the property. Defendants are accused of defrauding victims out of more than $900,000. As previously reported, on May 21, 2014, Heu and Miller, together with Thompson and Price, were charged with conspiracy to commit wire fraud and aiding and abetting wire fraud in connection with the scheme. In addition, on September 11, 2014, Price pleaded guilty in the United States District Court for the Western District of Texas to one count of conspiracy to commit wire fraud in connection with his role in the scheme, and faces up to 20 years imprisonment when sentenced on September 23, 2015. On December 4, 2014, Thompson pleaded guilty in the United States District Court for the Western District of Texas to one count of aiding and abetting wire fraud for his role, and, on December 17, 2014, agreed to forfeit money totaling more than $250,000 seized from bank accounts Thompson held at TARP recipient banks; jewelry and two televisions; as well as a money judgment of more than $900,000. Thompson faces up to 20 years in prison when sentenced on July 29, 2015. This case is being investigated by SIGTARP, the United States Attorney’s Office for the Western District of Texas, and the Federal Bureau of Investigation. Former Loan Officer Admits Role In $6 Million Mortgage Fraud Scheme – Joseph DiValli On May 28, 2015, the United States District Court for the District of New Jersey unsealed a plea agreement in which, Joseph DiValli, of Jackson, New Jersey, pleaded guilty to one count of conspiracy to commit wire fraud, one count of wire fraud and one count of tax evasion in the United States District Court for the District of New Jersey for his role in a large-scale mortgage fraud scheme that SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 caused millions of dollars in losses. At sentencing, scheduled for September 9, 2015, DiValli faces a maximum of 30 years in federal prison on the conspiracy and wire fraud counts and up to five years in prison for the tax evasion count. DiValli agreed to pay restitution of $217,262 to the IRS in connection with the tax evasion count. According to court documents and statements made in court: From March 2011 through November 2012, DiValli and other conspirators enriched themselves by agreeing to submit fraudulent mortgage loan applications and related documents to financial institutions, including TARP recipient banks, after recruiting “straw buyers” to purchase properties in New Jersey. DiValli and others also used another conspirator, a bank employee, to create misleading certifications showing certain bank accounts contained a specific amount of funds, when, in actuality, they contained less. Additionally, DiValli and other conspirators submitted false appraisal reports, back-dated deeds, and used unlicensed title agents to close transactions and disburse the mortgage proceeds. In addition, DiValli admitted using a separate wire fraud scheme to modify a mortgage on his personal residence. From March 2011 through June 2012, DiValli used false payroll ledgers to deceive a loan officer into believing that DiValli’s net earnings were lower than his actual income level. DiValli also admitted receiving income of more than $450,000 in 2012. In order to avoid taxes of $79,000, DiValli failed to file taxes for 2012 and cashed his paychecks at a check-cashing facility to conceal his income. As previously reported, on January 23, 2013, as part of a wide-scale mortgage fraud investigation in New Jersey, DiValli and ten other individuals were arrested, including by SIGTARP agents and its law enforcement partners, and charged relating to their roles in fraudulent mortgage schemes. In addition to DiValli, those arrested were: Christopher Woods, Matthew Amento, Carmine Fusco, Kenneth Sweetman, Jose Luis Salguero Bedoya, Paul Chemidlin, Jr., Delio Countinho, Christopher Ju, Yazmin Soto-Cruz, and Jose Martins. • In 2012, Woods and Amento each pleaded guilty to conspiracy to commit wire fraud and wire fraud, and each were sentenced in 2013 to 18 months imprisonment and ordered to pay $1,267,851 in restitution to, among others, the government and TARP Recipients Bank of America and PNC Bank. • On June 8, 2015, Ju was sentenced to ten months in prison and ordered to pay $256,511.07 in restitution, also having pled guilty in 2014 to conspiracy to commit wire fraud affecting a financial institution. • In 2014, Fusco, Soto-Cruz, Sweetman, Coutinho, Martins, and Salguero each pleaded guilty to conspiracy to commit wire fraud affecting a financing institution and each is scheduled to be sentenced in the coming months. • In 2014, Chemidlin pleaded guilty to conspiracy to commit wire fraud affecting a financial institution, among other charges, and awaits sentencing as well. This case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of New Jersey, the Federal Bureau of Investigation (“Newark Mortgage 37 38 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Fraud Task Force”), the Federal Housing Finance Agency, Office of the Inspector General, IRS-Criminal Investigation, the U.S. Postal Inspection Service, the U.S. Housing and Urban Development, Office of Inspector General, and the Hudson County Prosecutor’s Office. This case is being prosecuted in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President of Oregon Onion Farming Company Pleads Guilty to Bankruptcy Fraud by Concealing Assets From Creditors, Including TARP Recipient Bank – Farrell Larson & Zions Bancorporation On June 22, 2015, Farrell Larson, of Meadow, Utah, pleaded guilty in the United States District Court for the District of Idaho to one count of bankruptcy fraud involving fraudulent transfer and fraudulent concealment of assets in a bankruptcy. According to the plea agreement, Larson was the President and co-owner of Select Onion and Larson Land Company, which operated an onion farm and onion processing plant in Ontario, Oregon. In connection with a 2012 Chapter 11 bankruptcy Larson filed as the debtor in the United States Bankruptcy Court for the District of Idaho, Larson Land Company merged with Select Onion. On April 19, 2012, the Chief Bankruptcy Judge for the District of Idaho ruled that Larson could not use cash collateral of the Larson Land Company or Select Idaho. Nonetheless, just a day after the ruling, on April 20 and 23, 2012, Larson caused a total of $56,000 in cash to be withdrawn from Select Onion bank accounts, which reflected assets obtained by Select Onion after the bankruptcy filing. These withdrawals and subsequent money transfers – made to Larson himself, Larson’s family members, and companies Larson controlled – were done without the knowledge or authorization of the bankruptcy court or bankruptcy trustee, and Larson admitted to knowingly concealing assets from the trustee, his creditors and the bankruptcy court with the intent to defraud. Larson’s victim-creditors included, among others, TARP recipient Zions Bank, of Salt Lake City, Utah, to which Larson owed $3 million at the time of his bankruptcy filing. In November 2008, Zions Bancorporation, of Salt Lake City, Utah, parent of Zions Bank, received $1.4 billion in TARP funds. At sentencing, scheduled for September 8, 2015, Larson faces a maximum of five years in federal prison. Further, as part of his plea, Larson agreed to forfeit at least $47,000 as proceeds of his offense. This case is being investigated by SIGTARP, the United States Attorney’s Office for the District of Idaho, and the Internal Revenue Service-Criminal Investigation. Second New York Man Pleads Guilty to Role in HAMP Mortgage Modification Scam That Victimized Struggling Homeowners Nationwide – Aren Goldfaden, Homesafe America On June 1, 2015, Aren Goldfaden, of East Rockaway, New York, a sales representative for mortgage modification companies, pleaded guilty in the United States District Court for the Southern District of New York to conspiracy to commit wire fraud in connection with his role in helping to operating a mortgage SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 modification scheme that defrauded hundreds of victims out of millions of dollars having been charged in October 2013 together with four co-defendants. According to court documents, Goldfaden admitted that, between February 2010 and June 2011, he took part in a scheme falsely promising 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. Further, Goldfaden and the other 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 that: • The defendants’ companies were associated with HAMP; • A mortgage modification was guaranteed resulting in a significant reduction in the customer’s interest rate and/or monthly payments; and • Homeowners’ fees would be refunded in the event defendants could not modify the homeowners’ loan. As part of the scheme, the co-conspirators 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 delivered little or no service 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 October 15, 2015, Goldfaden faces a maximum of 30 years in federal prison. As previously reported, on October 23, 2013, in addition to Goldfaden, Guy Samuel, of Richmond Hill, New York; Anthony Blackwell, of New York, New York; Angel Gonzalez, of Rosedale, New York; and Jonathan Lyons, of Rockville Center, New York, were charged for their roles in the scheme. Gonzalez pleaded guilty on March 5, 2015, for his role in the scheme and faces up to 30 years in prison when sentenced on September 17, 2015. Additionally, on October 16, 2013, Scott Schreiber, of Brooklyn, New York, pleaded guilty to conspiracy to commit wire fraud and wire fraud, and, on September 19, 2013, Darrell Keys, of Uniondale, New York, pleaded guilty to conspiracy to commit wire fraud in connection with their roles in the scheme. 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. 39 40 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM New York Man Arrested, Charged With Conspiracy for Long-Running Mortgage Fraud Scheme – Philip Haas On June 1, 2015, the United States District Court for the Eastern District of New York unsealed an April 2015 criminal complaint charging Philip Haas with conspiracy to commit wire fraud in connection with a mortgage fraud scam involving a government-backed residential mortgage insurance program through the Federal Housing Administration (“FHA”) that victimized TARP recipient banks. According to the complaint, between February 2009 and November 2011, Haas allegedly conspired with others to obtain mortgages on properties by fraudulent means, by, among other means, selling properties that they did not own, including purportedly buying properties from homeowners who were unaware of the contract to sell (or did not authorize the sale of) the property, and who, in at least one instance, did not receive proceeds from any such sale, and did not know Haas. Haas and his co-conspirators also acquired properties from homeowners who were unable to continue making payments on their mortgages, and, almost simultaneously, flipped (or sold) the properties at increased prices. The increased prices allowed Hass and others to maximize the loan proceeds obtained from the FHA-approved lenders. Using falsified documents Haas and his co-conspirators made borrowers appear to be more creditworthy. Further, by delaying—or failing entirely to record—deed transfers, the co-conspirators concealed the fact that the purchase and sale occurred within 90 days, contrary to the FHA program guidelines. For example, Haas and his co-conspirators’ delay in recording the deed transfer allowed them to sell a property twice, obtaining two FHA-insured loans in the process. Additionally, once the mortgage loan applications were approved, the co-conspirators profited at closing by improperly directing a portion of the loan proceeds to be paid to themselves. The scheme fraudulently induced FHA-approved lenders to issue mortgage loans which were, in turn, sold to TARP recipient banks, JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A., and Bank of America, among others. Ultimately, in most instances, no mortgage payments were made and the loans defaulted. This case is being investigated by SIGTARP, the United States Attorney’s Office for the Eastern District of New York, the Department of Housing and Urban Development – Office of Inspector General, and the Federal Bureau of Investigation. It is being prosecuted in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. Prison Sentences Resulting From SIGTARP Criminal Investigations Of the 199 defendants convicted as a result of a SIGTARP investigation, 107 defendants have already been sentenced to prison for TARP-related crimes, 28 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 61 months, which is nearly double the national average length of prison sentences SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 involving white collar fraud of 36 months.v Eighteen defendants investigated 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. 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 70 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 53 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 49 months in prison. Figure 1.5 shows the people sentenced to prison, the sentences they received, and their affiliations. v See the U.S. Sentencing Commission’s 2013 Sourcebook of Federal Sentencing Statistics for additional information. 41 42 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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 Wilbur Anthony Huff 144 months 4 years supervised release Owner Oxygen Entities 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. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 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 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 Delton de Armas 60 months 3 years supervised release CFO Taylor, Bean and Whitaker Jeffrey Levine 60 months 5 years supervised release Executive Vice President Omni National Bank Bernard McGarry 60 months 3 years supervised release Chief Operatiing Officer Mount Vernon Money Center Richard Pinto [deceased] 60 months 5 years supervised release Chairman Oxford Collection Agency 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. Marleen Shillingford 36 months 3 years supervised release Co-owner Waikele Properties Corp. 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 Roger Jones 33 months 3 years supervised release Federal Housing Modification Department Raymond Bowman 30 months 2 years supervised release President Taylor, Bean and Whitaker 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 Tommy Arney 27 months 3 years supervised release Owner Residential Development Company 43 44 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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. Thomas Fu 21 months 5 years supervised release Owner/CFO Galleria USA, Inc. Karim Lawrence 21 months 5 years supervised release Officer Omni National Bank Ziad Nabil Mohammed Al Saffar 21 months 3 years supervised release Operator Compliance Audit Solutions, Inc. Michael Ramdat 21 months 3 years supervised release Steven J. Moorhouse 21 months 3 years supervised release Owner/President Jefsco Manufacturing Co., Inc. 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 Troy A. Fouquet 18 months 3 years supervised release Owner Team Management, LLC TRISA, LLC Robert Ilunga 18 months 3 years supervised release Manager Waikele Properties Corp. Walter Bruce Harrell 18 months 3 years supervised release Owner Abraham Kirschenbaum 18 months 2 years supervised release Robert Wertheim 18 months 2 years supervised release Co-Owner Premium Finance Group David Weimert 18 months 3 years supervised release Senior Vice President Anchor Bank Vernell Burris 12 months 2 years supervised release Employee H.O.P.E. 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 Lynn Nunes 12 months 5 years supervised release Owner Network Funding Carlos Peralta 12 months 3 years supervised release Park Avenue Bank 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. Duy Nguyen 12 months 5 years probation Owner HAMP Resources SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Christopher Ju 10 months 24 years probation 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 Daniel Al Saffar 6 months 3 years supervised release Sales Representative Compliance Audit Solutions, Inc. Dominic A. Nolan 6 months 5 years probation Owner CSFA Home Solutions Phillip Alan Owen 6 months 5 years supervised release Branch Manager Superior Financial Services, LLC Brian W. Harrison 6 months 6 months home detention Vice President/Loan Officer Farmer’s Bank and Trust 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 45 46 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 267 defendants (199 of whom have been convicted as of June 30, 2015, while others await trial).vi These defendants were charged in courts in 30 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.vii vi Criminal charges are not evidence of guilt. A defendant is presumed innocent until and unless proven guilty. vii 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 JULY 29, 2015 FIGURE 1.6 LOCATIONS WHERE CRIMINAL CHARGES WERE FILED AS A RESULT OF SIGTARP INVESTIGATIONS Tacoma Fargo Concord Boise 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 Louisville East St. Louis Wichita Jefferson City St. Louis Buffalo Sacramento Salt Lake City Oakland San Francisco Fresno Las Vegas Knoxville Nashville Los Angeles Santa Ana Riverside San Diego Little Rock Rome Birmingham San Antonio 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 Fresno 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 Rome District of New Hampshire Concord District of Idaho Boise Eastern District of New York Brooklyn 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 District of New Jersey Newark 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 Orange County District Attoney Santa Ana Western District of Kentucky Louisville Eastern District of Tennessee Knoxville District of Connecticut Bridgeport Hartford New Haven Eastern District of Louisiana New Orleans Middle District of Tennessee Nashville Prince George’s District Court Upper Marlboro Western District of Texas San Antonio District of Delaware Wilmington District of Massachusetts Boston District of Utah Salt Lake City District of Columbia Washington, DC Eastern District of Missouri St. Louis Middle District of Florida Fort Myers Western District of Missouri Jefferson City Kansas City Eastern District of Virginia Alexandria Norfolk Northern District of Florida Pensacola Middle District of Georgia Macon Middle District of Georgia Valdosta Note: Italics denote state cases. District of Nebraska Lincoln Omaha District of Nevada Las Vegas Western District of Washington Tacoma Western District of Wisconsin Madison 47 48 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP Helping to Bring Money Back to Victims and the Government Settlements As of June 30, 2015, investigations conducted by SIGTARP have resulted in more than $7.5 billion in 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. 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 courtordered restitution of $3.5 billion and forfeiture of $38.5 million. In the Bank of the Commonwealth case (“BOC”), where former chairman Edward J. Woodard led a $41 million bank fraud scheme that masked non-performing 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 JULY 29, 2015 As part of the Bank of the Commonwealth case, Thomas Arney, who pleaded 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. 49 50 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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) SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 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. 51 52 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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 June 30, 2015, SIGTARP investigations have resulted in orders temporarily suspending or permanently banning 95 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 95 individuals, 55 were heads or owners of companies, including those who were chairmen, chief executive officers, and presidents of financial institutions. Most of the remaining 40 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 his 21 month prison sentence for making false statements to TARP recipient Old Second National Bank and more than $880,000 restitution ordered, Steven Moorhouse has been prohibited from accepting any employment which requires him to possess or exercise control of any third party’s monetary assets or their equivalent. Second, on top of his six month prison sentence for carrying out a scheme in which he defrauded TARP Recipient Farmers Bank & Trust, former loan officer, Brian Harrison, has been prohibited from being employed in any capacity in which he has discretionary authority over financial matters. S ECT I O N 2 SIGTARP RECOMMENDATIONS 54 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 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 176 recommendations are designed to protect TARP programs and dollars. But they can only provide that protection if Treasury implements them. Treasury, however, has failed to implement 104 of SIGTARP’s 176 recommendations, losing opportunities to make a difference. This section discusses developments concerning 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 by making 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 provide 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. SIGTARP RECOMMENDED HOW TREASURY CAN MAKE TARP’S HOUSING PROGRAMS MORE EFFICIENT AND EFFECTIVE Treasury can make HAMP and HHF more effective. In November 2014, Treasury again extended - by one year - the payment period for certain HAMP incentives. 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: 55 56 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM • Treasury can still spend over $21 billion towards TARP’s housing programs, an amount larger than most Government programs; • Treasury can improve TARP’s housing programs to make them more effective; • 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. SIGTARP has made 79 recommendations concerning TARP’s housing programs, including nine recommendations concerning TARP’s HHF blight elimination program; Treasury has not implemented 73 of those recommendations. In the last two years alone, SIGTARP made 38 recommendations 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 make TARP more effective. SIGTARP RECOMMENDATIONS THIS QUARTER Treasury Can Do More to Inform Struggling Homeowners in 10 Underserved States About HAMP’s Opportunities For years, homeowners have faced barriers getting into HAMP – they still do. And for years, SIGTARP has reported on their challenges, recommending how Treasury can help more homeowners, including through its signature TARP housing program, HAMP. HAMP has struggled to reach the three to four million homeowners Treasury expected it would. To increase the number of homeowners HAMP could help, Treasury has extended the program’s application deadline three times, most recently in November 2014. But extending HAMP’s timeframe without eliminating the barriers homeowners face will not increase HAMP’s effectiveness. For example, homeowners in 10 states: Alaska, Arkansas, Indiana, Iowa, Kansas, Michigan, North Dakota, Oklahoma, Tennessee, and Texas, have applied to HAMP at significantly lower rates than the national average, according to Treasury data, SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 suggesting that Treasury may not have done enough to inform them about HAMP’s opportunities. In other words, while homeowners in these underserved states may need HAMP’s help, they may not even know it exists. Although we may not know all the reasons why HAMP applications are low in these states, Treasury should seize the opportunity to do more to inform these homeowners about HAMP. One thing is clear: when Treasury holds in-person, local HAMP outreach events where homeowners can meet one-on-one with mortgage servicers, HUD–approved counselors, and other local non-profit organizations, homeowners show up. They want to learn more about HAMP. These in-person events provide opportunities that radio, television, and the internet cannot, including the chance to shake a trustworthy hand and ask HAMP experts their questions face-to-face. From 2009 until September 2014, nearly 79,000 people attended Treasury’s 98 MHA borrower outreach events, according to Treasury data. Over 800 people attended each event, on average. Treasury held only one homeowner event in Indiana and one in Tennessee. Still, those events attracted 327 and 268 homeowners, respectively. But Treasury did not build on that success. Treasury has never even held one homeowner event in 6 of the 10 states most underserved by HAMP: Alaska, Arkansas, Iowa, Kansas, North Dakota, and Oklahoma. Instead, Treasury relied more on public service announcement campaigns and paid radio announcements to reach out to homeowners about HAMP. Still, Treasury has not targeted homeowners in the most HAMP-underserved states. Treasury ran no paid radio HAMP advertisement campaigns in 4 of the 10 states most underserved by HAMP (Alaska, Iowa, Kansas, and North Dakota). Treasury ran one paid campaign in Oklahoma and two in Indiana. Apart from a single paid radio campaign in Memphis, TN between May – June 2014, Treasury has not run any paid radio ads within the last year in these ten underserved states. Even though Treasury provides nationwide information on HAMP through the internet, including on its MHA website, those efforts may be ineffective. Homeowners may not be aware of Treasury’s efforts. They would have to learn about HAMP first and then know where to look on the internet. Still, other homeowners do not even have access to the internet; some have it, but do not know how to use it. And, SIGTARP’s criminal investigations have revealed as SIGTARP has explained to Treasury - that rather than finding Treasury’s information, homeowners may find fraudsters who pose as the Government or make empty promises. These homeowners end up victims of crime, not more knowledgeable about HAMP. To help these underserved homeowners, on May 1, 2015, SIGTARP warned Treasury of their obstacles and detailed how Treasury could do more to help them through HAMP. SIGTARP recommended Treasury specifically do the following: • In order to increase HAMP’s effectiveness at reaching all HAMP-eligible homeowners, Treasury should hold in-person homeowner outreach events in all major cities and high foreclosure cities within the 10 57 58 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HAMP-underserved states of Alaska, Arkansas, Indiana, Iowa, Kansas, Michigan, North Dakota, Oklahoma, Tennessee, and Texas. Treasury should ensure that there are sufficient HUD-approved counselors who can help the number of homeowners who attend these events with HAMP applications. • Treasury should hold additional and sustained public service campaign, and TARP-paid television and radio advertisements in all major cities and high foreclosure cities within the 10 HAMP-underserved states of Alaska, Arkansas, Indiana, Iowa, Kansas, Michigan, North Dakota, Oklahoma, Tennessee, and Texas, as soon as possible to ensure that homeowners have accurate and complete information about the program and to prevent homeowners from becoming victims of fraud schemes. While agreeing with SIGTARP about the importance of reaching as many eligible homeowners as possible through HAMP, Treasury rejected SIGTARP’s recommendations and appears unwilling to do more to help the homeowners in underserved states. Treasury can still make a difference, now. Treasury has the time and money – over $18 billion, actually – to help struggling homeowners in Alaska, Arkansas, Indiana, Iowa, Kansas, Michigan, North Dakota, Oklahoma, Tennessee. But while Treasury resists implementing SIGTARP’s important recommendations, Treasury is losing the opportunity to help those underserved homeowners through HAMP. They may not even know that Treasury’s support exists. The HAMP clock is ticking….Treasury should wait no longer. Homeowners in these underserved states could still benefit from Treasury’s help; Treasury can still provide it. Treasury Can Work With State Housing Finance Agencies Now to Prevent Fraud, Waste, and Abuse in Treasury’s New HHF Down Payment Assistance Program SIGTARP’s criminal investigations teach us how and why homeowners, the Government, and others become victims of TARP-related fraud. We have learned that TARP provides opportunities not only for homeowners who need its support, but also for fraudsters preying upon their vulnerabilities. Convicted defendants have told us how their schemes worked. Deceived homeowners explained how the internet led them to elaborate, convincing scams, rather than Treasury’s TARP programs. After discovering how TARP programs could be subject to waste and abuse, we have identified how to strengthen or mitigate those weaknesses. We have shared what we learned with Treasury to make TARP as efficient and effective as possible. Because new TARP programs can be complicated and confusing to homeowners and homebuyers, every time Treasury expands or revises TARP’s assistance, SIGTARP recommends ways Treasury can prevent and deter improper payments, fraud, waste, and abuse. When Treasury implements SIGTARP’s SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 recommendations, Treasury protects TARP. But when Treasury rejects SIGTARP’s recommendations, Treasury leaves TARP exposed. Still, con schemes - many targeting struggling homeowners - continue today, despite Treasury and SIGTARP’s successful efforts to deter and stop many crimes. Treasury must do everything possible to deter and prevent TARP fraud, waste, and abuse. Recently, with its blight elimination program and now with its pilot down payment assistance program in Florida, Treasury is changing HHF. Rather than working with state housing finance agencies to develop new, innovative programs based on Treasury-targeted support, Treasury answered the HFAs’ request to support existing state programs with Federal TARP funds. But bringing those state programs under TARP’s umbrella requires Treasury do more than just provide Federal funding. When it announced HHF, the White House promised, “Effective oversight under EESA.” To ensure effective TARP oversight, Treasury must protect TARP programs from fraud, waste, and abuse, even if Treasury delegates how to administer them – including to HHF state housing finance agencies. Those responsibilities remain with Treasury, always. After all, HHF is not a grant program. Drawing again from the knowledge we gained from fighting fraud, on May 19, 2015, SIGTARP warned Treasury that its pilot down payment assistance program in Florida presented many risks and recommended ways to shield TARP from them. To start, Treasury should ensure it is not left in the dark, uninformed, as Treasury is with its HHF blight elimination program. There, Treasury collects limited information and conducts limited oversight — certainly not the “effective oversight” promised — beyond that of compliance spot-checking. Treasury should learn from its previous HHF mistakes and monitor how participating state housing finance agencies use TARP money for down payment assistance.i Particularly, Treasury should require those states to provide detailed reporting, including the upto-date list of homebuyers receiving TARP funds and their addresses. Without providing that transparency, Treasury would leave Congress, taxpayers, and the public uninformed as well. And, Treasury could use the information it collects to uncover risks, including improper TARP payments, non-armslength transactions, and commingling of funds. Treasury could also analyze that information to determine whether to continue (post-pilot) or expand this assistance, to assess where improvements can be made, or to share lessons learned with participating state agencies for future use. Congress put Treasury in charge of TARP. Treasury must track whether Treasury’s TARP programs meet EESA’s goals. Treasury cannot fulfill those TARP responsibilities with limited knowledge and involvement, especially in HHF, a program designed to stabilize home prices and prevent foreclosures. Treasury must conduct comprehensive planning – now – to ensure its new HHF down payment assistance program is successful. Treasury should not wait i As of May 19, 2015, when SIGTARP made its recommendations, Treasury approved, but had not yet launched its HHF down assistance program in Florida. 59 60 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM until the end of HHF to measure whether the HHF down payment assistance program (or Treasury’s other HHF programs, including the Blight Elimination Program) are on track to achieve TARP’s goals. Treasury should also not leave those goals to chance. Instead, Treasury should hold participating state housing finance agencies accountable, upfront, to ensure the program is on track to meet Treasury’s targets. SIGTARP understands Treasury’s desire not to harm a state’s flexibility to tailor Treasury’s HHF programs to solve local problems. But Treasury must do more than provide Federal TARP funds. Treasury must fulfill the Federal role Congress gave it: to ensure that TARP programs are operating in the most effective manner and are on track to achieve the TARP goals. Treasury cannot delegate those Federal responsibilities to anyone, especially state housing finance agencies trying to fix their own local problems. While announcing HHF, then-Treasury Secretary Geithner explained, “This innovative program will allow us to work directly with states and localities to tailor housing assistance to local needs.” Treasury must work with state housing finance agencies to oversee this Federal program, not just defer to them. Otherwise, Treasury risks not meeting Federal interests. Treasury also has an opportunity to deter those who might defraud the Government, and provide a strong remedy where fraud does seep in. For example, to prevent homebuyers from lying in their TARP fund applications – or to have a powerful tool to later catch them – Treasury should require homebuyers to certify (under penalty of law) the information they submit is true. To ensure effective TARP oversight, SIGTARP recommends Treasury create one consistent Federal certification for any HHF program to obtain Federal TARP funds, rather than relying on certifications that exist for other reasons and programs. To avoid waste and abuse, Treasury should also guarantee TARP funds be returned to Treasury if a homebuyer participating in this program sells the home during the program’s scheduled number of years (five years in Florida). These are Treasury’s TARP funds, not the states’. But if Treasury has no information on which homeowners and homes are involved, Treasury cannot guarantee it is protecting those TARP dollars. Treasury should not rely on state housing finance agencies to protect Treasury’s right to have TARP funds returned to Treasury. To ensure Treasury provides effective HHF oversight, SIGTARP recommended: 1. Treasury should identify improper payment risks, and fraud, waste, and abuse risks, related to Hardest Hit Fund down payment assistance and should design an effective Treasury oversight plan with program requirements and guidelines, in addition to compliance efforts to mitigate those risks. In addition to the potential benefits of these programs that Treasury already analyzed, Treasury should analyze the risks associated with down payment assistance programs. 2. To reduce the likelihood of improper payments to ineligible homeowners and to deter fraud, waste, and abuse in TARP, Treasury should require that state housing finance agencies include in any homebuyer application for any Hardest Hit Fund down payment assistance program SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 3. 4. 5. 6. a certification to be signed by the homebuyer relating to income, firsttime homebuyer status, primary residence status, and any other material requirements for program participation. The certification should specify that any false or fictitious statements concerning such requirements would be the basis for civil penalties and assessments under the False Claims Act, 31 U.S.C. §§ 3729-3733, the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812, and/or criminal penalties under 18 U.S.C. § 1001 or other Federal law. SIGTARP recommends the following certification be included in the application form: I acknowledge that knowingly failing to disclose material information to the [name of state housing finance agency], or making or causing to be made a false, fictitious, or fraudulent statement or representation of material fact in an application for use in determining eligibility for a payment under the U.S. Department of Treasury’s Hardest Hit Fund’s [name of down payment assistance program], constitutes a crime punishable under Federal law. I, therefore, certify, under penalty of perjury that all the information I have given on this form, and in any accompanying statements, is complete, true, and correct and I acknowledge that any material omission or false, fictitious, or fraudulent statement or representation or entry could be the basis for civil penalties and assessments under the False Claims Act, 31 U.S.C. §§ 3729-3733, the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812, and/or criminal penalties under 18 U.S.C. § 1001 or other Federal law. To reduce the risk of fraud, waste and abuse, and to facilitate effective oversight, Treasury should require state housing finance agencies to report quarterly to Treasury the names and addresses of all homebuyers participating in any Hardest Hit Fund funded down payment assistance program. To reduce the risk of waste and abuse, to facilitate effective oversight, and to protect Treasury’s right to the return of TARP funds where a homebuyer participating in any Hardest Hit Fund funded down payment assistance program sells the home prior to the expiration of the lien, Treasury should require that state housing finance agencies develop an effective process to check a homebuyer’s continued primary residency in the home prior to releasing the lien. Treasury should conduct effective oversight of that process including providing guidelines for that process in addition to conducting oversight through compliance. To prevent fraud, waste, and abuse particularly through commingling and improper reporting, Treasury should require the participating state housing finance agencies to maintain down payment assistance funds and reporting under Hardest Hit Fund separate from other state down payment assistance programs, both at the state level and at the local city or county level. To prevent homeowners and homebuyers from becoming victims of fraud, and to arm the public with complete and accurate information, 61 62 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 7. 8. 9. 10. Treasury should sponsor outreach events in each county participating in the Hardest Hit Fund down payment assistance and conduct a media outreach campaign, consisting of, among other things, television, out-ofhome (such as billboards and bus and shuttle stop advertisements), radio and print. To ensure that any TARP Hardest Hit Fund down payment assistance successfully prevents foreclosures as required by EESA, at the start of the program, Treasury should set target outcomes quantifying expected results from this use of these TARP funds. Treasury can consult with each participating state housing finance agency to set realistic target outcomes, but should not defer to state housing finance agencies to define success. Treasury should share its target outcome with each participating state housing finance agencies. To ensure that any TARP Hardest Hit Fund down payment assistance successfully prevents foreclosures as required by EESA, at the start of the program Treasury should require participating state housing finance agencies to develop performance indicators that measure progress towards Treasury’s quantified target outcomes. Treasury should use its expertise and resources to help the state housing finance agencies develop performance indicators. Treasury should require that state housing finance agencies participating in Hardest Hit Fund down payment assistance report, on a periodic basis no less than every six months, on performance indicators. Treasury should use that reporting to monitor which cites/counties and states are on track to achieve Treasury’s target outcomes. Treasury should monitor this information and use it to determine whether to continue the TARP assistance past the pilot stage, whether to expand the assistance to other cites/counties or states, and to identify ways to improve the effectiveness of HHF down payment assistance. Treasury should ensure that state housing finance agencies participating in the Hardest Hit Fund down payment assistance have the resources, staffing, training, and knowledge, and that they are ready for and can effectively handle the expected number of homebuyer applications and other required work. Treasury responded to SIGTARP’s recommendations concerning HHF's downpayment assistance programs, agreeing to implement some, while rejecting others. First, Treasury explained, “Five of the recommendations (numbers 1,2,4,5, and 10) are either in the process of being implemented in the Florida Program or reflect standard practice for all HHF programs.” SIGTARP will continue to work with Treasury to monitor whether Treasury fully implements them as SIGTARP recommended. Second, Treasury “does not plan to implement the remaining recommendations.” Instead, Treasury is losing the opportunity SIGTARP presented SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 to ensure Treasury’s HHF down payment assistance program has effective oversight – before it has even started. Why does Treasury not want to reduce the risk of fraud, waste, and abuse, and promote effective oversight by requiring state housing finance agencies to report quarterly to Treasury the names and addresses of all homebuyers participating in any Hardest Hit Fund funded down payment assistance program? Why would Treasury not want to use that information to protect the Federal funds it invests in this HHF program? Why is Treasury willing to waste those funds if the homebuyer sells the house before the program’s term ends? Why is Treasury unwilling to prevent homeowners and homebuyers from becoming victims of fraud by arming them with complete and accurate information through Treasury-sponsored outreach events and a media outreach campaign? Why does Treasury not want to inform and educate homeowners about this Treasury initiative? Why does Treasury not want to ensure that any TARP Hardest Hit Fund down payment assistance successfully prevents foreclosures - as required by EESA - at the start of this new program? Why is Treasury choosing to not set target outcomes quantifying expected results from this use of these TARP funds? Why is Treasury unwilling to require participating state housing finance agencies to develop and report on performance indicators to monitor and measure progress towards Treasury’s quantified target outcomes? Why is Treasury reluctant to collect and use that information to determine whether to continue this TARP assistance past the pilot stage, or whether to expand the assistance to other cities, counties, or states? Why is Treasury resistant to identifying ways to make the HHF down payment assistance program more effective? Why is Treasury rejecting the chance to provide the “effective oversight” promised for HHF? Why is Treasury choosing, instead, to expose its new HHF down payment assistance program - and homebuyers - to fraud, waste, and abuse? Treasury can still make a difference – if it implements all of SIGTARP’s recommendations concerning the new HHF down payment assistance program, as SIGTARP recommended. 63 * * * * * * * 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 64 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 JULY 29, 2015 65 * * * * * * 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 66 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 JULY 29, 2015 67 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 68 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 JULY 29, 2015 69 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 70 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 JULY 29, 2015 71 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 72 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 JULY 29, 2015 73 * * * 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 74 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 JULY 29, 2015 75 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 76 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 JULY 29, 2015 77 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 78 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 JULY 29, 2015 79 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 80 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 JULY 29, 2015 81 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 82 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 JULY 29, 2015 83 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 84 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 JULY 29, 2015 85 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 86 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 JULY 29, 2015 87 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 88 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 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 JULY 29, 2015 89 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 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. Comments 90 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 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. Comments SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 91 In order to increase HAMP’s effectiveness at reaching all HAMP-eligible homeowners, Treasury should hold in-person homeowner outreach events in all major cities and high foreclosure cities within the 10 HAMP-underserved states of Alaska, Arkansas, Indiana, Iowa, Kansas, Michigan, North Dakota, Oklahoma, Tennessee, and Texas. Treasury should ensure that there are sufficient HUD-approved counselors who can help the number of homeowners who attend these events with HAMP applications. Treasury should hold additional and sustained public service campaign, and TARP-paid television and radio advertisements in all major cities and high foreclosure cities within the 10 HAMP-underserved states of Alaska, Arkansas, Indiana, Iowa, Kansas, Michigan, North Dakota, Oklahoma, Tennessee, and Texas, as soon as possible to ensure that homeowners have accurate and complete information about the program and to prevent homeowners from becoming victims of fraud schemes. Treasury should identify improper payment risks, and fraud, waste, and abuse risks, related to Hardest Hit Fund down payment assistance and should design an effective Treasury oversight plan with program requirements and guidelines, in addition to compliance efforts to mitigate those risks. In addition to the potential benefits of these programs that Treasury already analyzed, Treasury should analyze the risks associated with down payment assistance programs. 165 166 167 Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. 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) 164 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process 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. Treasury has not agreed to implement this important recommendation. Comments 92 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM To reduce the risk of fraud, waste and abuse, and to facilitate effective oversight, Treasury should require state housing finance agencies to report quarterly to Treasury the names and addresses of all homebuyers participating in any Hardest Hit Fund funded down payment assistance program. 169 Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. To reduce the likelihood of improper payments to ineligible homeowners and to deter fraud, waste, and abuse in TARP, Treasury should require that state housing finance agencies include in any homebuyer application for any Hardest Hit Fund down payment assistance program a certification to be signed by the homebuyer relating to income, first-time homebuyer status, primary residence status, and any other material requirements for program participation. The certification should specify that any false or fictitious statements concerning such requirements would be the basis for civil penalties and assessments under the False Claims Act, 31 U.S.C. §§ 3729-3733, the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812, and/or criminal penalties under 18 U.S.C. § 1001 or other Federal law. SIGTARP recommends the following certification be included in the application form: I acknowledge that knowingly failing to disclose material information to the [name of state housing finance agency], or making or causing to be made a false, fictitious, or fraudulent statement or representation of material fact in an application for use in determining eligibility for a payment under the U.S. Department of Treasury’s Hardest Hit Fund’s [name of down payment assistance program], constitutes a crime punishable under Federal law. I, therefore, certify, under penalty of perjury that all the information I have given on this form, and in any accompanying statements, is complete, true, and correct and I acknowledge that any material omission or false, fictitious, or fraudulent statement or representation or entry could be the basis for civil penalties and assessments under the False Claims Act, 31 U.S.C. §§ 3729-3733, the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812, and/or criminal penalties under 18 U.S.C. § 1001 or other Federal law. (CONTINUED) 168 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X Not Implemented TBD/NA Continued on next page See discussion in Section 2. See discussion in Section 2. Comments SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 93 To prevent fraud, waste and abuse particularly through commingling and improper reporting, Treasury should require the participating state housing finance agencies to maintain down payment assistance funds and reporting under Hardest Hit Fund separate from other state down payment assistance programs, both at the state level and at the local city or county level. To prevent homeowners and homebuyers from becoming victims of fraud, and to arm the public with complete and accurate information, Treasury should sponsor outreach events in each county participating in the Hardest Hit Fund down payment assistance and conduct a media outreach campaign, consisting of, among other things, television, out-of-home (such as billboards and bus and shuttle stop advertisements), radio and print. To ensure that any TARP Hardest Hit Fund down payment assistance successfully prevents foreclosures as required by EESA, at the start of the program, Treasury should set target outcomes quantifying expected results from this use of these TARP funds. Treasury can consult with each participating state housing finance agency to set realistic target outcomes, but should not defer to state housing finance agencies to define success. Treasury should share its target outcome with each participating state housing finance agencies. To ensure that any TARP Hardest Hit Fund down payment assistance successfully prevents foreclosures as required by EESA, at the start of the program, Treasury should require participating state housing finance agencies to develop performance indicators that measure progress towards Treasury’s quantified target outcomes. Treasury should use its expertise and resources to help the state housing finance agencies develop performance indicators. 171 172 173 174 Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. To reduce the risk of waste and abuse, to facilitate effective oversight, and to protect Treasury’s right to the return of TARP funds where a homebuyer participating in any Hardest Hit Fund funded down payment assistance program sells the home prior to the expiration of the lien, Treasury should require that state housing finance agencies develop an effective process to check a homebuyer’s continued primary residency in the home prior to releasing the lien. Treasury should conduct effective oversight of that process including providing guidelines for that process in addition to conducting oversight through compliance. (CONTINUED) 170 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 94 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Treasury should ensure that state housing finance agencies participating in the Hardest Hit Fund down payment assistance have the resources, staffing, training, and knowledge, and that they are ready for and can effectively handle the expected number of homebuyer applications and other required work. 176 Implemented Partially Implemented Note: * Indicates that Treasury considers the recommendation closed and will take no further action. Treasury should require that state housing finance agencies participating in Hardest Hit Fund down payment assistance report, on a periodic basis no less than every six months, on performance indicators. Treasury should use that reporting to monitor which cites/counties and states are on track to achieve Treasury’s target outcomes. Treasury should monitor this information and use it to determine whether to continue the TARP assistance past the pilot stage, whether to expand the assistance to other cites/counties or states, and to identify ways to improve the effectiveness of HHF down payment assistance. (CONTINUED) 175 Recommendation SIGTARP RECOMMENDATIONS TABLE In Process X X Not Implemented TBD/NA See discussion in Section 2. See discussion in Section 2. Comments SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 95 96 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SECT IO N 3 MORTGAGE SERVICERS HAVE DENIED FOUR MILLION HOMEOWNER APPLICATIONS FOR HAMP ASSISTANCE 98 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 ONLY 30% OF HOMEOWNERS WHO APPLIED FOR HAMP GOT IN, 70% WERE TURNED DOWN BY THEIR SERVICER At the start of TARP, our nation was in a foreclosure crisis. More than two million homeowners had foreclosures commenced against them in 2008.1 TARP is not supposed to be just a bailout of the largest financial firms, but was always supposed to include a bailout of homeowners at risk of foreclosure. Congress rejected Treasury’s initial proposal that TARP just be a bailout of some of the largest financial firms. Instead, in recognition of the foreclosure crisis, Congress made foreclosure mitigation an express part of the law authorizing TARP. Among other things, preserving homeownership is an explicit purpose of that law, and “the need to help families keep their homes” is one of the considerations that the Secretary of Treasury is required by law to consider in exercising his authorities under TARP.2 As SIGTARP reported in its March 25, 2010, audit report,i a working group of officials from Treasury, the Department of Housing and Urban Development, and the White House developed the outlines of a mortgage modification program that was intended to “have a scale that can have a real impact on turning the housing problems around in this country.” In February 2009, the Administration announced its signature TARP housing program known as the Home Affordable Modification Program (“HAMP”) to “enable as many as 3 to 4 million at-risk homeowners to modify the terms of their mortgage to avoid foreclosure.”3 Treasury designed HAMP to encourage mortgage servicers, on a voluntary basis, to modify eligible mortgages so that the monthly payments of homeowners who are in default or at imminent risk of default will be reduced to affordable, sustainable levels. To encourage participation, Treasury pays incentives using TARP funds. HAMP was initially a $75 billion program: $50 billion to be funded by TARP funds for Treasury’s part of HAMP (to modify mortgages not owned by the Government–sponsored enterprises Fannie Mae and Freddie Mac), plus $25 billion for GSE-owned mortgages.4 Although this allocation was reduced to $29.8, approximately $18.5 billion in TARP funds remains unspent and available for HAMP as of June 30, 2015.5 Although participation in HAMP is voluntary, servicers who agree to participate are required to offer HAMP modifications to all eligible homeowners. The actual execution of HAMP lies in large part with participating mortgage servicers, whose employees are responsible for reviewing homeowner HAMP applications and deciding whether a homeowner gets into HAMP or not. A servicer must follow the HAMP rules in making its decision, and Treasury has an oversight responsibility to ensure that servicers follow Treasury’s HAMP rules.ii i SIGTARP, “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. ii TARP funds are used to pay incentives for non-GSE, HAMP permanent modifications. The GSEs pay for GSE-HAMP modifications. Treasury has oversight over the TARP funded portion of HAMP; the GSEs have oversight over the GSE funded portion of HAMP. 99 100 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HAMP has struggled to get the number of homeowners envisioned by Treasury into the program. Most HAMP-eligible homeowners needed HAMP assistance when the nation was gripped by the foreclosure crisis. There were more than 2.8 million homeowners who had foreclosures commenced against them in 2009, and nearly 2.9 million in 2010.6 Those homeowners who were able to get into the HAMP program, and then get through the trial period to receive a permanent modification of their mortgage, saw their monthly mortgage payments decrease. Homeowners originally had until December 2012 to apply for HAMP but, with very low numbers of homeowners in HAMP, in March 2012, Treasury extended that application deadline by a year.7 Treasury has extended the HAMP application deadline two additional times.8 The low homeowner participation numbers, compared to the 3 to 4 million homeowners Treasury expected to help in HAMP, have never been explained by Treasury, but raise initial questions such as: • Is homeowner participation in HAMP low because not enough homeowners applied for HAMP? • Did Treasury set the HAMP eligibility requirements too strictly to make a difference in helping most of the homeowners at risk of foreclosure? • Have mortgage servicers participating in HAMP wrongfully denied homeowners who should have gotten into the program? According to Treasury’s official HAMP database, nearly 5.7 million homeowners applied for HAMP (both the GSE version and TARP version) since December 1, 2009, when Treasury began requiring servicers to report on the outcomes of all HAMP application decisions.iii Overall, therefore, the problem does not appear to be that not enough homeowners are applying for HAMP,iv but that not enough homeowners are getting into HAMP. Treasury has reported extensively about the homeowners who received help from HAMP, but very little about homeowners who applied for HAMP and were turned down. According to Treasury’s official HAMP database, of the 5.7 million homeowners who applied for HAMP between December 2009 and April 2015, servicers turned down 4 million.v That means that, according to Treasury’s HAMP database, servicers turned down more than 7 out of every 10 homeowners (72%) who applied for HAMP.9 The problem may be far worse than that. In a separate survey, participating servicers report that they have denied far more than 4 million homeowners for HAMP. In those surveys, HAMP servicers report denying 5.8 million homeowners for the HAMP program, an additional 1.8 million not captured in the HAMP database during the height of the foreclosure crisis. Treasury has stated that they iii Unless otherwise noted, this report is limited to HAMP application outcomes (including for HAMP Tier 1, HAMP Tier 2, Treasury/FHA HAMP, and RD HAMP) since December 1, 2009, as Treasury did not require servicers to report on application denials or trial fallouts prior to that date. iv As SIGTARP noted in its April 2015 Quarterly Report to Congress, the aggregate number of homeowners who have applied for HAMP nationwide masks significant differences in application rates across states and regions, and homeowners in the states most underserved by HAMP have applied for HAMP at lower rates than homeowners in other states. See SIGTARP, Quarterly Report to Congress, 4/29/2015, www.sigtarp.gov/Quarterly%20Reports/April_29_2015_Quarterly_Report_to_Congress.pdf. v Approximately 12,000 additional homeowner applications were voluntarily reported by servicers prior to December 1, 2009. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 do not validate the survey results.vi,10 As noted, Treasury did not require servicers to report their denials of homeowner applications into this official HAMP database until December 1, 2009—approximately 7 months after HAMP started. In this report, using data from the official HAMP database, SIGTARP details why servicers rejected so many people for HAMP—or, more accurately, what reason servicers gave Treasury for rejecting so many people for HAMP—and how these reasons raise concerns given known misconduct and errors by servicers. Additionally, SIGTARP reports on which of the largest mortgage servicers denied the highest number of homeowners for HAMP and which denied the largest percentage of homeowners applying for HAMP. SIGTARP also reports on how homeowners applying for HAMP fared state-by-state. Detailed knowledge about homeowners who were not successful in getting the affordable mortgage assistance they sought from HAMP is essential to Treasury’s oversight. It is Treasury’s responsibility to ensure that HAMP servicers are complying with HAMP’s rules and not wrongfully denying homeowners for HAMP. It is also Treasury’s responsibility to ensure that the rules it has created for HAMP are the correct ones. SIGTARP found that the denial codes from which Treasury requires servicers to choose do not give a clear picture of why homeowners were denied. This is an area that Treasury should assess further given the 18 months that homeowners have left to apply for HAMP. Midway through the program, Treasury “course corrected” HAMP when faced with high numbers of homeowners falling out of HAMP trial modifications. It is time for Treasury to do a similar course correct for homeowners who have been denied entry into the program altogether, particularly where servicer misconduct contributed to the outcome. HOMEOWNERS HAVE HAD A HARD TIME GETTING INTO HAMP More Than 7 Out of 10 Homeowners Were Turned Down for HAMP As of December 1, 2009, Treasury began requiring servicers to report information on homeowners who submitted a HAMP application but were denied participation in the program.11 Since that time, according to Treasury’s official HAMP database, approximately 1.7 million homeowners were approved to start HAMP trial modifications, while nearly 4 million homeowners were denied HAMP assistance— that is, more than 70% of all HAMP applications servicers processed during that period were denied.vii,12 Figure 3.1 shows the aggregate number and percent of homeowners whose HAMP applications were denied by year. vi Treasury has told SIGTARP that the survey results report homeowner “applications,” and may also reflect inconsistencies and inaccuracies in how the various servicers have reported that activity. vii Treasury’s official HAMP database only includes information on applications that have received a decision (trial offer or denial letter) from their servicer; applications in process are not included. Figures exclude 710,742 trial modifications started prior to December 1, 2009, since the absence from Treasury’s data of corresponding application denial information for that period prevents meaningful analysis of that period. 101 102 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 3.1 HOMEOWNERS WHOSE HAMP APPLICATIONS WERE DENIED, BY YEAR, AS OF APRIL 2015 5,000,000 82% 4,000,000 72% 69% 67% 67% 3,000,000 63% 2,000,000 1,000,000 0 1,201,713 2,046,047 3,044,890 3,568,223 3,902,803 4,002,885 2010 2011 2012 2013 2014 2015* Cumulative Homeowners Denied Percent of Homeowners Denied by Year *Denials for 2015 include all denials reflected in Treasury’s HAMP database through April 2015. This includes 1,632 denials dated after April 2015 (one denial dated as of March 2016 was excluded from this analysis). Sources: Treasury, “HAMP 1MP: Trial Fallout and Denials - Vintage & Reason”, April 2015, accessed 6/5/2015; Treasury HAMP data. As shown in Figure 3.1, HAMP servicers denied 1.2 million homeowners’ HAMP applications through the end of 2010, the first full year Treasury required servicers to report this data. By comparison, there were 2.9 million foreclosure filings that year.13 By the end of 2011, the number of homeowners to whom servicers denied HAMP assistance had nearly doubled, to over 2 million. Nearly 1 million additional homeowners were denied participation in the program in 2012. Through April 2015, more than 4 million homeowners saw their HAMP applications denied—roughly three out of four homeowners who applied. As shown in Figure 3.1, the rate at which servicers have denied homeowners’ HAMP applications has remained high throughout the life of the program. Getting into the HAMP program does not guarantee a homeowner relief, but it’s a start. Of the 1.7 million homeowners who started HAMP trial modifications since the program began tracking the outcomes of all applications, 384,530 (23%) fell out of the program during the trial period.14 Of the 1,257,259 homeowners who made it past the trial period and into a permanent HAMP mortgage modification, 333,977 (27%) subsequently fell out of the program (which Treasury refers to as a redefault).15 Figure 3.2 shows how many of the homeowners who applied were offered HAMP trials, how many of those that were offered HAMP trials ended up in permanent HAMP modifications, and how many of those that obtained permanent HAMP modifications remain active in HAMP. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 FIGURE 3.2 HAMP APPLICATION OUTCOME SUMMARY, AS OF APRIL 2015 5,696,803 Homeowners Applied for HAMP 1,693,923 Homeowners Were Offered HAMP Trial Modifications 1,257,259 Homeowners Obtained HAMP Permanent Modifications 888,358 Homeowners Remain in HAMP Application Denials (4,002,886 homeowners) Fell out during trial period (384,530 homeowners) Redefaulted and fell out of HAMP (333,977) Sources: Treasury, “HAMP 1MP: Trial Fallout and Denials - Vintage & Reason,” April 2015, accessed 6/5/2015; Treasury HAMP data. 103 104 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HOMEOWNERS LIVING IN THE MIDDLE OF THE UNITED STATES, INCLUDING THE GREAT PLAINS, HAD THE HARDEST TIME GETTING INTO HAMP Treasury’s official HAMP database shows that homeowners living in states in the middle of the United States were denied the chance to get into the HAMP program at higher rates than homeowners in other states. Figure 3.3 shows HAMP application denial rates by state. FIGURE 3.3 APPLICATIONS DENIED AS A PERCENTAGE OF APPLICATIONS RECEIVED, AS OF APRIL 2015 72% 73% 74% 81% 69% 72% 73% 74% 75% 68% 68% 68% 72% 76% 75% 68% 68% 73% 75% 77% 72% 74% 74% 73% 73% 71% 67% 65% 70% 70% 68% 77% 75% 70% 66% 73% 71% 71% 76% 74% 73% 75% 70% 72% 78% 70% 74% 68% 75% 70% 71% 75% Plus Applications Denied 70–74% Applications Denied 65–69% Applications Denied Sources: Treasury, “HAMP 1MP: Trial Fallout and Denials - Trial Denials by State,” April 2015, accessed 6/5/2015; Treasury HAMP data. Homeowners in North Dakota saw servicers deny 81% of all applications for HAMP—the highest application denial rate of any state. Eleven other states had homeowners denied at rates of 75% or more—South Dakota (78%), West Virginia (77%), Oklahoma (77%), Iowa (76%), Arkansas (76%), Wyoming (75%), Nebraska (75%), Kansas (75%), Louisiana (75%), Kentucky (75%), and Texas (75%). In fact, homeowners in every state faced a hard time getting into HAMP. No state had low HAMP denial rates for their homeowners. Rhode Island had the lowest HAMP application denial rate but, still, 65% of all Rhode Island homeowners who applied for HAMP were denied. Table 3.1 shows the HAMP applications received, outcomes, and denial rates by state: SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 TABLE 3.1 HAMP APPLICATION VOLUME, OUTCOMES, AND DENIAL RATES BY STATE, AS OF APRIL 2015 State Alabama Alaska Arizona Applications Received Applications Denied Trials Started Denial Rate 51,803 38,321 13,482 74% 3,240 2,391 849 74% 172,103 117,534 54,569 68% Arkansas 21,911 16,708 5,203 76% California 1,106,642 757,296 349,346 68% Colorado 82,351 59,928 22,423 73% Connecticut 79,125 55,119 24,006 70% Delaware 19,276 13,145 6,131 68% District of Columbia 10,966 7,974 2,992 73% Florida 673,382 471,178 202,204 70% Georgia 219,318 149,963 69,355 68% Hawaii 20,516 14,578 5,938 71% Idaho 22,660 16,539 6,121 73% Illinois 280,507 191,774 88,733 68% Indiana 81,013 60,115 20,898 74% Iowa 22,260 17,005 5,255 76% Kansas 21,237 15,965 5,272 75% Kentucky 33,056 24,675 8,381 75% Louisiana 51,982 38,925 13,057 75% Maine 17,607 12,498 5,109 71% Maryland 165,185 109,465 55,720 66% Massachusetts 115,318 77,152 38,166 67% Michigan 181,705 133,888 47,817 74% Minnesota 75,415 52,379 23,036 69% Mississippi 29,660 21,508 8,152 73% Missouri 74,439 54,180 20,259 73% Montana 7,202 5,261 1,941 73% Nebraska Nevada New Hampshire New Jersey New Mexico 11,917 8,975 2,942 75% 109,447 74,532 34,915 68% 23,390 16,302 7,088 70% 206,920 144,976 61,944 70% 22,890 16,410 6,480 72% New York 304,696 212,895 91,801 70% North Carolina 130,402 92,203 38,199 71% 1,634 1,318 316 81% North Dakota Continued on next page 105 106 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HAMP APPLICATION VOLUME, OUTCOMES, AND DENIAL RATES BY STATE, AS OF APRIL 2015 (CONTINUED) Applications Received Applications Denied Trials Started Denial Rate 154,428 113,160 41,268 73% Oklahoma 26,938 20,736 6,202 77% Oregon 65,359 47,152 18,207 72% Pennsylvania 163,897 118,211 45,686 72% Rhode Island 22,635 14,607 8,028 65% South Carolina 72,480 53,624 18,856 74% State Ohio South Dakota 3,193 2,480 713 78% 79,742 56,736 23,006 71% Texas 273,517 204,074 69,443 75% Utah 43,939 30,062 13,877 68% Tennessee Vermont 5,936 4,410 1,526 74% Virginia 126,838 88,234 38,604 70% Washington 123,723 88,779 34,944 72% West Virginia 11,064 8,520 2,544 77% Wisconsin 60,533 43,343 17,190 72% Wyoming Total 3,536 2,668 868 75% 5,696,808 4,002,886 1,693,923 70% Note: Totals include applications received from Puerto Rico, Guam, and the Virgin Islands, as well as 27 applications for which Treasury’s data is incomplete. Sources: Treasury, “HAMP 1MP: Trial Fallout and Denials - Trial Denials by State,” April 2015, accessed 6/5/2015; Treasury HAMP data. JP MORGAN CHASE AND BANK OF AMERICA, HISTORICALLY THE TWO LARGEST HAMP SERVICERS, AND CITI EACH TURNED DOWN 80% OR MORE OF HOMEOWNERS WHO APPLIED FOR HAMP; OCWEN, THE CURRENT LARGEST HAMP SERVICER, TURNED DOWN MORE THAN 70% OF HOMEOWNERS WHO APPLIED FOR HAMP Effective December 1, 2009, Treasury made the decision to require that HAMP servicers report to Treasury’s official HAMP database on every person denied for HAMP and the reason why the servicer denied the homeowner admittance into the program. Under HAMP, a homeowner’s mortgage servicer reviews the homeowner’s application and supporting documents and determines whether the person gets SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 into HAMP or not. Requiring reporting on HAMP application denials is one way that Treasury gathers information to conduct oversight over HAMP servicers. Based on Treasury’s data through April 30, 2015, CitiMortgage, Inc. (“Citi”) has denied 340,439 out of 391,418 (87%) applications it received, roughly 9 out of every 10 homeowners that applied.16 Through 2012, the mortgage servicers that had the highest numbers of HAMP participating homeowners were JPMorgan Chase and Bank of America. Overall, JP Morgan Chase has denied 84% of homeowners who applied for HAMP through April 30, 2015, denying almost a million homeowners (952,413). Only 16% of homeowners who applied through JPMorgan Chase got into HAMP trial modifications. Bank of America denied 80% of homeowners who applied for HAMP, denying 685,364 homeowners. Only 20% of homeowners who applied through Bank of America got into HAMP trial modifications.17 Beginning in 2013, Ocwen became the largest HAMP servicer.18 Ocwen has denied 70% of all homeowners applying for HAMP, denying 748,414 homeowners and approving fewer than one-third of homeowners who applied.19 Figure 3.4 shows the number of homeowners who were denied a HAMP trial modification, and the number who actually started a HAMP trial, by the seven top HAMP servicers Treasury currently reports on in its quarterly MHA Program Performance Report. FIGURE 3.4 HOMEOWNERS DENIED A HAMP TRIAL VS. HOMEOWNERS WHO STARTED A HAMP TRIAL, BY SERVICER, AS OF APRIL 2015 1,200,000 186,234 318,261 1,000,000 425,060 175,310 800,000 274,966 600,000 400,000 50,979 169,087 200,000 94,026 0 340,439 952,413 685,364 748,414 404,248 220,461 91,724 559,823 CITIMORTGAGE INC. (87% DENIAL RATE) JPMORGAN CHASE BANK, N.A. (84% DENIAL RATE) BANK OF AMERICA, N.A. (80% DENIAL RATE) OCWEN LOAN SERVICING, LLC (70% DENIAL RATE) WELLS FARGO BANK, N.A. (60% DENIAL RATE) NATIONSTAR MORTGAGE LLC (57% DENIAL RATE) SELECT PORTFOLIO SERVICING, INC. (49% DENIAL RATE) OTHER SERVICERS (57% DENIAL RATE) Homeowners Turned Down for HAMP Homeowners Starting a HAMP Trial Modification Sources: Data for the large non-GSE servicers Treasury currently reports in its quarterly servicer assessments. Treasury, “HAMP 1MP: Trial Fallout and Denials - Servicer, Vintage & Reason,” April 2015, accessed 6/5/2015; Treasury HAMP data. 107 108 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM As high as the 4 million homeowners denied for HAMP is, that number may substantially understate the actual number of homeowners whose HAMP applications were turned down for HAMP. Although the official HAMP database shows nearly 4 million homeowners denied for HAMP by servicers, Treasury’s “HAMP Application Activity by Servicer” report, as of April 2015, shows that those HAMP servicers surveyed by Treasury separately report having denied almost 5.8 million applications—or approximately 1.8 million more homeowner denials than Treasury’s official HAMP database.20 Some of this difference may reflect homeowners who were denied by servicers in the several months in 2009 before they were required to report denials to Treasury.viii According to Treasury’s April 2015 survey, Citi reported denying a total of 388,127 homeowners (47,688 more than reflected in Treasury’s official HAMP database), JP Morgan reported denying a total of 1,312,346 homeowners (359,933 more), Bank of America reported denying a total of 842,135 homeowners (156,771 more), and Ocwen reported denying a total of 979,348 homeowners (230,934 more).21 OVER THE LAST FOUR YEARS, TREASURY HAS FOUND PROBLEMS WITH THE SEVEN LARGEST HAMP SERVICERS’ HANDLING OF HOMEOWNERS’ HAMP APPLICATIONS AT VARIOUS STAGES— INCLUDING PROBLEMS AT FIVE OF THEM IN 2014 ALONE It is Treasury’s responsibility to ensure that mortgage servicers participating in HAMP treat homeowners fairly and do not wrongfully deny homeowners who should have gotten into the program. Treasury conducts oversight by enacting HAMP guidelines governing the HAMP approval process, and by having its compliance agent, a division of Freddie Mac, visit each of the largest servicers each quarter to spot check between 400 and 600 loan files to evaluate whether the servicers are following HAMP guidelines.22 Treasury is accountable to the American taxpayers who fund TARP for measuring HAMP’s success. After conducting an audit, in March 2010 SIGTARP issued a report recommending that Treasury unambiguously and prominently disclose its goals and estimates of how many homeowners will actually be helped through HAMP permanent modifications.ix Additionally, SIGTARP recommended at that time that, beyond measuring modifications, Treasury develop other performance metrics to measure the implementation and success of HAMP over time. For example, SIGTARP recommended that Treasury set and publicly report viii Treasury has told SIGTARP that the survey results report homeowner “applications,” and may also reflect inconsistencies and inaccuracies in how the various servicers have reported that activity. ix SIGTARP, “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. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 against 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 homeowners fall out of the program prior to permanent modification, and redefault rates.23 In April 2011, Treasury took action to implement parts of SIGTARP’s recommendation by announcing that it would start grading the 10 largest HAMP servicers on key performance metrics and would begin withholding financial incentives for servicers receiving an unsatisfactory grade. This would be the first public information about Treasury’s compliance review over HAMP servicers. Public embarrassment over poor servicer assessment results has led to servicer improvements, just as SIGTARP had envisioned in its 2010 recommendation. Treasury’s first public servicer assessments, published on June 9, 2011, showed alarming results, with 4 of the 10 largest HAMP servicers needing “substantial” improvement and the remaining six needing “moderate” improvement.24 Since Treasury’s first public servicer assessment was published in June 2011, Treasury has found problems with some of the largest HAMP servicers in a critical metric defined by Treasury as “second-look.” During the “second look” review, Treasury’s compliance agent reviews loans not in a permanent modification to assess the timeliness and accuracy of the servicer’s homeowner outreach and eligibility review in order to verify that the homeowner was properly considered, denied, or deemed ineligible for receiving a permanent modification. In that first June 2011 servicer assessment, 5 of the top 10 servicers (Bank of America, Citi, JP Morgan Chase, Ocwen, and One West Bank) ranked poorly in Treasury’s second look. Treasury has since continued to find second look problems, including that top HAMP servicers wrongfully denied homeowners who may have gotten into HAMP. Although there was some improvement in 2012, in two quarters in 2014 Treasury found second look problems at Ocwen, Wells Fargo, and Citi. In the second quarter of 2014, Treasury found in its second look that Citi needed “substantial” improvement, as Treasury disagreed with Citi’s denial determinations 15.2% of the time in its review.25 Treasury’s second look review also found problems recently in the fourth quarter of 2014 at Select Portfolio Servicing, and at Nationstar Mortgage, LLC in the first quarter of 2015.26 Treasury’s findings make clear that even after more than five years of HAMP, top HAMP servicers are still mistreating homeowners by not following HAMP rules designed to protect homeowners. Overall, Citi has had one of the worst records of non-compliance with Treasury’s HAMP application review guidance, failing to meet Treasury’s benchmarks in 9 out of 17 reviews, including 7 of the last 8. In its most recent evaluation of Citi, Treasury disagreed with 4.4% of Citi’s HAMP application denial determinations, tied for the highest among all servicers (with Nationstar Mortgage, LLC), and more than twice Treasury’s 2% benchmark. Citi is the only large active servicer that has ever been rated as needing “substantial improvement” with respect to denial determinations, and it has received the rating twice, once in 2013 and again in 2014.27 109 110 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM THE TOP REASONS SERVICERS REPORT FOR TURNING DOWN HOMEOWNERS FOR HAMP ATTRIBUTE DENIAL TO THE CONDUCT OF THE HOMEOWNER OR THE HOMEOWNER’S INCOME, DESPITE KNOWN PROBLEMS WITH SERVICER MISCONDUCT IN THESE AREAS RELATED TO HAMP HAMP’s program guidelines require that servicers report to Treasury the reason the servicer denied each homeowner for HAMP by selecting one of the Treasurydefined denial reasons set out in the HAMP guidelines.x,28 The top three reasons servicers report for denying homeowners’ HAMP applications attribute the denial to the fault of the homeowner or to the homeowner falling outside of eligibility standards. These include denials because: the homeowner’s application was “incomplete;” the homeowner withdrew the HAMP application or “failed to accept” an offered HAMP trial; or the homeowner’s income fell outside of HAMP eligibility.29 While these denials may be appropriate in particular cases, the fact that servicers have reported the same reasons so frequently—in light of known problems at the largest HAMP servicers—raises concerns over whether Treasury is doing enough to ensure that denials of homeowner HAMP applications are accurate and based on the actual conduct and status of the homeowners, rather than on the misconduct of the mortgage servicers. As reported by SIGTARP, by the Consumer Finance Protection Bureau, by Treasury in its reviews of the top HAMP servicers, and by homeowners who have filed complaints with Treasury, there are many problems with servicers themselves that can affect each of these three denial reasons. Persistent problems and errors in the application and income calculation process (servicers calculate a homeowner’s income) have historically plagued homeowners seeking HAMP assistance, and continue to do so. As a result, eligible homeowners may have been, and may continue to be, denied a chance to get into HAMP through no fault of their own. Table 3.2 shows the ten most common reasons given by HAMP servicers when they deny homeowners’ HAMP applications, as well as the definition of those reasons provided by Treasury in the HAMP guidelines. x Treasury has required HAMP servicers to report a denial reason for any loans denied HAMP after December 1, 2009 from a list of reasons laid out in Treasury guidelines. If more than one reason is applicable, servicer is required to use a hierarchy provided by Treasury to determine which code to report. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 TABLE 3.2 TOP 10 HAMP DENIAL REASONS OVER THE LIFE OF THE PROGRAM, AS OF APRIL 2015 Reason Definition Request Incomplete Homeowner requested a modification under the MHA program but did not provide the financial and/or hardship verification documentation required to complete the evaluation of their request in a timely manner. 1,017,730 25% Current DTI Less than 31% Under HAMP Tier 1, homeowner’s current monthly housing expense is less than or equal to 31% of their gross monthly income (i.e. monthly income before taxes and other deductions). 730,231 18% Offer Not Accepted by Borrower / Request Withdrawn Homeowner withdrew their modification request for consideration for either a Trial Period Plan or HAMP modification or did not accept either a Trial Period Plan or a HAMP modification offer. Failure of homeowner to make the first trial period payment in a timely manner is considered non-acceptance of the Trial Period Plan. 531,521 13% Ineligible Mortgage Loan does not meet basic program eligibility criteria, such as: mortgage origination on or before January 1, 2009; or outstanding mortgage balance within program limits. 322,694 8% 311,844 8% Default Not ImminentDefault Status Not Eligible • For HAMP Tier 1 or owner-occupied HAMP Tier 2: The subject loan is not delinquent and default is not reasonably foreseeable. • For rental property considered under HAMP Tier 2: The homeowner has not missed two or more mortgage payments. Associated Denials Percentage of Denials Reason Property Not Owner Occupied Loan is not eligible for modification under HAMP Tier 1 because the property secured by the mortgage loan is not occupied by the homeowner as their primary residence. 196,977 5% Excessive Forbearance Loan is not eligible for modification under HAMP Tier 1 because the principal forbearance required to achieve a payment of no more than 31% ofthe homeowner's monthly income requires forbearance exceeding program limits. 189,881 5% Post-Modification DTI Outside Acceptable Range Proposed modified monthly payment, which includes a modified monthly principal and interest payment on the first lien mortgage loan plus property taxes, hazard insurance premiums and homeowners dues (if any), is not within eligibility guidelines defined for HAMP Tier 2 in the MHA Handbook. 178,557 4% Investor Guarantor Not Participating At least one of the following parties has not granted authority for the servicer to modify the loan under HAMP: investor, guarantor, or private mortgage insurance company. 142,033 4% Negative NPV The result of the standardized Net Present Value (NPV) test is “negative”. This test compares expected cash flows with and with out HAMP, if expected future cash flows under HAMP are lower, the servicer is not required to modify the loan. 119,291 3% Other Includes HAMP applications denied for any of the following reasons: Insufficient Monthly Payment Reduction, Loan Paid off, Property and/or homeowner Exceeds Allowable Number of HAMP Modifications, Ineligible Rental Property, Application Discrepancy, No Change in Circumstance, Ineligible homeowner, Other Ineligible Property (i.e. Property Condemned, Property >4 units), Unemployment Forbearance Plan, Court/Public Official Declined, Dodd Frank Certification Non-Compliance, Federally Declared Disaster Area. 262,127 7% Total Applications Denied 4,002,886 Sources: Treasury, “HAMP 1MP: Trial Fallout and Denials - Servicer, Vintage & Reason,” April 2015, accessed 6/5/2015; Treasury HAMP data; Treasury, “Making Home Affordable Data File User Guide V 8.0,” February 2, 2015, www.treasury.gov/initiatives/financial-stability/reports/Documents/MHA%20Data%20File%20User%20Guide%20v8.0%20FINAL.PDF, accessed 6/12/2015. 111 112 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM As shown in Table 3.3, those top categories have consistently been the most commonly used over the life of HAMP. TABLE 3.3 TOP HAMP DENIAL REASONS BY YEAR, AS OF APRIL 2015 Total Denials Top Denial Reason Denials Percentage of Year's Denials 2009 20,088 Offer Not Accepted by Borrower/ Request Withdrawn 11,204 56% 2010 1,181,625 Current DTI Less than 31% 280,965 24% 2011 844,334 Request Incomplete 227,153 27% 2012 998,843 Request Incomplete 330,627 33% 2013 523,333 Request Incomplete 150,368 29% 2014 334,580 Offer Not Accepted by Borrower/ Request Withdrawn 80,057 24% 2015 100,082 Offer Not Accepted by Borrower/ Request Withdrawn 29,398 29% Overall 4,002,885 Request Incomplete 1,017,730 25% Vintage Note: Analysis excludes one denial dated March 2016. Sources: Treasury, “HAMP 1MP: Trial Fallout and Denials - Servicer, Vintage & Reason,” April 2015, accessed 6/5/2015; Treasury HAMP data. Given the high rate at which homeowners are denied HAMP overall, particularly for these three reasons that purport to be based on the conduct and status of the homeowner, Treasury must ensure that the application process is as fair and effective as possible, and that all eligible homeowners are given the chance to get into HAMP. “Incomplete” Homeowner HAMP Applications HAMP servicers have denied more than a million homeowners for HAMP, accounting for almost a quarter of all denials, claiming that the homeowner’s request was “incomplete.” Treasury’s definition of “incomplete” applications includes homeowners not providing all documentation in a timely manner. The HAMP application process is lengthy and complex, requiring no less than 4 separate application components, as well as a substantial number of other verification documents, and some homeowners may not turn in all required supporting documentation. Some homeowners may be confused about what to turn in, for example when income is seasonal, or job-by-job. Confused homeowners could benefit from additional help from servicers in completing the application, and from other free help that may be available. However, as SIGTARP has reported in the past, there is evidence that sometimes an “incomplete” application is not always the fault of the homeowner, but that of the servicer. For example, homeowners have reported to SIGTARP that their servicers required them to resubmit application documents multiple times, extending the time it takes to review and decide on the HAMP application, which SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 can be frustrating and confusing to homeowners who believe they have turned in their full package and are awaiting a decision. SIGTARP has reported on lengthy backlogs up to or even more than one year for some HAMP servicers. Sometimes the homeowner turns in all required documentation, but the servicer loses it. SIGTARP has repeatedly reported on problems with servicers losing homeowner documents in HAMP, and has received complaints from homeowners that it shared with Treasury. SIGTARP has also reported on problems with paperwork being delayed or lost when a servicer transfers the mortgage while the HAMP application is pending. In one of the most egregious examples of a servicer losing HAMP supporting documentation, SIGTARP conducted a criminal investigation that resulted in a July 2014 pubic non-prosecution agreement with the Department of Justice after SIGTARP found that SunTrust Mortgage had no effective document management system in place to process and retain borrowers’ documentation and, as a result, routinely lost HAMP application paperwork. SIGTARP found that SunTrust employees piled so many unopened Federal Express packages from homeowners containing their HAMP supporting documents into one room that eventually the floor buckled. SIGTARP also found that SunTrust mass denied homeowners from HAMP without reviewing their applications at all. Similarly, as detailed in a December 2013 settlement, the Consumer Finance Protection Bureau found that Ocwen, the largest HAMP servicer, provided false and misleading information to homeowners about the status of their loss modification review, failed to account for documentation submitted by homeowners seeking modifications, failed to respond to homeowner requests for loan modification information and assistance, and failed to honor modifications in process of loans obtained from other servicers. The Ocwen and SunTrust cases alone raise concerns about how many of the 1 million homeowners denied HAMP for this reason may not have been at fault for not turning in their supporting documentation for their HAMP application, and prove that the servicer itself can be at fault. Treasury has an opportunity to require servicers to provide more clarity on this denial reason. For example, Treasury could ask whether the homeowner turned in all documents, or whether the documents submitted by the homeowner were not accepted by the servicer. Those are two very different situations, yet under Treasury’s defined denial reasons they are treated the same. Withdrawn HAMP Applications and Homeowners “Failing to Accept” Trial Modifications Another of the top reasons servicers report to Treasury for turning down homeowners seeking to get into HAMP is “Offer Not Accepted by Homeowner/ Request Withdrawn.” Servicers reported to Treasury denying 531,521 homeowners’ HAMP applications for this reason—about 18% of all homeowners denied. This Treasury-defined denial reason is confusing because it comprises two distinct situations: one in which the homeowner withdraws a HAMP application, and one 113 114 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM in which the homeowner actually qualifies for HAMP and is offered a chance to start a trial modification but, for some reason, fails to accept the offer. Failing to make the first monthly payment also falls into this denial reason. It is not possible to distinguish from the official HAMP database which homeowners withdrew their HAMP applications, compared to which homeowners “failed to accept” a trial offer. Given the time and effort it takes homeowners to get through the lengthy and complicated HAMP application process, the large number of homeowners reported as having declined an offered HAMP trial raises questions as to the circumstances in which a homeowner would do so. Some 94 percent of all homeowners in HAMP received a decrease in their interest rate, dropping their monthly mortgage payment.30 If the homeowner cannot afford the modified payment, they certainly cannot afford the original mortgage payment. On its face, this Treasury-defined reason for a servicer to deny a homeowner for HAMP appears to be solely based on homeowner conduct, not servicer conduct. However, even here servicer misconduct may play a role. For example, SIGTARP has reported on servicers that have lengthy delays in reviewing and making a decision on HAMP applications—backlogs inconsistent with HAMP guidelines that it should generally take servicers between 1-2 months to process completed HAMP applications, depending of the timeliness and quality of the documentation submitted by homeowners.31 For example, as of April 2015, Citi had 25,936 outstanding unprocessed applications, but only processed 1,801 applications during that month—a rate at which it would take the servicer 14 months to process the applications it has already received, not counting new applications it continues to receive.32 Bank of America and Select Portfolio Services, LLC (another large HAMP servicer) also had significant application backlogs of 5 months each.33 Some homeowners may not have the luxury of time to wait months or even years for a decision, and may withdraw their HAMP application because they were forced to find other alternatives to foreclosure. Denials of Homeowners for HAMP Based on Income Calculations HAMP servicers have reported to Treasury that they denied almost 1.2 million homeowners based on income-related reasons. Servicers have denied 1,192,994 homeowners on the basis of their calculated income: 730,231 homeowners were denied due to “Current DTI Less than 31%,” another 189,881 homeowners were denied due to “Excessive Forbearance,” another 178,557 homeowners were denied due to “Post-Modification DTI Outside Acceptable Range,” and 94,325 homeowners were denied due to “Insufficient Monthly Payment Reduction.” xi,34 As defined by Treasury under the program guidelines, each of these determinations depends crucially on the accurate calculation of homeowner income, a calculation that is performed by the mortgage servicer. Here, too, servicer misconduct may contribute to these denials. Problems with servicers incorrectly calculating homeowners’ incomes have plagued HAMP in the xi Servicer calculations of homeowner income may influence other types of denials such as “Negative NPV.” SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 past, and continue to be an issue. In Treasury’s first public assessment of the top 10 HAMP servicers, Treasury ranked all 10 servicers poorly in the area of borrower income calculation errors.35 HAMP servicers continue to make errors at various stages in the application process when they calculate homeowners’ incomes. In 2014, Treasury ranked both Citi and Select Portfolio Servicing as needing “substantial” improvement because of high income calculation error rates. During the last six quarters, Treasury continued to find errors with the way servicers calculated homeowners’ incomes: Bank of America was rated as needing “moderate” improvement once, and Select Portfolio Servicing as needing “substantial” improvement twice and “moderate” improvement three times. Treasury has consistently rated Nationstar as needing “moderate” improvement in this area each quarter since Treasury began publishing assessments of that servicer in Q4 2013.36 Treasury Can Do More to Help Viewed through the lens of the known history of servicer misconduct, the high rates at which HAMP servicers have turned down homeowners for HAMP and the specific reasons they have reported for those denials make it imperative that Treasury understand the real causes of homeowner denials and act to ensure servicers are treating homeowners who apply for HAMP fairly. Treasury should hold servicers accountable for extensive delays, lost paperwork, and errors in calculating key eligibility factors such as income, rather than let those and other servicer problems seep into the servicers’ decisions on homeowners’ HAMP applications. Treasury has had information on these high denial rates by individual servicers for more than four years. Treasury could use that information to identify the reasons why homeowners were not getting into HAMP and to identify specific servicers with high rates of homeowner denials. Treasury requested the information, and could have done more with it, making a course correction in the HAMP application process much earlier to help more homeowners avoid losing their homes. Treasury has done a HAMP course correction before when faced with high numbers of HAMP homeowners falling out of their trial modifications in the early days of the program. 115 116 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 3.4 HAMP TRIAL FALLOUT AND CONVERSION STATISTICS – BEFORE AND AFTER JUNE 2010, AS OF APRIL 2015 Trial Start Period Before June 2010 Since June 2010 Grand Total Trials Started Trial Fallouts Trials Active Trials Converted Permanent Trial Fallout Rate 1,218,272 668,120 171 549,981 55% 1,186,393 110,779 52,031 1,023,583 9% 2,404,665 778,899 52,202 1,573,564 32% Note: 709,590 trial modification starts prior to December 1, 2009 and 1,152 trial starts without a trial start date recorded are included in “Before June 2010” category. Source: Treasury HAMP data. As shown in Table 3.4, some 668,120 of the 1,218,272 homeowners (55%) who started HAMP trial modifications before June 2010 ended up falling out of the program before they were able to convert their trial into a permanent modification. That means that roughly two-thirds as many homeowners fell out of trial modifications prior to June 2010 as currently are in active HAMP permanent modifications. SIGTARP has made several recommendations to improve HAMP’s effectiveness. SIGTARP recommended that Treasury ensure servicers verify homeowners’ income before accepting them into a program for which they ultimately would not be eligible. SIGTARP also recommended that Treasury set acceptable trial conversion rates, hold servicers accountable to those conversion rates, and publish servicer’s performance against those rates.xii Treasury corrected course, requiring that servicers verify income before a HAMP trial could commence (starting in June 2010), and pushing servicers to convert HAMP trials to permanent modifications more quickly and effectively in accordance with HAMP guidelines.37 This course correction resulted in substantial progress in reducing the number of homeowners who fell out of trial. In 2014, only 9% of homeowners who started a HAMP trial fell out before getting into a permanent modification.38 Treasury should make a similar course correction to reduce servicers’ high rates of denying homeowners seeking to get into the program. The servicer misconduct that Treasury is still finding hurts homeowners’ chances in HAMP. Under their agreements with Treasury, servicers are required to have sufficient resources to fully and effectively carry out HAMP’s requirements. If Treasury does not take stronger action, servicers will have no reason to change. SIGTARP has consistently urged Treasury to use its full authority, including the power to permanently withhold TARP incentive payments from servicers who fail to perform, to enforce those obligations and protect homeowners.xiii However, despite these extensive and continuing problems—documented in many cases by Treasury’s own servicer xii For a full list of SIGTARP recommendations to Treasury, refer to pages 64 – 95 of this report. xiii For more information, refer to SIGTARP’s October 27, 2011 Quarterly Report to Congress (pages 298 – 300), which can be found at www.sigtarp.gov/Quarterly%20Reports/October2011_Quarterly_Report_to_Congress.pdf SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 assessments—Treasury has never permanently withheld TARP incentive payments from any servicer.xiv,39 All cannot be right when three of the largest HAMP servicers, Citi, JPMorgan Chase and Bank of America, turn down 80% or more of homeowners’ HAMP applications, and the largest HAMP servicer, Ocwen, turns down more than 70% of homeowners for HAMP. Those extremely high denial rates hurt HAMP’s ability to be a mortgage modification program that reaches “a scale that can have a real impact on turning the housing problems around in this country,” as Treasury envisioned, and hurt homeowners who were at-risk and could have benefitted from HAMP. xiv Treasury has never permanently withheld TARP payments from servicers. A few times Treasury has temporarily withheld payments from servicers, only to give the servicer all of the money later. 117 118 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SECT IO N 4 TARP OVERVIEW 120 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 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, 2008.40 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.41 Treasury has obligated $474.8 billion to 14 programs, but subsequently deobligated funds, reducing obligations to $454.6 billion.42 Of that amount, as of June 30, 2015, $428.2 billion had been spent, and taxpayers are owed $35.9 billion.43 According to Treasury, as of June 30, 2015, it had $35.1 billion in writeoffs and realized losses, leaving $0.8 billion in TARP funds outstanding.44 Treasury’s write-offs and realized losses are money that taxpayers will never get back. These amounts do not include $16.5 billion in TARP funds spent on housing support programs, which are designed as a Government subsidy, with no repayments to taxpayers expected.45 Obligated funds remain available to be spent on only TARP’s housing support programs. According to Treasury, in the quarter ended June 30, 2015, $0.8 billion of TARP funds were spent on housing programs, leaving $21 billion obligated and available to be spent.46 Table 4.1 provides a breakdown of program obligations, changes in obligations, expenditures, principal repaid, principal refinanced, amounts still owed to taxpayers under TARP, and obligations available to be spent as of June 30, 2015. Table 4.1 lists 10 categories of TARP programs. It excludes the Capital Assistance Program (“CAP”), which was never funded, and summarizes three categories of automotive programs under “Automotive Industry Support Programs” and three categories of housing programs under “Housing Support Programs.” Table 4.2 details write-offs and realized losses in TARP as of June 30, 2015. Obligations: Definite commitments that create a legal liability for the Government to pay funds. Deobligations: An agency’s cancellation or downward adjustment of previously incurred obligations. 121 122 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.1 OBLIGATIONS, EXPENDITURES, PRINCIPAL REPAID, PRINCIPAL REFINANCED, AMOUNTS STILL OWED TO TAXPAYERS, AND OBLIGATIONS AVAILABLE TO BE SPENT ($ BILLIONS) Program Obligation After DoddFrank (As of 10/3/2010) Current Obligation Expenditure Principal Repaid (As of 6/30/2015) (As of 6/30/2015) (As of 6/30/2015) Principal Refinanced into SBLF (As of 6/30/2015) Still Owed to Taxpayers under TARP (As of 6/30/2015)a Available to Be Spent (As of 6/30/2015) Housing Support Programsb $45.6 $37.5c $16.5n 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 $21.0 Community Development Capital Initiativee Asset Guarantee Program Automotive Industry Support Programs Term Asset-Backed Securities Loan Facility Total $428.2m NA $21.0 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 $16.5 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 June 30, 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. n Treasury entered into a letter of credit (L/C) to fund the FHA Short Refinance Program. In March 2013, pursuant to the agreement, Treasury funded a reserve account with $50 million for any future loss claim payments. In March 2015, $40 million of the reserve balance was returned to Treasury. All unused reserve balances will be returned to Treasury at the program’s conclusion. Sources: Treasury, Transactions Report, 6/29/2015; Treasury, Monthly TARP Update, 6/1/2015; Treasury, Monthly TARP Update, 7/1/2015; Treasury, response to SIGTARP data call, 7/6/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 123 TABLE 4.2 TREASURY’S STATEMENT OF REALIZED LOSSES AND WRITE-OFFS IN TARP, AS OF 6/30/2015 TARP Program Institution Total TARP Investment Realized Lossa, Write-Offsb,c ($ 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, and 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 195 CPP Banks $1,810a,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 written off 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 $5,058 SSFI AIGd $13,485a Total Investment Total Realized Loss Total TARP Investment $29,299 $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 $35,111 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, 6/29/2015; Treasury, Monthly Report to Congress, June 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 7/1/2015; Treasury, response to SIGTARP data call, 7/6/2015; Treasury, Monthly TARP Update, 6/3/2013, 6/13/2013, 7/1/2014, 10/1/2014, 1/2/2015, 4/1/2015, and 7/1/2015. 124 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 6/30/2015 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 25 banks; warrants for stock in an additional 11 banks Community Development Capital Initiative Remaining principal investments in 64 banks/ credit unions *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, 6/29/2015; Treasury, Monthly TARP Update, 7/1/2015; Treasury, response to SIGTARP data call, 7/6/2015. 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 June 30, 2015, 100 institutions remain in TARP: 25 banks with remaining CPP principal investments; 11 CPP banks for which Treasury now holds only warrants to purchase stock; and 64 banks and credit unions in CDCI.47 Treasury does not consider the 11 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.48 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 June 30, 2015, 233 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 (167), and institutions that are in various stages of bankruptcy or receivership (32).49 Twentythree banks have been sold at auction at par value or for more than the par amount of taxpayers’ investment.50 Four CPP banks merged with other CPP banks.51 Taxpayers also are entitled to dividend payments, interest, and warrants for taking on the risk of TARP investments. According to Treasury, as of June 30, 2015, Treasury had collected $48.5 billion in interest, dividends, and other income, including $9.6 billion in proceeds from the sale of warrants and stock received as a result of exercised warrants.52 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 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”).53 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, 2014.54 This was a decrease from its estimate of $39 billion based on November 30, 2013 data.55 According to OMB, this decrease was due to “improved market conditions and significant progress in winding down TARP investments.”56 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 2014.57 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 $37.5 billion.58 According to Treasury, the largest costs from TARP are expected to come from housing programs and from assistance to AIG and the automotive industry.59 This estimate assumes that all of the funds obligated for housing support programs will be spent. The most recent TARP program cost estimates from each agency are listed in Table 4.4. 125 126 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.4 COST (GAIN) OF TARP PROGRAMS ($ 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 7/1/2015; CBO Estimate – CBO, “Report on the Troubled Asset Relief Program—March 2015,” www.cbo.gov/sites/default/files/cbofiles/attachments/50034-TARP.pdf, accessed 7/1/2015; 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 7/1/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 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.60 As of June 30, 2015, $16.5 billion (44% of obligated funds) has been expended.61 • 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.”62 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 June 30, 2015, MHA had expended $11.3 billion of TARP money (38% of $29.8 billion).63 Of that amount, $9.4 billion was expended on HAMP, which includes $1.7 billion expended on homeowners’ HAMP permanent modifications that later redefaulted.64 In addition, $971 million was expended on the Home Affordable Foreclosure Alternatives (“HAFA”) program and $778 million on the Second Lien Modification Program (“2MP”).65 As of June 30, 2015, there were 480,541 active Tier 1 and 98,060 active Tier 2 permanent first-lien modifications under the TARP-funded portion of HAMP, up from 477,217 and 83,466, respectively, at March 31, 2015. In the past quarter, the number of active Tier 1 permanent modifications increased by 3,324, while the number of Tier 2 permanent modifications increased by 14,594.66 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.”67 Treasury obligated $7.6 billion for this program.68 As of June 30, 2015, $5.2 billion had been drawn down by the states from HHF.69 However, as of March 31, 2015, the latest data available on state-level expenditures, only $4 billion had been spent assisting 226,511 homeowners and $50.5 million to eliminate blighted properties, with $525.7 million used for administrative expenses and the remaining $585.6 million as unspent 127 128 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM cash-on-hand.70,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 June 30, 2015, Treasury has paid $145,330 on claims for six defaults under the program.71 As of June 30, 2015, there have been 6,176 refinancings under the FHA Short Refinance program, an increase of 482 refinancings during the past quarter.72 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.73 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.74 As of June 30, 2015, 36 of those institutions remained in TARP; in 11 of them, Treasury holds only warrants to purchase stock. Treasury does not consider these 11 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 June 30, 2015, 25 of the 36 institutions had outstanding CPP principal investments.75 As of June 30, 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 $314.4 million in TARP funds outstanding.76 According to Treasury, $197.3 billion of the CPP principal (or 96.3%) had been recovered as of June 30, 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.”77 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.78 Only $106 million of CDCI money went to institutions that were not already TARP recipients. As of June 30, 2015, 64 institutions remained in CDCI.79 For more information, see the “Community Development Capital Initiative” discussion in this section. i 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. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 • Systemically Significant Failing Institutions (“SSFI”) Program — SSFI enabled Treasury to invest in systemically significant institutions to prevent them from failing.80 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.81 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.82 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”).83 Treasury also accepted common stock warrants from each, as required by EESA. Both banks fully repaid Treasury for its TIP investments.84 Treasury auctioned warrants in both companies.85 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.86 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.87 Treasury converted the TRUPS it received from FDIC into Citigroup subordinated notes and subsequently sold them for $894 million.88 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.”89 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.90 As of June 30, 2015, taxpayers had taken a loss of $2.5 billion on TARP’s investment in Ally Financial.91 Overall, as of June 30, 2015, $79.7 billion in taxpayer funds had been disbursed through AIFP and its subprograms, and Treasury had recovered $63.1 billion in 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. 129 130 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM principal, for a $16.6 billion loss on TARP’s AIFP program investments that will never be repaid, including: the $2.5 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.92 As of June 30, 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”).93 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 2010.94 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.95 For more information, see the “Automotive Industry Support Programs” discussion in this section. 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”).96 As of June 30, 2015, no CMBS or ABS loans are outstanding.97 As of early 2013, the TALF program collected fees totaling more than the amount of loans still outstanding.98 As of June 30, 2015, there had been no surrender of collateral related to these loans.99 For more information, see the “TALF” discussion in this section. 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 JULY 29, 2015 • Public-Private Investment Program (“PPIP”) — Under PPIP, nine PublicPrivate Investment Funds (“PPIFs”) managed by private asset managers 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 June 30, 2015. Together, all nine PPIFs drew down $18.6 billion in debt and equity financing from the total obligation, and fully repaid Treasury.100 As of June 30, 2015, the entire PPIP portfolio had been liquidated, and all PPIP funds had been legally dissolved.101 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.102 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. 131 132 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.103 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.104 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.105 Through June 30, 2015, 2,199,627 homeowners had started HAMP Tier 1 trial modifications, of which 1,396,741 had become permanent modifications (up 17,886 from the prior quarter). As of June 30, 2015, there were 887,001 active permanent HAMP Tier 1 modifications (down 3,782 from the prior quarter), of which 480,541 were under TARP and the remainder under the GSE portion of the program. In the quarter ended June 30, 2015, 14,657 homeowners started new HAMP Tier 1 trial modifications, compared to 15,104 who started in the previous quarter.106 As of June 30, 2015, 143,442 homeowners had started HAMP Tier 2 trial modifications, of which 116,554 had become permanent (up 17,852 from the prior quarter). As of that date, 98,060 Tier 2 permanent modifications remained active (up 14,594 from the prior quarter).107 In the quarter ended June 30, 2015, 16,344 homeowners started new HAMP Tier 2 trial modifications, compared to 17,557 who started in the previous quarter.108 Of Tier 2 permanent modifications started, 18,363 were previously HAMP Tier 1 permanent modifications, of which 14,559 remained active.109 The GSEs do not participate in the Tier 2 program. Additionally, as of June 30, 2015, 453,908 homeowners in HAMP Tier 1 permanent modifications had redefaulted (12,446 in the most recent quarter), and another 17,521 homeowners redefaulted out of HAMP Tier 2 permanent modifications (3,019 in the most recent quarter).110 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. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 • 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.111 As of June 30, 2015, there were 197,939 short sales or deeds-in-lieu under HAFA, of which 13,659 involved homeowners that had previously received permanent HAMP modifications.112 • 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.113 As of June 30, 2015, there were 84,426 active permanently modified second liens in 2MP.114 • 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”).115 Treasury provides TARP-funded incentives to encourage modifications under the FHA and RD modification programs, but not for the VA modification program. As of June 30, 2015, there were 122 RD-HAMP active permanent modifications, 66,746 FHAHAMP active permanent modifications, and 554 VA-HAMP active permanent modifications.116 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.117 As of March 31, 2015, the latest data available, 226,511 homeowners had received assistance under HHF.118 • 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 June 30, 2015, provided up to $100 million in loss coverage on these newly originated FHA loans.119 As of June 30, 2015, 6,176 loans had been refinanced under FHA Short Refinance.120 For additional discussion on HAFA, please see the discussion “Home Affordable Foreclosure Alternatives” (“HAFA”) in this section. 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. 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. 133 134 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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 $16.5 billion, or 44%, has been expended as of June 30, 2015.121 Of that, $0.8 billion was expended in the quarter ended June 30, 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 available to pay servicer, homeowner, and investor incentives under MHA programs at $29.8 billion, of which $11.3 billion (38%), has been spent as of June 30, 2015.122 Treasury allocated $7.6 billion to the Hardest Hit Fund. As of June 30, 2015, of the $7.6 billion in TARP funds available for HHF, states had drawn down $5.2 billion.123 As of March 31, 2015, the latest date for which spending analysis is available, the states had drawn down $5.1 billion.124 As of March 31, 2015, states had spent $4 billion (53%) of the allocated funds to assist 226,511 homeowners, spent $50.5 million on blight elimination programs, spent $525.7 million (7%) for administrative expenses, and held $585.6 million (8%) as unspent cash-onhand.125,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 2015.126 Of the $100 million currently allocated for FHA Short Refinance, $20 million has been spent, which includes $10 million held in a prefunded reserve account to pay future claims, $10 million spent on administrative expenses, and $145,330 spent on 6 refinanced mortgages that later redefaulted.127 Table 4.5 shows the breakdown in expenditures and estimated funding allocations for these housing support programs. Figure 4.1 also shows these expenditures, as a percentage of allocations. i According to Treasury, committed program funds are funds committed to homeowners who have been approved to participate in HHF programs that are anticipated to be disbursed over the duration of their participation; HFAs [states] vary as to when and how they capture and report funds as committed. HHF funds committed for homeowner assistance are recorded variously as homeowner assistance, cash-on-hand, or undrawn funds. ii Figures obtained from each state’s Quarterly Financial Report, which reconciles each type of cash disbursement to funds drawn from Treasury. As such, all expenses are based on actual cash disbursements. Additionally, cash-on-hand may include lien recoveries and borrower remittances. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 TABLE 4.5 TARP ALLOCATIONS AND EXPENDITURES BY HOUSING SUPPORT PROGRAMS, AS OF 6/30/2015 ($ BILLIONS) ALLOCATIONS EXPENDITURES MHA HAMPa First Lien Modification $19.1 $7.5 PRA Modification 2.0 1.5 HPDP 1.6 0.4 UP — —b $22.7 $9.4 HAFA HAMP Total 4.2 1.0 2MP 0.1 0.8 Treasury FHA-HAMP 0.2 RD-HAMP 0.2 —c — c FHA2LP 2.7 MHA Total — $29.8 $11.3 HHF (Drawdown by States) $7.6 $5.2 FHA Short Refinance $0.1e d Total $37.5 —f $16.5 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 allocated $0.02 billion to the RD-HAMP program. As of June 30, 2015, $398,451 has been expended for RD-HAMP. d Not all of the funds drawn down by states have been used to assist homeowners. As of March 31, 2015, HFAs had drawn down approximately $5.1 billion, and, according to the latest data available, only $4 billion (53%) of TARP funds allocated for HHF have gone to help 226,511 homeowners. e This amount includes up to $25 million in fees Treasury will incur for the availability and usage of the $100 million letter of credit. f Treasury’s $20 million in program expenditures include a $10 million pre-funded reserve balance (In March 2013, Treasury funded a reserve account with $50 million for any future loss claim payments, $40 million of the reserve balance was returned to Treasury in March 2015), and $10 million in administrative expenses. Sources: Treasury, responses to SIGTARP data calls, 1/5/2012, 7/6/2015 and 7/23/2015; Treasury, Transactions Report-Housing Programs, 6/26/2015; Treasury, Monthly TARP Update, 7/1/2015. 135 136 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.1 TARP HOUSING SUPPORT FUNDS ALLOCATED AND SPENT, AS OF 6/30/2015 ($ BILLIONS) HAMP $22.7 billion 41% spent ($9.4 billion) 69% spenta ($5.2 billion) Hardest Hit Fund $7.6 billion 23% spent ($1.0 billion) HAFA $4.2 billion FHA2LP $2.7 billion Funds Allocated Funds Spent None spent 2MP $0.1 billion 598% spent ($0.8 billion) Treasury FHA–HAMP $0.2 billion 75% spent ($0.2 billion) FHA Short Refinance $0.1 billionb 20% spent ($0.02 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 $398,451 as of June 30, 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 June 30, 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, 7/6/2015, and 7/23/2015; Treasury, Transactions Report-Housing Programs, 6/26/2015. As of June 30, 2015, Treasury had active agreements with 77 servicers.128 That compares with 145 servicers that had agreed to participate in MHA as of October 3, 2010.129 According to Treasury, of the $29.8 billion obligated to participating servicers under their Servicer Participation Agreements (“SPAs”), as of June 30, 2015, only $11.3 billion (38%) has been spent, broken down as follows: $9.4 billion had been spent on completing 867,173 permanent modifications of first liens, including HAMP Tier 1, HAMP Tier 2, PRA, and HPDP (578,601 of which remain active); $777.6 million had been spent under 2MP; and $971.2 million had been spent on incentives for short sales or deeds-in-lieu of foreclosure under HAFA.130 Of the combined amount of incentive payments for all of the housing programs, according to Treasury, approximately $6.2 billion went to pay investor or lender incentives, $2.8 billion went to pay servicer incentives, and $2.2 billion went to pay homeowner incentives. For just HAMP Tier 1 incentives alone (excluding PRA and HPDP), Treasury has spent $7.2 billion, of which $3.4 billion has been spent on investor incentives, $2.2 billion has been spent on servicer incentives, and $1.6 billion has been spent on homeowner incentives.131 Table 4.6 shows the breakdown of TARP-funded expenditures related to housing support programs (not including the GSE-funded portion of HAMP). SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 TABLE 4.6 BREAKDOWN OF TARP EXPENDITURES, AS OF 6/30/2015 ($ 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 $760.2 $16.9 $1,432.8 $73.1 Investor Monthly Reduction Cost Share $3,289.4 Annual Borrower Incentive Payment $1,636.0 Tier 2 Incentive Payments $256.1 HAMP First Lien Modification Incentives Total $7,464.5 PRA $1,521.7 HPDP UP $375.0 $—a HAMP Program Incentives Total $9,361.2 HAFA Incentives Servicer Incentive Payment $281.3 Investor Reimbursement $216.5 Borrower Relocation $473.4 HAFA Incentives Total $971.2 Second-Lien Modification Program Incentives 2MP Servicer Incentive Payment $72.7 2MP Annual Servicer Incentive Payment $50.1 2MP Annual Borrower Incentive Payment $51.2 2MP Investor Cost Share $267.0 2MP Investor Incentive $336.5 Second-Lien Modification Program Incentives Total $777.6 Treasury/FHA-HAMP Incentives Annual Servicer Incentive Payment $87.9 Annual Borrower Incentive Payment $84.5 Treasury/FHA-HAMP Incentives Total $172.4 RD-HAMP $—b FHA2LP $— MHA Incentives Total HHF Disbursements (Drawdowns by State HFAs) FHA Short Refinance (Loss-Coverage) Total Expenditures $11,282.8 $5,217.0 $20.3 $16,520.1 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 $398,451 as of June 30, 2015. Source: Treasury, responses to SIGTARP data calls, 7/6/2015, and 7/23/2015. 137 138 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TREASURY REMOVES HAMP INCOME RESTRICTIONS AND APPLICATION REQUIREMENTS FOR HOMEOWNERS WHO ARE 90 DAYS DELINQUENT On July 1, 2015, Treasury announced “Streamline HAMP” iii for homeowners already 90 days delinquent on their mortgage.iv Required for the largest HAMP servicers, and optional for other servicers, Streamline HAMP keeps some of the same HAMP eligibility requirements and removes others. The homeowner will no longer have to meet the following HAMP requirements: • Completion of HAMP application • Income limitations including front-end debt-to-income ratio of 31% • Income verification The homeowner still must meet the following HAMP requirements: • Mortgage originated on or before January 1, 2009 • One to four unit property that has not been condemned • Owner occupied or rental • Unpaid principal balance under $729,750 (single-unit property)v According to Treasury, the new Streamline HAMP (effective January 1, 2016) is modeled after similar programs offered by the GSEs and intended to reach more homeowners, and get them into HAMP more efficiently, than Treasury has been able to do under existing HAMP. As SIGTARP has reported several times, homeowners have faced significant obstacles in completing the HAMP application with all of the required supporting documents. Sometimes homeowners are confused as to what is needed. Sometimes, homeowners are not at fault. SIGTARP has reported several times about lost paperwork at HAMP servicers. Treasury is developing a Streamline HAMP Net Present Value (“NPV”) test. When the Streamline NPV test is positive, servicers will be encouraged, but not required, to offer a Streamline HAMP trial period plan to eligible homeowners within 15 days. If the homeowner makes all required trial plan payments and signs an affidavit saying that they are experiencing a hardship, they will receive a permanent modification. iii Treasury, “Supplemental Directive 15-06 – Streamlined Modification Process,” 7/1/2015. Unless otherwise noted, all details regarding the announced Streamline HAMP program described herein are drawn from SD 15-06. iv Streamline HAMP will also apply to homeowners who already completed five years in HAMP, are seeing the first year of their interest rate rise, and have become 60 days delinquent. v Applicable unpaid principal balance limits are $934,200 for two-unit properties, $1,129,250 for three-unit properties, and $1,403,400 for four-unit properties. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Streamline HAMP represents a further step by Treasury to loosen HAMP requirements in an effort to increase homeowner participation in HAMP. In 2012, Treasury expanded HAMP to rental properties and to homeowners with a wider range of debt-to-income situations by creating a new HAMP called HAMP Tier 2. In general, under Tier 2 homeowners receive a modification similar to a Tier 1 modification, but with a less favorable modified interest rate. Due in part to their loosened criteria, Tier 2 modifications have comprised an increasing portion of new HAMP activity since 2012, and have accounted for more than 50% of new HAMP trial starts in each of the last 4 months.vi The ultimate performance of Streamline HAMP depends on many factors, including the fact that Treasury is leaving it to servicers to develop their own policies on Streamline HAMP. Treasury should monitor servicers and performance closely. vi Treasury, HAMP 1MP: Program Volumes Supplemental - First Trial Payment Due Month by Tier, June 2015, accessed 7/22/2015. Refer to pages 174–175 for detailed discussion on HAMP Tier 2. 139 140 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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.”132 Although HAMP contains several subprograms, the term “HAMP” is most often used to refer to the HAMP First-Lien Modification Program, described below. For additional information about the HAMP application and modification process, please see the discussion, “How HAMP Works,” in this section. 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.133 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.134 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 Fourth Consecutive Quarter As of June 30, 2015, a total of 887,001 mortgages were in active HAMP Tier 1 (“HAMP”) permanent modifications under both TARP (non-GSE) and GSE HAMP, down from 890,783 as of March 31, 2015. In the most recent quarter, active TARP (non-GSE) HAMP modifications increased by 3,324, offset by a decrease in GSE HAMP active modifications of 7,106. Some 18,672 homeowners were in active trial modifications. As of June 30, 2015, for homeowners receiving permanent modifications, 95.8% received an interest rate reduction, 66.1% received a term extension, 36.1% received principal forbearance, and 17.5% received principal forgiveness.135 Table 4.7 shows HAMP modification activity, broken out by TARP and GSE loans. For more detail on redefaulted modifications over the life of HAMP, see Table 4.13 and Figure 4.5. For more detail on HAMP modification activity, broken out by TARP and GSE loans, see Table 4.29 on page 184. For additional information about what happens to HAMP permanent modifications after five years, please see the discussion, “Payment Increases on HAMP-Modified Mortgages.” TABLE 4.7 CUMULATIVE HAMP TIER 1 MODIFICATION ACTIVITY BY TARP/GSE, AS OF 6/30/2015 Trials Started Trials Cancelled Trials Active Trials Converted to Permanent Permanents Redefaulted Permanents Paid Off Permanents Active TARP 1,117,260 353,228 13,413 750,619 252,918 16,469 480,541 GSE 1,082,367 430,986 5,259 646,122 200,990 38,404 406,460 Total 2,199,627 784,214 18,672 1,396,741 453,908 54,873 887,001 Source: Treasury, “HAMP 1MP: Program Volumes - Program Type & Payor by Tier - June 2015,” accessed 7/22/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 During this quarter, 14,657 homeowners started new trial modifications (down from 15,104 last quarter) and 17,886 started new permanent modifications (up from 15,387 last quarter). As 12,446 homeowners re-defaulted in HAMP during the quarter, and another 8,517 paid off their modified loans, the number of active HAMP permanent modifications decreased by 3,782.136 As shown in Figure 4.2, which shows permanent modifications started, by quarter, the number of new HAMP modifications continues to decline quarter over quarter. FIGURE 4.2 HAMP TIER 1 PERMANENT MODIFICATIONS STARTED, BY QUARTER, 2009-2015 180,000 160,000 140,000 120,000 100,000 17,886 HAMP permanent modifications were started in the quarter ended 6/30/2015. 80,000 60,000 40,000 20,000 0 Q1 Q2 Q3 2009 Q4 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 Q4 2011 Q1 Q2 Q3 2012 Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 2014 Q4 Q1 Q2 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 - June 2015,” accessed 7/22/2015; Fannie Mae, responses to SIGTARP data calls, 1/23/2014, 4/24/2014, and 7/24/2014. During this quarter, there were 2,499 more loans permanently modified under HAMP than in the previous quarter, but 149,334 fewer than the second quarter of 2010, the quarter when the most HAMP permanent modifications were started.137 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.138 Servicers are then required to review and evaluate the borrower for a HAMP trail modification within 30 calendar days of receiving a completed application.139 However, while Treasury requires that servicers review a 141 142 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM For additional information about the HAMP application and modification process, please see the discussion, “How HAMP Works,” in this section. 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.140 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.141 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 55,608 requests for HAMP assistance in May 2015.142 However, servicers reported only processing (i.e., approving or denying) 52,380 applications in that month.143 This means that HAMP servicers received 3,228 more applications than they processed during the month (6% 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 4.3, according to data reported by Treasury as of May 2015, only 5 out of the 10 servicers who reported receiving the most applications in that month—Ocwen Loan Servicing, LLC (“Ocwen”), Nationstar Mortgage LLC, Select Portfolio Servicing, Inc. (“SPS”), Bayview Loan Servicing, LLC (“Bayview”), and U.S. Bank National Association—succeeded in processing more applications than they received. Those servicers collectively processed only 1,472 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 454 (7%) for Bank of America, NA (“Bank of America”), 2,817 (60%) for CitiMortgage, Inc. (“Citi”), 800 (13%) for JPMorgan Chase Bank, NA (“JPMorgan Chase”), 367 (6%) for Wells Fargo Bank, NA, and 56 (2%) for Specialized Loan Servicing LLC. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 FIGURE 4.3 SERVICERS ABLE OR UNABLE TO PROCESS THE NUMBER OF HAMP APPLICATIONS RECEIVED THAT MONTH (MAY 2015) Processed More Than Number of Applications Received 1,000 750 500 503 406 344 216 250 3 0 (56) -250 -500 (454) (367) -750 Processed Fewer Than Number of Applications Received (800) -1,000 -1,250 -1,500 -1,750 -2,000 -2,250 -2,500 -2,750 (2,817) -3,000 Ocwen Loan Servicing, LLC Nationstar Mortgage LLC Bank of America, NA Wells Fargo Bank, NA JPMorgan CitiMortgage Inc Chase Bank, NA Select Portfolio Servicing, Inc. Specialized Loan Servicing LLC Bayview Loan Servicing, LLC U.S. Bank National Association Source: Treasury, “HAMP Application Activity by Servicer, As of May 2015,” www.treasury.gov/initiatives/financialstability/reports/Documents/HAMP%20Application%20Activity%20by%20Servicer%20May%202015.pdf, accessed 7/1/2015. On a program-to-date basis, the most recent data reported on Treasury’s website, as of May 2015, shows that servicers had received an aggregate of 8,849,477 applications since June 1, 2010, compared to an aggregate of 7,909,606 previously reported as having been received as of February 2015, an increase of 939,871 applications.144 This appears primarily to be due to two large servicers that significantly revised upward the cumulative number of applications they reported having received in the March 2015 survey compared to the February 2015 survey: Ocwen reported it had received 561,133 more applications through March 2015 than it had through February, despite reporting only 13,073 new applications in the month of March 2015; JPMorgan Chase reported it had received 197,199 more applications through March 2015 than it had through February, despite reporting only 5,576 new applications in the month of March.145 Treasury’s data shows that 223,338 homeowners had not had their requests processed through May 2015, compared to 210,401 as of February 2015.146 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. 143 144 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Timeliness of HAMP Application Processing by Servicer Table 4.8 presents the latest data published by Treasury on the number of homeowner HAMP applications the top servicers report having processed in May 2015, as well as the total number of applications not yet processed as of that month. At the most recent processing rates reported for May 2015, it would take 7 of the top 10 HAMP servicers longer than three months to process the number of homeowner applications that hadn’t yet received a decision, even were they to receive no additional applications; JPMorgan Chase would take over six months, and Citi would take over a year. TABLE 4.8 MONTHS TO PROCESS OUTSTANDING APPLICATIONS AT MOST RECENT RATE BY SERVICER, AS OF 5/31/2015 Servicer Name Applications Processeda Total Applications Unprocessedb Months to Process the Homeowners who have already appliedc CitiMortgage Inc 1,844 25,265 13.7 JPMorgan Chase Bank, NA 5,243 45,243 8.6 Bank of America, NA 6,238 33,569 5.4 Select Portfolio Servicing, Inc. 4,503 23,066 5.1 Wells Fargo Bank, NA 6,246 26,102 4.2 11,521 47,571 4.1 861 2,674 3.1 Specialized Loan Servicing LLC 2,518 4,284 1.7 Bayview Loan Servicing, LLC 1,949 3,034 1.6 Nationstar Mortgage LLC 7,768 8,874 1.1 Ocwen Loan Servicing, LLC Green Tree Servicing LLC Other Servicers TOTAL 3,689 3,656 1.0 52,380 223,338 4.3 Notes: a Requests Processed in the most recent month, May 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,” May 2015. HAMP Mortgage Servicing Transfers In its October 2014 Quarterly Report,vii SIGTARP reported on homeowners in and seeking HAMP who got “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 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 vii SIGTARP, “Quarterly Report to Congress,” 10/29/2014, www.sigtarp.gov/Quarterly%20Reports/October_29_2014_Report_to_ Congress.pdf. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 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 homeowners. SIGTARP has received homeowner complaints in each of these scenarios, which it shares with Treasury. In SIGTARP’s criminal investigation of TARP recipient SunTrust, which 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.147 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 that resulted in lost trial modifications.148 Later in 2013, the largest HAMP servicer, Ocwen, agreed to provide $2 billion in relief to homeowners to settle charges by CFPB and 49 state attorneys general that it “took advantage of borrowers at every stage,” including failing to honor previously agreed-upon trial modifications with prior servicers.149 In 2014, CFPB issued a second bulletin based on similar findings made in their examinations of servicers.150 More recently, 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, which included failing to honor homeowners’ modifications in process when the loan was transferred, requiring homeowners to be re-evaluated for modifications after completing trial modifications, seeking payments under the pre-modification terms even when it knew or had reason to know the loan had been modified by a previous servicer, and failing to ensure it had complete and accurate modification status information when they acquired loan servicing.151 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.152 Thousands of HAMP homeowners have had their mortgage servicing transferred, with almost 75% acquired by a handful of HAMP servicers. Figure 4.4 presents Treasury’s data on the number of 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. 145 146 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HAMP modifications (trial and permanent) transferred between mortgage servicers since the program began.viii FIGURE 4.4 CUMULATIVE HAMP SERVICING TRANSFERS – TRIAL AND PERMANENT MODIFICATIONS TRANSFERRED 300,000 250,000 237,824 248,016 203,076 200,000 150,000 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 June 2015 servicing transfers reporting cycle. Some servicing transfers that occur during this quarter may not be reported until subsequent reporting periods. Note: Analysis excludes 7,528 intracompany transfers. Source: SIGTARP analysis of Treasury HAMP Servicing Transfer Data. For more details on HAMP mortgage servicing transfers, see “HAMP Mortgage Servicing Transfers,” in SIGTARP’s April 2015 Quarterly Report, pages 142-147. As shown in Figure 4.4, through June 2015, Treasury data show that 248,016 mortgages in a HAMP trial or permanent modification had been transferred. Only 1,526 HAMP modifications were transferred during 2009, the first year of the program, but 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. viii “HAMP Modification” herein 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. 147 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 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; by contrast, non-bank servicer Ocwen Loan Servicing, LLC (“Ocwen”) was the most active receiver of HAMP mortgage servicing transfers in each of the next four years through 2014. According to Treasury data, Bayview Loan Servicing, LLC has been the most active acquirer of HAMP mortgage servicing transfers thus far in 2015. Table 4.9 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 175,776 HAMP loans, or 71% of the total number transferred. Ocwen, alone, acquired over 117,000 HAMP loans, 47% of the total number transferred. TABLE 4.9 al To t ag S e Se ele LL rv ct C P ic o in r g, tfo 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 C Sp Se ec rv ia ic liz in ed g, LL Loa C n JP M or ga n Ch as e Ru Ba M sh nk an m ,N ag or e A em L en oa Fa tS n y er Se vi ce rv ic s in LL g, C LL C N db ew Se a P rv Sh en ic el n F in lp i g oi na nt nc O th M ia er or l, tg LL ag C e of e ag nt ta ns 10,755 — 1,499 4,381 2 230 23 1,061 5,506 40,196 16% American Home Mortgage Servicing, Inc. 27,665 — — — 11 7 — 9 11 — 64 27,767 11% 11% Pe al To t N O BU rc e io 15,671 at 1,068 cw Bank of America, National Association YE en RS Lo r an M or Se tg rv ic in g, LL C HAMP SERVICING TRANSFERS – TOP TEN BUYERS AND SELLERS SELLERS GMAC Mortgage, LLC 24,323 — 52 5 138 840 3 3 16 — 2,323 27,703 JPMorgan Chase Bank, NA 10,950 73 7,796 — 2,774 898 — 12 27 2 540 23,072 9% OneWest Bank 18,346 — — — — 1,162 — — — — 4 19,512 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% Aurora Loan Services, LLC — 10,818 192 — 11 — — — — — 65 11,086 4% CitiMortgage, Inc. 12 18 1,496 2 3,870 29 — 2,367 661 — 2,404 10,859 4% Wilshire Credit Corporation Other Grand Total Percentage of Total — 9 — 8,938 — — — — — — 31 8,978 4% 6,017 4,432 7,209 6,990 2,485 856 7,350 1,725 2,832 1,419 8,019 49,334 20% 117,227 31,021 27,528 15,935 10,817 8,651 7,355 4,346 3,570 2,482 19,084 248,016 47% 13% 11% 6% 4% 3% 3% 2% 1% 1% 8% Note: Analysis excludes 7,528 intracompany transfers. Analysis includes servicing transfers through the June 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 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.153 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.154 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%.155 The terms of HAMP permanent modifications remain fixed for five years.156 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.157 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.158 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.159 Table 4.10 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 JULY 29, 2015 TABLE 4.10 HAMP TIER 1 PERMANENT MODIFICATIONS WITH SCHEDULED PAYMENT INCREASES BY YEAR, AS OF 5/31/2015 Year Modified 2009 2010 2011 2012 2013 2014 2015 All Years Total Active Permanent Modifications Permanent Modifications with Scheduled Payment Increases 29,502 277,593 215,374 143,665 119,561 75,336 28,705 889,736 27,655 259,500 193,263 117,751 99,467 64,726 24,103 786,465 Interest Ratea Median Increase Monthly Paymenta Modification Status Median Before Modification 6.50% $1,430 After Modification 2.00% $751 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 $1,012 $778 2.58% $1,034 2.00% 4.60% Before Modification 6.25% $1,431 After Modification 2.00% $746 After All Increases 3.66% Before Modification 6.10% 2.00% 3.81% Before Modification 6.13% $806 2.43% 1.59% $1,042 $898 $880 2.00% Before Modification 6.04% $1,259 After Modification 2.00% $670 After All Increases 3.69% Before Modification 6.38% 2.00% $706 2.14% 1.69% $894 $816 $177 $137 $1,415 $761 2.17% $975 Notes: a Analysis of HAMP permanent modifications with scheduled interest rate and payment increases excludes 64,530 HAMP permanent modifications with incomplete records. Source: SIGTARP analysis of Treasury HAMP data. $150 $1,296 4.20% 4.40% $141 $715 1.57% After Modification After Modification $221 $1,367 After All Increases After All Increases $241 $1,443 After Modification After Modification $248 $1,451 After All Increases After All Increases Median Increase $196 149 150 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM As shown in Table 4.10, 786,465 of the 889,736 (88%) homeowners who had active HAMP Tier 1 permanent modifications as of May 31, 2015 are scheduled for or have experienced these interest rate and payment increases.160 That means just 103,271 homeowners, or 12%, will not experience payment increases.161 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 $1,415.162 HAMP permanent modifications reduced the median interest rate for these homeowners’ loans to 2% and their median monthly payment to $761.163 The scheduled payment increases will cause their median interest rate to rise to 4.4% and their median payment to increase to $975.164 Their median rate increase will be 2.2% and their median payment increase will be $196.165 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. As of June 30, 2015, according to Treasury data, 192,515 homeowners in active HAMP modifications passed the date of their first scheduled payment increase, and an additional 90,717 homeowners are scheduled for payment increases by the end of the year.166 Table 4.11 provides additional detail about interest rate and payment increases by year. 29,502 29,502 29,494 2015 2016 2017 HAMP Permanent Modifications Started in 2011 HAMP Permanent Modifications Started in 2012 6,291 21,052 23,915 25,719 4.9% 4.9% 4.0% 3.0% 0.0% 0.8% 1.0% 1.0% 1,012 1,011 939 847 $4 $84 $94 $93 277,412 277,524 277,579 277,591 68,063 183,579 209,767 227,700 5.0% 5.0% 4.0% 3.0% 0.1% 0.8% 1.0% 1.0% 1,034 1,031 967 875 $7 $70 $95 $94 214,972 215,200 215,315 215,367 14 122,439 151,905 168,333 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 $96 143,114 143,373 143,523 143,610 HAMP Permanent Modifications Started in 2014 HAMP Permanent Modifications Started in 2015 119,338 119,157 118,913 2019 2020 2021 14 40,207 89,732 99,466 3.8% 3.8% 3.8% 3.0% 0.3% 0.4% 0.8% 1.0% 881 881 867 803 $27 $29 $61 $84 74,626 74,833 75,017 75,151 20 45,689 59,551 64,725 4.2% 4.2% 4.0% 3.0% 0.2% 0.3% 1.0% 1.0% 896 896 876 793 $16 $21 $87 $84 28,595 28,464 28,547 24,103 13 21,992 3.0% 3.7% 3.7% 1.0% 0.3% 0.7% 755 818 817 $81 $29 $64 3.0% 3.7% 3.7% 3.7% 1.0% 0.5% 0.5% 0.7% 838 899 899 898 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 4.10, 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 64,530 permanent modifications with incomplete records. 2023 2022 119,460 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 99,370 111,889 $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 5/31/2015 (CONTINUED) 2023 2022 2021 2020 2019 2018 29,502 2014 Total Active Permanent Year of Increase Modifications HAMP Permanent Modifications Started in 2009 HAMP PERMANENT MODIFICATIONS WITH SCHEDULED PAYMENT INCREASES, ANNUAL, AS OF 5/31/2015 TABLE 4.11 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 151 152 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Homeowners in All States Will Be Affected by Payment Increases Table 4.12 shows, as of May 31, 2015, all active HAMP permanent modifications with scheduled monthly mortgage payment increases, by state. TABLE 4.12 HAMP TIER 1 PERMANENT MODIFICATIONS WITH SCHEDULED PAYMENT INCREASES, AS OF 5/31/2015 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 4,627 3,510 75.9% $91 $873 388 316 81.4% 166 809 31,532 27,991 88.8% 184 1,208 Arkansas 1,821 1,479 81.2% 94 695 California 231,035 212,049 91.8% 299 1,724 Colorado 11,904 10,414 87.5% 170 1,011 Connecticut 11,818 10,476 88.6% 187 1,116 2,622 2,226 84.9% 165 834 Florida 114,435 100,781 88.1% 161 1,168 Georgia 30,905 25,923 83.9% 131 1,061 Guam 9 7 77.8% 60 173 Hawaii 3,620 3,346 92.4% 360 1,230 Idaho 3,181 2,726 85.7% 158 894 Illinois 45,679 40,676 89.0% 170 1,072 Indiana 7,850 6,215 79.2% 91 1,022 Iowa 1,872 1,539 82.2% 89 626 Kansas 1,958 1,617 82.6% 101 1,042 Kentucky 3,153 2,570 81.5% 90 798 Louisiana 4,747 3,769 79.4% 97 922 Maine 2,417 2,138 88.5% 139 709 Maryland 28,217 24,881 88.2% 239 1,174 Massachusetts 21,076 19,181 91.0% 230 1,064 Michigan 24,425 20,908 85.6% 119 1,273 Minnesota 12,839 11,366 88.5% 170 1,117 Mississippi 2,857 2,130 74.6% 84 730 Missouri 8,039 6,501 80.9% 101 878 State Alabama Alaska Arizona Delaware Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 HAMP TIER 1 PERMANENT MODIFICATIONS WITH SCHEDULED PAYMENT INCREASES, AS OF 5/31/2015 (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 975 832 85.3% $166 $1,074 1,093 889 81.3% 86 632 18,613 16,695 89.7% 210 1,042 3,710 3,288 88.6% 174 806 New Jersey 30,047 27,337 91.0% 230 1,100 New Mexico 3,010 2,514 83.5% 137 913 New York 50,047 46,609 93.1% 288 1,507 North Carolina 15,291 12,695 83.0% 112 1,060 127 104 81.9% 110 560 17,740 14,752 83.2% 95 886 Oklahoma 1,908 1,505 78.9% 83 696 Oregon 9,958 8,953 89.9% 190 1,052 Pennsylvania 18,665 15,664 83.9% 125 873 Puerto Rico 3,129 2,899 92.6% 93 982 Rhode Island 4,244 3,831 90.3% 185 905 South Carolina 7,891 6,470 82.0% 113 1,105 273 227 83.2% 121 836 8,358 6,611 79.1% 93 1,075 Texas 23,361 18,666 79.9% 94 1,082 Utah 7,173 6,268 87.4% 198 1,023 783 686 87.6% 148 853 9 7 77.8% 181 549 Virginia 20,316 17,823 87.7% 224 1,118 Washington 19,216 17,308 90.1% 218 1,155 District of Columbia 1,524 1,369 89.8% 256 1,096 West Virginia 1,117 914 81.8% 120 626 Wisconsin 7,762 6,521 84.0% 121 968 370 293 79.2% 165 829 889,736 786,465 88.4% $196 $1,724 State Montana Nebraska Nevada New Hampshire North Dakota Ohio South Dakota Tennessee Vermont Virgin Islands Wyoming Total a Analysis of HAMP permanent modifications with scheduled interest rate and payment increases excludes 64,530 HAMP permanent modifications with incomplete records. Source: SIGTARP analysis of Treasury HAMP data. 153 154 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM As shown in Table 4.12 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.167 Homeowners in 11 jurisdictions face mortgage payment increases that are more than the $196 national median: California, Hawaii, Maryland, Massachusetts, Nevada, New Jersey, New York, Utah, Virginia, Washington, and Washington, DC.168 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.169 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 Redefaultingix As of June 30, 2015, HAMP has helped more than 887,001 homeowners avoid foreclosure through permanent mortgage modifications, but another 453,908 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.170,x This is an increase from the 441,462 of homeowners who had redefaulted through the end of the previous quarter, as this quarter alone 12,446 homeowners redefaulted in HAMP. As of June 30, 2015, taxpayers lost $1.7 billion in TARP funds paid to servicers and investors as incentives for 252,918 homeowners who received TARP (non-GSE) HAMP permanent modifications and later redefaulted, which is an increase of 7,191 from the last quarter.171 Also, 76,185 (9% of active HAMP permanent modifications) had missed one to two monthly mortgage payments and, thus, are at risk of redefaulting out of the program.172 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%.xi 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 2010.173 Homeowners who received HAMP permanent modifications in 2009 redefaulted at rates ranging from 47.5% to 52.6% at the time they reached 60 months, the latest aging for which Treasury’s monitoring report provides data, while homeowners who received HAMP permanent modifications in 2010 redefaulted at rates ranging from 41.3% to 48.4% (an increase from 40.5% to 47.3% reported last quarter).174,xii 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 ix In this section, “HAMP” refers to the original HAMP First-Lien Modification Program, which Treasury later named HAMP Tier 1. x 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. xi According to Treasury, Treasury’s calculation of redefault rates may exclude some modifications due to missing or invalid data. xii The most recent HAMP redefault data provided to SIGTARP by Treasury only covers through March 2015 and does not account for modifications that redefaulted after 60 months. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 homeowners with redefaulted loans reported by 20 servicers that participated in a survey, as of May 31, 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 30% of homeowners who redefaulted received an alternative modification, usually a private sector modification.175 Table 4.13 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 4.13 HAMP TIER 1 PERMANENT MODIFICATION REDEFAULT ACTIVITY, AS OF 6/30/2015 Year Modified TARP GSE Total Permanents Started Annual Permanents Redefaulted 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 25,335 750,619 15,115 252,918 34% Total 750,619 — 252,918 — 2009 43,305 43,305 339 339 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 7,938 646,122 11,293 200,990 31% Total 646,122 — 200,990 — 1% 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 33,273 1,396,741 26,408 453,908 32% Total 1,396,741 — 453,908 — Notes: Data is as of December 31, 2009; December 31, 2010; December 31, 2011; December 31, 2012; December 31, 2013, December 31, 2014, and June 30, 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 – June 2015,” accessed 7/22/2015; 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. 155 156 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM As shown in Table 4.13, during the current year there were only 33,273 new modifications, while there were 26,408 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 6/30/2015 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, 7/23/2015. As illustrated in Figure 4.5, over time the rate at which homeowners redefault on their HAMP modifications increases. More than 43% of the homeowners that obtained permanent modifications in 2009 and 2010 have since redefaulted, compared to only 8% of the homeowners that received HAMP modifications in 2014 and 2015.176 Servicer Redefault Rates As of June 30, 2015, of 1,305,541 homeowners’ HAMP permanent modifications currently serviced by 10 of the largest servicers, 397,907, or 30.5%, subsequently redefaulted. Table 4.14 provides data on homeowners’ HAMP permanent modifications by servicers participating in HAMP and currently servicing the modifications listed. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 TABLE 4.14 HOMEOWNERS’ HAMP PERMANENT MODIFICATIONS AND REDEFAULTS CURRENTLY WITHIN SERVICERS’ PORTFOLIOS, BY SERVICER, AS OF 6/30/2015 Permanent Modifications Permanent Modifications Redefaulted Percentage of Permanent Modifications Redefaulted Ocwen Loan Servicing, LLCa 315,676 104,038 33.0% Wells Fargo Bank, N.A. 208,156 57,261 27.5% JPMorgan Chase Bank, N.A.c 175,630 47,070 26.8% Nationstar Mortgage LLC 166,823 45,115 27.0% b Select Portfolio Servicing, Inc. 96,544 38,765 40.2% Bank of America, N.A.d 104,865 33,692 32.1% Green Tree Servicing LLC 103,335 24,817 24.0% Seterus Incorporated 70,036 24,816 35.4% CitiMortgage Inc 43,584 13,921 31.9% Specialized Loan Servicing LLC 20,892 8,412 40.3% Other 207,754 73,522 35.4% Total 1,513,295 471,429 31.2% 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 – June 2015,” accessed 7/20/2015. As shown in Table 4.14, four servicers account for more than half of homeowners’ HAMP permanent modifications that redefaulted: Ocwen Loan Servicing, LLC, with 104,038 homeowners’ permanent modifications redefaulted; Wells Fargo Bank, N.A., with 57,261 homeowners’ permanent modifications redefaulted, JPMorgan Chase Bank, NA, with 47,070 homeowners’ permanent modifications redefaulted and Nationstar Mortgage LLC with 45,115 homeowners’ permanent modifications redefaulted.177 Of the 10 largest servicers participating in HAMP, the three with the highest percentage of homeowners’ HAMP permanent modifications that redefaulted were Specialized Loan Servicing LLC, with 40.3% of homeowners’ permanent modifications redefaulted; Select Portfolio Servicing, Inc., with 40.2% of homeowners’ permanent modifications redefaulted; and Seterus Incorporated, with 35.4% of homeowners’ permanent modifications redefaulted, as compared with the average for the 10 of 30.5%.178 Redefaults: Impact on Taxpayers Funding TARP Taxpayers have lost about $1.7 billion in TARP funds paid to servicers and investors as incentives for 252,918 homeowners’ non-GSE, HAMP (Tier 1) permanent 157 158 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM mortgage modifications that redefaulted.179 As of June 30, 2015, Treasury has distributed $8.9 billion in TARP funds for 750,619 homeowners’ non-GSE, HAMP (Tier 1) permanent modifications.180 According to Treasury, $5.1 billion of that was designated for investor incentives, $2.2 billion for servicer incentives, and $1.6 billion for homeowner incentives.181 (Homeowner incentives are paid to servicers that, in turn, apply the payment to a homeowner’s mortgage). According to Treasury, 19% of those funds were paid for incentives on homeowners’ HAMP permanent modifications that later redefaulted.182 Table 4.15 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 JULY 29, 2015 TABLE 4.15 TARP INCENTIVE PAYMENTS ON HOMEOWNERS’ HAMP PERMANENT MODIFICATIONS CURRENTLY WITHIN SERVICERS’ PORTFOLIOS, AS OF 6/30/2015 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 $2,030,501,031 $534,426,673 $43,840,517 $2,613,227,925 20% 546,627,572 243,408,032 9,974,829 800,010,433 30% Wells Fargo Bank, N.A.d Select Portfolio Servicing, Inc. 1,204,923,754 218,261,462 37,794,692 1,461,856,051 15% JPMorgan Chase Bank, NAb 1,183,744,615 162,722,802 25,010,443 1,373,078,338 12% Nationstar Mortgage LLCe 538,462,424 116,920,455 11,269,035 666,651,914 18% Bank of America, N.A. 596,052,422 99,173,618 16,875,543 712,156,968 14% 85,739,148 47,991,568 1,558,841 135,298,141 35% CitiMortgage Inc 208,821,712 41,996,839 10,038,867 260,857,418 16% Bayview Loan Servicing LLC 164,330,146 36,295,973 10,141,546 210,780,321 17% 55,823,492 23,607,643 1,446,664 80,877,799 29% c Specialized Loan Servicing LLC Carrington Mortgage Services, LLC Other 426,964,200 164,451,444 21,889,549 613,338,413 27% Total $7,041,990,517 $1,689,256,510 $189,840,525 $8,928,133,722f 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 $7,046,170 on modifications that the servicer classified as “withdrawals.” Source: Treasury, response to SIGTARP data call, 7/10/2015. 159 160 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM As shown in Table 4.15, 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 4.15).183,xiii 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 4.15).184 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.185 Tables 4.16 – 4.22 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. xiii 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 JULY 29, 2015 TABLE 4.16 REDEFAULTED HOMEOWNERS’ HAMP PERMANENT MODIFICATIONS, BY REGION, CUMULATIVE AS OF 6/30/2015 Permanent Modifications Active Modifications Redefaulted Modifications 376,418 263,254 98,044 26% 74,756 45,339 24,679 33% Southwest/South Central 112,655 66,115 40,627 36% Midwest 216,986 128,965 79,079 36% Mid-Atlantic/Northeast 316,992 196,287 110,114 35% West Mountain West/Plains Southeast TOTAL Redefault Rate 298,934 187,041 101,365 34% 1,396,741 887,001 453,908 32% Notes: Includes GSE and non-GSE modifications. Of HAMP permanent modifications, 54,873 loans have been paid off. Source: Treasury, “HAMP 1MP: Program Volumes Supplemental - Tier 1: State – June 2015,” accessed 7/22/2015. FIGURE 4.6 REDEFAULTED HAMP PERMANENT MODIFICATIONS, BY REGION, CUMULATIVE AS OF 6/30/2015 AK MOUNTAIN WEST/ PLAINS 24,679 WA MT OR ID WEST 98,044 CA NV ND WY MN WI SD CO IL KS MO HI AZ GU OK NM AR NY OH IN PA WV VA KY NH MA CT RI NJ DE MD DC NC TN MS AL TX MID-ATLANTIC/ NORTHEAST VT ME 110,114 MI IA NE UT MIDWEST 79,079 SC GA SOUTHEAST 101,365 LA FL PR SOUTHWEST/ SOUTH CENTRAL 40,627 WEST MOUNTAIN WEST/PLAINS SOUTHWEST/SOUTH CENTRAL MIDWEST MID-ATLANTIC/NORTHEAST SOUTHEAST VI 161 162 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM West TABLE 4.17 REDEFAULTED HAMP PERMANENT MODIFICATIONS, BY STATE, CUMULATIVE AS OF 6/30/2015 WA AK OR GU Permanent Modifications Redefaulted Modifications Redefault Rate AK 663 388 210 32% CA 325,470 230,176 82,680 25% GU CA Active Modifications 13 8 3 23% HI 5,291 3,609 1,410 27% OR 15,343 9,906 4,578 30% WA 29,638 19,167 9,163 31% 376,418 263,254 98,044 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 - June 2015,” accessed 7/22/2015. WEST Percentage of Redefaults on HAMP Permanent Modifications >27% 25-27% <25% Mountain West/Plains TABLE 4.18 REDEFAULTED HAMP PERMANENT MODIFICATIONS, BY STATE, CUMULATIVE AS OF 6/30/2015 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 18,479 11,766 5,043 27% ID 5,096 3,162 1,606 32% KS 3,529 1,943 1,342 38% MT 1,547 970 432 28% ND 225 126 72 32% NE 2,047 1,083 801 39% NV 31,072 18,542 11,482 37% SD 512 274 172 34% UT 11,582 7,106 3,507 30% WY Total 667 367 222 33% 74,756 45,339 24,679 33% Notes: Includes GSE and non-GSE modifications, excludes permanent modifications paid off. Source: Treasury, “HAMP 1MP: Program Volumes Supplemental - Tier 1: State - June 2015,” accessed 7/22/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Southwest/South Central TABLE 4.19 REDEFAULTED HAMP PERMANENT MODIFICATIONS, BY STATE, CUMULATIVE AS OF 6/30/2015 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 3,280 1,811 1,264 39% AZ 52,331 31,409 18,386 35% LA 8,785 4,743 3,659 42% NM 4,871 2,997 1,642 34% OK 3,585 1,907 1,436 40% TX 39,803 23,248 14,240 36% 112,655 66,115 40,627 36% Total Notes: Includes GSE and non-GSE modifications, excludes permanent modifications paid off. Source: Treasury, “HAMP 1MP: Program Volumes Supplemental - Tier 1: State - June 2015,” accessed 7/22/2015. Midwest TABLE 4.20 REDEFAULTED HAMP PERMANENT MODIFICATIONS, BY STATE, CUMULATIVE AS OF 6/30/2015 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 3,581 1,860 1,452 41% IL 74,184 45,616 26,752 36% IN 13,849 7,834 5,306 38% KY 5,634 3,142 2,192 39% MI 39,682 24,288 13,306 34% MN 21,386 12,785 7,507 35% MO 14,669 8,023 5,915 40% OH 30,165 17,711 11,173 37% WI 13,836 7,706 5,476 40% 216,986 128,965 79,079 36% Total Notes: Includes GSE and non-GSE modifications, excludes permanent modifications paid off. Source: Treasury, “HAMP 1MP: Program Volumes Supplemental - Tier 1: State - June 2015,” accessed 7/22/2015. 163 164 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Mid-Atlantic/Northeast TABLE 4.21 REDEFAULTED HAMP PERMANENT MODIFICATIONS, BY STATE, CUMULATIVE AS OF 6/30/2015 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 19,498 11,800 7,163 37% DC 2,463 1,524 807 33% DE 4,598 2,616 1,831 40% MA 34,051 20,967 11,666 34% MD 45,792 28,167 16,143 35% ME 4,280 2,418 1,663 39% NH 6,421 3,684 2,416 38% NJ 50,492 30,008 19,108 38% NY 74,388 50,040 22,489 30% PA 32,639 18,659 12,780 39% RI 7,080 4,262 2,611 37% VA 32,027 20,254 10,247 32% VT 1,308 779 451 34% WV Total 1,955 1,109 739 38% 316,992 196,287 110,114 35% Notes: Includes GSE and non-GSE modifications, excludes permanent modifications paid off. Source: Treasury, “HAMP 1MP: Program Volumes Supplemental - Tier 1: State - June 2015,” accessed 7/22/2015. Southeast TABLE 4.22 REDEFAULTED HAMP PERMANENT MODIFICATIONS, BY STATE, CUMULATIVE AS OF 6/30/2015 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 8,649 4,618 3,610 42% FL 173,666 114,237 54,331 31% GA 50,946 30,793 18,303 36% MS 5,457 2,839 2,383 44% NC 26,706 15,243 10,121 38% PR 4,360 3,130 1,125 26% SC 13,642 7,862 5,119 38% TN 15,497 8,309 6,372 41% 11 10 1 9% 298,934 187,041 101,365 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 - June 2015,” accessed 7/22/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 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 and the Virgin Islands have lower rates of redefault). Conversely, homeowners in the Midwest and Deep South have fared the worst in HAMP. In the Midwest, 36.4% of participating homeowners have redefaulted on their HAMP modification, the highest of any region. In the Deep South, 44% of Mississippi homeowners participating in HAMP have redefaulted, the highest redefault rate in the nation, while 42% of homeowners in Louisiana and Alabama, and 41% of homeowners in Tennessee, have redefaulted. California has the highest number of homeowners who redefaulted on HAMP permanent modifications with 82,680, followed by Florida, Illinois, and New York with 54,331, 26,752, and 22,489, 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 assistancexiv 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.186 The process by which servicers solicit and evaluate homeowners is outlined in Figure 4.7. xiv Homeowners may request MHA assistance by contacting their mortgage servicer directly, calling 888-995-HOPE (4673), or visiting www.makinghomeaffordable.gov. 165 166 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 4.5,” 6/1/2015, www.hmpadmin.com//portal/programs/docs/hamp_servicer/ mhahandbook_45.pdf, accessed 7/1/2015. 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 JULY 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).187 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.xv 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;xvi 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 xv 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. xvi Prior 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 7/1/2015; Treasury, “Supplemental Directive 12-02, MHA Extension and Expansion,” 3/9/2013, www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd1202.pdf, accessed 7/1/2015; Treasury, “Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages, Version 4.5,” 6/1/2015, www.hmpadmin.com//portal/programs/docs/ hamp_servicer/mhahandbook_45.pdf, accessed 7/1/2015. 167 168 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.188 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.189 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.190 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 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 4.5,” 6/1/2015, www.hmpadmin.com//portal/programs/docs/hamp_servicer/ mhahandbook_45.pdf, accessed 7/1/2015. As described in Figure 4.8, HAMP Trial modifications are supposed to last for three months. However, according to Treasury, many homeowners end up in extended trial periods. Treasury reports on trials that last six months or longer: 4,731 (13% of the 35,640 active trials) have lasted at least six months and, of those, 2,188 (6% of active trials) have lasted at least a year. Additionally, 784,214 of 2,199,627 (36%) of HAMP Tier 1 Trial Starts were cancelled and 9,920 of 143,442 (7%) of HAMP Tier 2 Trial Starts were cancelled. Overall 794,134 of 2,343,069 (34%) trial starts were cancelled.191 169 170 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM What Happens Once a Homeowner is in a Permanent Modification 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. 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 beginning in year six 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. In each of the first five years, homeowners who make monthly payments on time can earn an annual principal reduction of up to $1,000; homeowners remaining in HAMP on the sixth anniversary of their trial start date can earn an additional one-time principal reduction of $5,000 (and may be offered a recast of their mortgage to further reduce their monthly payments). If at any time the homeowner falls three payments behind, they redefault out of HAMP and their mortgage reverts to its pre-modification terms.192 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: At the start of the 6th 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 $196 during that time (HAMP Tier 2 modifications are not subject to these payment increases). On the 6th anniversary of the trial start date homeowners remaining in HAMP receive a $5,000 principal reduction incentive and may be able to obtain a loan recast to reduce 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 4.5,” 6/1/2015, www.hmpadmin.com//portal/programs/docs/hamp_servicer/ mhahandbook_45.pdf, accessed 7/1/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Modification Incentives Treasury provides servicers with an up front incentive for modifying loans that is based on the extent of the loans delinquency upon entry into a HAMP TPP. For loans less than or equal to 120 days delinquent, servicers receive $2,000. For loans 121-210 days delinquent, servicers receive $1,600. For loans more than 210 days delinquent, servicers receive $1,200. 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).193 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 $1,000.194 The principal reduction accrues monthly and is payable for each of the first five years as long as the homeowner remains in good standing.195 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.196 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.197 As of June 30, 2015, of the $29.8 billion in TARP funds allocated to the 77 servicers participating in MHA, 90% was allocated to 10 servicers.198 Table 4.23 shows incentive payments made to these servicers. 171 172 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.23 TARP INCENTIVE PAYMENTS BY 10 SERVICERS, ALL MHA PROGRAMS, AS OF 6/30/2015 SPA Cap Limit Incentive Payments to Borrowers Incentive Payments to Investors Incentive Payments to Servicers Total Incentive Payments $7,068,059,630 $456,391,278 $1,605,161,375 $622,196,713 $2,683,749,365 JPMorgan Chase Bank, NAb 4,169,900,269 402,779,397 1,180,486,086 490,461,068 2,073,726,550 Wells Fargo Bank, N.A.d 4,708,711,422 388,225,388 999,862,179 469,250,860 1,857,338,426 Bank of America, N.A.c 4,697,261,703 387,785,200 813,777,112 445,821,286 1,647,383,598 Select Portfolio Servicing, Inc. 1,654,764,999 143,557,876 301,360,816 169,411,136 614,329,828 Nationstar Mortgage LLCe 1,996,900,213 110,998,430 316,607,575 147,026,158 574,632,163 CitiMortgage Inc 1,020,831,396 94,607,880 315,210,022 131,958,542 541,776,444 OneWest Bank 967,079,746 65,995,672 227,513,631 89,404,264 382,913,567 Bayview Loan Servicing LLC 438,391,543 27,900,784 64,377,025 29,930,619 122,208,428 Saxon Mortgage Services Inc 100,807,086 19,655,075 41,738,413 39,413,598 100,807,086 2,959,215,792 147,305,881 339,999,077 196,607,614 683,912,572 $29,781,923,798 $2,245,202,860 $6,206,093,310 $2,831,481,857 $11,282,778,028 Ocwen Loan Servicing, LLCa 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, 6/26/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 As shown in Table 4.23, Ocwen Loan Servicing, LLC, received $2,683,749,365 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 73% 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, 24% of incentives paid to Bank of America, N.A. went to homeowners, the highest among the four largest servicers. Of the $11.3 billion in total incentives paid to all servicers, 20% went to homeowners, 55% went to investors, and the remaining 25% went to the servicers. Table 4.24 below shows similar incentives information, but limited to HAMP incentives. Of the $9.4 billion in total HAMP incentives paid, 17% went to homeowners, 58% went to investors, and the remaining 25% went to the servicers. TABLE 4.24 TARP INCENTIVE PAYMENTS BY 10 SERVICERS, HAMP ONLY, AS OF 6/30/2015 Incentive Payments to Borrowers Incentive Payments to Investors Incentive Payments to Servicers Total Incentive Payments Ocwen Loan Servicing, LLCa $391,493,165 $1,565,332,110 $577,767,596 $2,534,592,871 JPMorgan Chase Bank, NAb 286,244,554 967,812,835 391,087,276 1,645,144,666 Wells Fargo Bank, N.A. 267,947,420 888,278,257 373,128,452 1,529,354,128 Bank of America, N.A. d 219,378,479 598,396,043 318,574,074 1,136,348,596 Select Portfolio Servicing, Inc. 104,562,647 277,339,257 144,504,846 526,406,750 Nationstar Mortgage LLCe 96,464,182 294,877,012 132,515,313 523,856,507 c CitiMortgage Inc 84,346,272 214,941,347 114,117,087 413,404,706 OneWest Bank 50,211,297 194,402,977 77,455,014 322,069,288 Saxon Mortgage Services Inc 19,331,075 41,733,526 39,251,598 100,316,199 Bayview Loan Servicing LLC 17,686,566 57,465,803 20,480,061 95,632,430 Other Servicers 98,308,071 285,482,167 150,309,204 534,099,442 $1,635,973,728 $5,386,061,334 $2,339,190,521 $9,361,225,582 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, June 2015. 173 174 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.199 HAMP Tier 2 also allows homeowners with a wider range of debt-toincome situations to receive modifications.200 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.”201 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.202 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.203 Approximately 14,559 of homeowners in active HAMP Tier 2 permanent modifications were previously in HAMP Tier 1 permanent modifications.204 According to Treasury, as of June 30, 2015, a total of 60 of the 77 servicers with active MHA servicer agreements had fully implemented HAMP Tier 2, including all of the 10 largest servicers.205 According to Treasury, as of June 30, 2015, it had paid $433.1 million in incentives in connection with 116,554 HAMP Tier 2 permanent modifications, 98,060 of which remain active.206 HAMP Tier 2 mortgage modification activity and property occupancy status is shown in Table 4.25. TABLE 4.25 HAMP TIER 2 FIRST LIEN MODIFICATION ACTIVITY AND OCCUPANCY STATUS, AS OF 6/30/2015 Trials Started Trials Cancelled Trials Active Trials Converted Permanent Permanents Disqualified Permanents Paid-Off Permanents Active 134,542 9,338 15,845 109,359 16,561 904 91,889 Tenant Occupied 7,775 496 979 6,300 840 57 5,403 Vacant 1,125 86 144 895 120 7 768 143,442 9,920 16,968 116,554 17,521 968 98,060 Property Type Borrower Occupied Total Source: Treasury, “HAMP 1MP Program Volumes – Tier 2 Property Type – June 2015,” accessed 7/22/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 According to Treasury data, of the 143,442 HAMP Tier 2 trial mortgage modifications started, 134,542 (94%), were for owner-occupied properties; 7,775 (5%), were for tenant-occupied properties (as represented by homeowner at time of application), and 1,125 (1%) were for vacant properties. Of the 134,542 owneroccupied HAMP Tier 2 trials started, 15,845 (12%) remained active, 9,338 (7%) were cancelled, and 109,359 (81%) were converted to permanent. Of the 109,359 owner-occupied HAMP Tier 2 permanent modifications started, 91,889 (84%) remained active and 16,561 (15%) redefaulted. Of the 7,775 HAMP Tier 2 trials started on properties the homeowner represented as tenant-occupied, 979 (13%) remained active, 496 (6%) were cancelled, and 6,300 (81%) were converted to permanent. Of the 6,300 HAMP Tier 2 permanent modifications started on properties the homeowner represented as tenant-occupied, 5,403 (86%) remained active and 840 (13%) redefaulted. Of the 1,125 HAMP Tier 2 trials started for vacant properties, 144 (13%) remained active, 86 (8%) were cancelled, and 895 (80%) were converted to permanent. Of the 895 HAMP Tier 2 permanent modifications started for vacant properties, 768 (86%) remained active and 120 (13%) redefaulted.207 In the quarter ending June 30, 2015, 16,344 Tier 2 trials were started (down from 17,557 in the preceding quarter), 17,852 trials converted to permanent modifications (up from 13,714 in the preceding quarter), and 3,019 Tier 2 modifications redefaulted (up from 2,679 in the preceding quarter). As of June 30, 2015 there were 16,968 homeowners active in HAMP Tier 2 trial modifications, compared to 19,906 at the previous quarter end. Of the 116,554 homeowners that received a permanent HAMP Tier 2 modification, 37,527 (32%) received principal reduction through PRA, and another 756 (1%) 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.208 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.”209 NeighborWorks is a Congressionally chartered corporation that through a national network of non-profit organizations administers housing programs, including housing counseling.210 The initiative, called the MHA Outreach and Borrower Intake Project, paid $450 to housing counseling agencies for each homeowner they worked with to submit complete applications for HAMP to servicers.211 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.212 175 176 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM As of June 30, 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 servicer, whether or not the homeowner eventually receives a HAMP mortgage modification.213 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.214 According to Treasury, housing counseling agencies are due $1,771,200 for those accepted applications.215 NeighborWorks has, as of June 30, 2015, requested $7.9 million in total funds, mostly for outreach, oversight, and administration, as well as for the counseling agency payments. Of the $7.9 million in total funds committed to this program only 23% of the committed funds are used for agency counseling payments. The remaining 77% are designated for administration, marketing and outreach.216 TABLE 4.26 FIGURE 4.10 MHA OUTREACH AND BORROWER INTAKE PROJECT, AS OF 6/30/2015 Agency Counseling Fees $1,771,200 MHA OUTREACH AND BORROWER INTAKE PROJECT, AS OF 6/30/2015 Administrative Expenses Intermediary Oversight Fees $268,889 Administration (NWA) 2,052,773 Quality Control & Compliance 490,270 Technology Build 590,166 Counselor Training 274,504 Outreach Expenses Agency Outreach Fees Supplemental Outreach Fees Virtual Outreach Events Traditional Outreach Events Total Expenses $1,571,524 475,106 58,380 308,563 $7,861,374 Source: Treasury, responses to SIGTARP data calls, 7/6/2015 and 7/17/2015. For more information on these additional housing programs, see SIGTARP’s October 2013 Quarterly Report, pages 93-99. 23% 77% 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, responses to SIGTARP data calls, 7/6/2015 and 7/17/2015. 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 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 liens”), and programs that offer alternatives to foreclosure (the Home Affordable Foreclosure Alternative program or “HAFA.” Home Affordable Unemployment Program (“UP”) In July 2010, Treasury created UP to help unemployed homeowners hold onto their homes while they seek a HAMP mortgage modification. Under UP, unemployed homeowners who meet certain qualifications can have their mortgage payments temporarily reduced or postponed—called “forbearance”—to no more than 31% of their monthly gross income (including unemployment benefits).217 Originally, the forbearance period was a minimum of three months, unless the homeowner found work earlier. However, in July 2011, after SIGTARP recommended the term be extended, Treasury increased the minimum UP forbearance period to twelve months.218 Homeowners who are approved to receive unemployment benefits and who also request assistance under HAMP must be evaluated for and, if eligible, offered an UP forbearance plan by their mortgage servicer (as of June 1, 2012, a servicer may also consider a borrower whose loan is secured by a vacant or tenantoccupied property).219 The servicer must consider a borrower for UP regardless of the borrower’s monthly mortgage payment ratio and regardless of whether the borrower had a payment default on a HAMP trial plan or lost good standing under a permanent HAMP modification. Servicers are not required to offer an UP forbearance plan to borrowers who are more than 12 months delinquent at the time of the UP request.220 Alternatively, servicers may evaluate unemployed borrowers for HAMP and offer a HAMP trial period plan instead of an UP forbearance plan if, in the servicer’s business judgment, HAMP is the better loss mitigation option.221 Re-employed borrowers with reduced income still facing a hardship must be considered for HAMP. If the borrower is eligible, any payments missed prior to and during the period of the UP forbearance plan are capitalized as part of the normal HAMP modification process.222 If the UP forbearance period expires and the borrower is ineligible for HAMP, the borrower may be eligible for MHA foreclosure alternatives, such as HAFA.223 As of May 31, 2015, which is the latest data available from Treasury, 43,779 homeowners had started a UP forbearance plan—less than one-third of the 154,698 homeowners who had applied for UP relief.224 As of May 31, 2015, 1,641 homeowners (fewer than 4% of those who had started an UP plan) were actively participating in the program, a decline of more than half from the March level (3,493).225 The number of homeowners in an active UP plan has declined in 11 of the last 12 months and, as of May 31, 2015, was about one-fifth of the corresponding number as of December 31, 2012.226 For more information on HAMP UP, see ‘Home Affordable UP: A Highly Underutilized Program,’ in SIGTARP’s October 2014 Quarterly Report, pages 136-137, and SIGTARP’s October 2013 Quarterly Report, pages 95-96. 177 178 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.27 CUMULATIVE HOMEOWNER HAMP UP ACTIVITY, AS OF 5/31/2015 Homeowners Requesting UP Assistancea UP Forbearance Plans Started Completed UP Forbearance Plansb Active UP Forbearance Plans Dec. 2010 Dec. 2011 Dec. 2012 Dec. 2013 Dec. 2014 May 2015 24,402 66,842 98,270 125,557 145,622 154,698 6,961 18,403 30,525 38,445 42,142 43,779 584 8,835 14,583 20,250 22,628 23,120 5,967 6,113 7,786 5,482 3,671 1,641 Notes: a “Homeowners Requesting UP Assistance” is the sum of “Total UP Forbearance Plans Started” and “Total UP Forbearance Requested & Denied” as reported by Treasury. b Under Treasury guidance, “completed” UP plans include situations where the “forbearance plan term (including any extensions) have expired, where the borrower has been re-employed, or where the borrower has moved into another forbearance plan, such as a Federal Declared Disaster (FDD) or Hardest Hit Fund plan.” Source: Treasury, Home Affordable Unemployment Program Non-GSE Forbearance Plans Worksheets, various dates. As shown in Table 4.27, as of May 31, 2015, approximately half (53%, or 23,120) of homeowners who received UP forbearance completed their UP forbearance plan successfully, while a similar number (19,018, or 43%) fell out of UP.227 According to Treasury data, fewer than one out of every six homeowners who started an UP plan went on to receive a HAMP modification (including 4,917 homeowners who successfully completed their UP plans, and 1,853 who did not).228 Servicer participation in UP is voluntary—there is no TARP funding for UP, and HAMP servicers are not paid for participating—which may in part explain the program’s low utilization. Through May 31, 2015, only 2,711 of the homeowners who sought UP assistance had previously been in a HAMP modification.229 Table 4.28 provides more detail on the remaining MHA programs. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 HOME AFFORDABLE FORECLOSURE ALTERNATIVES (“HAFA”) Starting in April 5, 2010,xvii Treasury began providing incentives to servicers, homeowners, and investors to encourage short sales or deeds-in-lieu of foreclosure as alternatives to foreclosure.230 Under HAFA, the servicer forfeits the ability to pursue a deficiency judgment against a borrower when the proceeds from the short sale or deed-in-lieu are less than the outstanding amount on the mortgage. In October 2014, Treasury announced an increase from $3,000 to $10,000 in the relocation assistance payable to eligible homeowners and tenants who are required to vacate the property as a condition to the short sale or deedin-lieu transaction for HAFA transactions closing after February 1, 2015.231 In exchange for facilitating a HAFA transaction, the program also pays servicers up to $1,500, and reimburses investors up to $8,000 for a portion (currently twothirds) of payments made to subordinate lienholders in exchange for releasing the lien and the borrower’s liability.232 Deficiency Judgment: Court order authorizing a lender to collect all or part of an unpaid and outstanding debt resulting from the borrower’s default on the mortgage note securing a debt. A deficiency judgment is rendered after the foreclosed or repossessed property is sold when the proceeds are insufficient to repay the full mortgage debt. Relocation assistance may be paid to qualifying homeowners or tenants as long as the homeowner or tenant resided in the property at the time HAFA assistance was requested and was required to vacate as a condition of the short sale or deed-in-lieu.xviii If the homeowner qualifies for HAFA relocation assistance, they are paid when the short sale or deed-in-lieu is closed. If the property was only occupied by a tenant and not the homeowner, then the servicer must provide the relocation assistance directly to the tenant, with no proceeds going to the homeowner.233 HAFA: A Slow Start, Declining Activity Through June 30, 2015, HAFA had facilitated 197,939 transactions, approximately 94% of which were short sales and 6% of which were deed-in-lieu transactions.234 By comparison, servicers denied nearly 3.9 million homeowners in HAMP between April 2010 and June 2015.235 According to Treasury’s data, 79% of HAFA transactions through June 30, 2015, involved relocation assistance, while 21% did not.236 As of that date, Treasury had paid $971 million in incentives to borrowers, servicers and investors, or just 23% of the $4.2 billion in TARP funds allocated to the program.237 According to Treasury’s data, HAFA transaction volume has varied significantly over the years. As shown in Figure 4.12, the program started off slowly, with only 4,191 transactions during the 9 months the program was active in 2010. The number of HAFA transactions peaked in 2012, when 65,297 were completed, and then declined in each of 2013 and 2014. In the twelve months through June 30, 2015, just 21,988 HAFA transactions have been completed, down from 33,016 xvii Treasury announced that some servicers could implement HAFA before April 5, 2010. xviii For deed-in-lieu transactions, the servicer can allow the borrower to remain in the home as a renter (referred to as a “deed-for- lease”) or to repurchase the property later, but such transactions are not eligible for relocation assistance. Treasury, “Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages, version 4.5,” 6/1/2015, www.hmpadmin.com/portal/ programs/docs/hamp_servicer/mhahandbook_45.pdf, accessed 6/12/2015. FIGURE 4.11 HAFA TRANSACTIONS BY TYPE, AS OF JUNE 30, 2015 3% 2% 19% 76% Deed-in-lieu with Relocation Compensation Deed-in-lieu without Relocation Compensation Short Sale with Relocation Compensation Short Sale without Relocation Compensation Source: Treasury, “HAFA Program Inventory – Program Type – June 2015,” accessed 7/22/2015. 179 180 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.13 HAFA TRANSACTIONS BY PROPERTY TYPE, AS OF JUNE 30, 2015 3% 3% in the twelve months ended June 30, 2014. According to Treasury data, HAFA transactions have decreased quarter over quarter in 8 of the last 10 quarters.238 FIGURE 4.12 HAFA TRANSACTION ACTIVITY, AS OF JUNE 30, 2015 250,000 200,000 189,133 197,939 163,026 150,000 117,530 100,000 94% Principal Residence Second or Vacation Home Investment Property 52,233 50,000 0 7,372 2010 44,861 2011 Annual Transactions 65,297 45,496 26,107 8,806 2012 2013 2014 2015 Cumulative Transactions Source: Treasury, “HAFA Program Inventory – Loan Agreement Issue Month – June 2015,” accessed 7/22/2015. Source: Treasury, “HAFA Program Inventory – Program Type – June 2015,” accessed 7/22/2015. FIGURE 4.14 HAMP STATUS OF HOMEOWNERS COMPLETING HAFA TRANSACTIONS, AS OF MAY 31, 2015 6% 5% 9% 81% Does not qualify for a Trial Period Plan Does not successfully complete a Trial Period Plan Permanent HAMP Modification Delinquency Requested a Short Sale or Deed-in-Lieu Source: Treasury HAFA data, as of May 2015. For a discussion of HAMP Tier 1 activity by state, see SIGTARP’s report, “Treasury’s Opportunity to Increase HAMP’s Effectiveness by Reaching More Homeowners in States Underserved by HAMP,” in SIGTARP’s April 2015 Quarterly Report, pages 109-122. HAFA may be used to help prevent foreclosures on primary residences, investment properties, or second/vacation homes. The program provides relocation assistance for displaced tenants when an investment property is sold. As shown in Figure 4.13, HAFA transactions to date have largely involved principal residences, as about 94% of all HAFA transactions involved principal residences, 3% involved investment properties, and 3% involved second or vacation homes. As shown in Figure 4.14, as of May 31, 2015 (the latest such data is available), 96% of HAFA transactions involve homeowners who could not get into HAMP or were unsuccessful once in. Some States Have Been Underserved by HAFA SIGTARP compared Treasury’s HAFA’s short sale data (which accounts for 95% of HAFA transactions) to CoreLogic data on short sale transactions on a nationwide basis and state by state. According to Treasury’s data, HAFA transactions account for just 13% of all short sale transactions tracked by CoreLogic across the country since April 2010, when the program became active. SIGTARP found that many states have been deeply underserved by HAFA—particularly those in the Great Plains, Midwest, and Southeast.239 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 FIGURE 4.15 HAFA SHORT SALES AS A PERCENTAGE OF ALL SHORT SALES (APRIL 2010 – MARCH 2015) 11.4 4.0 N/A 1.5 11.6 15.4 10.9 5.2 N/A 4.0 16.0 23.0 12.1 7.5 3.2 4.7 4.1 3.4 19.0 4.3 14.0 11.9 19.4 3.5 4.2 3.8 8.5 Foreclosures for each HAMP modification Less than five percent 4.3 1.1 10.5 13.0 39.2 6.7 48.8 11.3 3.4 6.9 19.0 9.2 7.3 10.4 4.1 6.9 10.3 2.9 2.9 9.7 19.3 6.8 Between five and ten percent 13.0 8.5 Between ten and fifteen percent More than fifteen percent Insufficient data (CoreLogic) Note: HAFA short sale transactions (April 2010 - March 2015) as a percentage of short sale transactions tracked by CoreLogic (April 2010 – March 2015). Source: CoreLogic; Treasury HAMP data. As shown in Figure 4.15, the five states most underserved by HAFA include AlaskaNorth Dakota, where only 1.13% of short sales were HAFA transactions, North Dakota Alaska (only 1.5%), Iowa (2.9%), Nebraska (2.9%), Iowa (3%), and Oklahoma (3.25%). The greater volume of activity outside HAFA in these and other states may be explained, in part, by the fees and deficiency judgments that servicers are able to collect from the borrower in non-HAFA transactions, even though Treasury, as of August 2011, has required servicers to notify eligible borrowers in writing about the availability of the HAFA program and, unless prohibited by investor guidance, to prioritize HAFA over proprietary short sale or deed-in-lieu options.240 A significant number of states are being underserved by HAFA. These results underscore the importance of Treasury implementing SIGTARP’s May 1, 2015 recommendation to conduct more homeowner MHA outreach in underserved states and regions.xix xix Refer to page 569 for SIGTARP’s May 1, 2015 recommendation letter to Treasury. 181 182 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.28 ADDITIONAL MAKING HOME AFFORDABLE (“MHA”) HOUSING SUPPORT PROGRAMS, AS OF 6/30/2015 Program Principal Reduction Alternative (“PRA”)b Home Price Decline Protection (“HPDP”)b Second Lien Modification Program (“2MP”) Treasury/ Federal Housing AdministrationHome Affordable Modification Program (“Treasury/FHAHAMP”) Department of Agriculture Rural DevelopmentHome Affordable Modification Program (“RDHAMP”) Date Announced 6/3/2010 Date Started Purpose To provide incentives to investors to modify homeowners’ mort10/1/2010 gages under HAMP by reducing the principal amount owed. Homeowners Assisted Estimated Number of Homeowners to be Permanents Permanents Assisted Started Active Estimated TARP Allocation (In Billions)a TARP Expenditures (In Billions) — 191,573c 147,488c $2.00 $1.5 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. — 221,869c 138,943c 1.55 0.37 4/28/2009 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. 149,557 84,426 0.13 0.78 7/30/2009d 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. 87,654 66,746 0.23 0.17 9/17/2010d To provide TARP-funded, HAMP-like incentives to servicers and borrow9/24/2010 ers for modifications of mortgages insured by RD. — 174 122 0.02 —e Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 ADDITIONAL MAKING HOME AFFORDABLE (“MHA”) HOUSING SUPPORT PROGRAMS, AS OF 6/30/2015 Program Treasury/ Federal Housing Administration Second Lien Program (“Treasury/FHA2LP”) g Department of Veterans Affairs-Home Affordable Modification Program (“VA HAMP”) Date Announced Date Started Purpose 183 (CONTINUED) Homeowners Assisted Estimated Number of Homeowners to be Permanents Permanents Assisted Started Active Estimated TARP Allocation (In Billions)a TARP Expenditures (In Billions) 3/26/2010d 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 1/8/2010d To provide non-TARPfunded, HAMP-like incentives to servicers 2/1/2010 and borrowers for modifications of mortgages insured by the VA. — 738 554 —f —f 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 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.” e As of June 30, 2015, $398,451 has been expended for RD-HAMP. f Treasury does not provide incentive compensation related to VA-HAMP. g As of December 31, 2013, the FHA2LP program had expired. 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, 4/23/2015, 7/6/2015 and 7/23/2015; Treasury, Treasury, “2MP Program Inventory – Program Type by Payor – June 2015,“ accessed 7/23/2015; Treasury, “FHA & RD HAMP Trial Starts – Program Summary – June 2015,” accessed 7/23/2015; VA, responses to SIGTARP data calls, 1/8/2014, 4/3/2014, 7/7/2014, 10/23/2014, 1/2/2015, 4/1/2015 and 7/1/2015; Treasury, “Making Home Affordable Program Handbook for Servicers of NonGSE Mortgages, Version 4.5; 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 10-05: 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 29,761 2,199,627 2011 2012 2013 2014 2015 Total Total 563,828 6,654 1,082,367 2015 902,620 22,114 2014 2010 35,719 2009 81,478 2013 1,117,260 Total 2012 23,107 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 2,199,627 2,169,866 2,096,957 1,970,300 1,774,595 1,466,448 902,620 1,082,367 1,075,713 1,053,599 1,017,880 936,402 798,330 510,491 1,117,260 1,094,153 1,043,358 952,420 838,193 668,118 392,129 Cumulative 784,214 1,098 3,624 6,655 10,876 27,452 686,058 48,451 430,986 1,151 1,742 4,446 4,814 10,654 383,448 24,731 353,228 (53) 1,882 2,209 6,062 16,798 302,610 23,720 Annual 784,214 783,116 779,492 772,837 761,961 734,509 48,451 430,986 429,835 428,093 423,647 418,833 408,179 24,731 353,228 353,281 351,399 349,190 343,128 326,330 23,720 Cumulative Trials Cancelled 18,672 23,282 40,193 62,111 79,307 152,289 787,231 5,259 7,694 13,551 25,775 36,391 77,396 442,455 13,413 15,588 26,642 36,336 42,916 74,893 344,776 Annual Trials Active 1,396,741 33,273 86,196 141,920 202,025 353,677 512,712 66,938 646,122 7,938 26,229 43,497 87,280 168,423 269,450 43,305 750,619 25,335 59,967 98,423 114,745 185,254 243,262 23,633 Annual 1,396,741 1,363,468 1,277,272 1,135,352 933,327 579,650 66,938 646,122 638,184 611,955 568,458 481,178 312,755 43,305 750,619 725,284 665,317 566,894 452,149 266,895 23,633 Cumulative Trials Converted to Permanent 453,908 26,408 68,428 83,403 108,089 110,367 56,745 468 200,990 11,293 27,122 33,990 49,229 51,287 27,730 339 252,918 15,115 41,306 49,413 58,860 59,080 29,015 129 Annual 453,908 427,500 359,072 275,669 167,580 57,213 468 200,990 189,697 162,575 128,585 79,356 28,069 339 252,918 237,803 196,497 147,084 88,224 29,144 129 Cumulative Permanents Redefaulted 54,873 14,544 16,539 14,113 6,769 2,101 802 5 38,404 9,622 10,905 10,592 5,271 1,442 569 3 16,469 4,922 5,634 3,521 1,498 659 233 2 Annual 54,873 40,329 23,790 9,677 2,908 807 5 38,404 28,782 17,877 7,285 2,014 572 3 16,469 11,547 5,913 2,392 894 235 2 Cumulative Permanents Paid Off 887,001 (8,634) 1,225 44,403 87,168 241,209 455,165 66,465 406,460 (13,244) (11,799) (1,085) 32,780 115,694 241,151 42,963 480,541 4,610 13,024 45,488 54,388 125,515 214,014 23,502 Annual 887,001 895,635 894,410 850,007 762,839 521,630 66,465 406,460 419,704 431,503 432,588 399,808 284,114 42,963 480,541 475,931 462,907 417,419 363,031 237,516 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 - June 2015,” accessed 7/22/2015; 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. Notes: Data is as of December 31, 2009; December 31, 2010; December 31, 2012; December 31, 2013; December 31, 2014; and June 30, 2015. Total GSE TARP Annual Trials Started ANNUAL AND CUMULATIVE HAMP TIER 1 MODIFICATION ACTIVITY, AS OF 6/30/2015 TABLE 4.29 184 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Housing Finance Agency Hardest Hit Fund (“HHF”) More than 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”).241 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.”242 This TARPfunded housing support program was to be developed and administered by state housing finance agencies (“HFAs”) with Treasury’s approval and oversight.243,xx 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.244 Treasury approved each of the 19 states’ initial program proposals and approves any proposed changes to programs.245 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).246 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.247 Plans to use these funds were approved by Treasury on June 23, 2010.248 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 2009.249 Plans to use these funds were approved by Treasury on August 3, 2010.250 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.251 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.252 Treasury approved third round proposals on September 23, 2010.253 On September 29, 2010, a fourth round of HHF funding of an additional $3.5 billion was made available to existing HHF participants.254 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:255 xx 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 June 30, 2015, there were 74 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. 185 186 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM • • • • • • • 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 Downpayment assistance According to Treasury, states can reallocate funds between programs and modify existing programs as needed, with Treasury approval, until December 31, 2017.256 According to Treasury, as of June 30, 2015, there were 74 active HHF programs in 18 states and Washington, DC, a net addition of one program from the prior quarter. According to Treasury, seven states reallocated funds, modified or eliminated existing programs, or established new HHF programs with Treasury approval in the quarter ended June 30, 2015: Arizona, Florida, New Jersey, Nevada, North Carolina, Ohio and Washington, DC.257 In April, Treasury approved Florida’s Down Payment Assistance Program, reallocating $50 million from that state’s Unemployment Mortgage Assistance Program and Mortgage Reinstatement Assistance Program to target first-time homebuyers.258 This represents the first time HHF funds will be used to help homeowners purchase a home.259 In May 2015, Treasury approved Arizona’s request to expand its Unemployment/ Underemployment/Reinstatement Mortgage Assistance Component to expand eligibility to include junior mortgages and to raise the maximum cap for assistance to $60,000.260 In May 2015, Treasury also approved changes to the District of Columbia’s HomeSaver Program to, among other things, expand the program to reach additional homeowners, including those at risk of tax sale eviction due to outstanding real property tax obligations.261 Finally, in May 2015, Treasury approved a new, second program for New Jersey, the Home Saver Program, and reallocated $17,288,770 from the state’s HomeKeeper program to the new program.262 According to Treasury, the Home Saver Program seeks to use HHF funds to facilitate a first mortgage loan modification, recast, or refinance that reduces the household monthly payment to an affordable level.263 On June 25, 2015, Treasury approved changes to the HHF programs in Nevada and North Carolina. In Nevada, Treasury approved reallocating over $78.1 million in HHF funds to two existing programs—nearly doubling the allocation for the Principal Reduction Program (from $50.2 million to $97.1 million), and increasing seven-fold the allocation for the Second Mortgage Reduction Plan (from $4.7 million to $35.9 million)—by reducing the amounts allocated to the Mortgage Assistance Program (by $2.6 million, to $34.1 million) and the Mortgage Assistance Program Alternative (by $500,222, to $1.6 million), and by completely defunding both the Home Retention Fund (previously $35 million) and the Recast Refinance and Modification Program ($40 million). Other changes included raising the maximum mortgage to $50,000 for Nevada’s Second Mortgage Reduction Plan.264 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 In North Carolina, Treasury approved a new HHF program, the state’s fifth: the Principal Reduction Recast Lien Extinguishment for Unaffordable Mortgages, that offers per-household assistance of up to $50,000 to provide an affordable and longterm sustainable mortgage. Treasury approved $15 million in funding for the new program, reallocated from the Modification Enabling Pilot (cut by $10 million) and the Second Mortgage Refinance Program (cut by $5 million).265 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 June 30, 2015, four states—Rhode Island, Illinois, Oregon, and Ohio—have been approved to use this streamlined process.266 In the quarter ended June 30, 2015, Ohio was the only state to reallocate HHF funds under this process, shifting a total of $14.4 million from five different programs into its unemployment and past-due payment programs ($7.9 million) and its blight elimination program ($6.5 million).267 States’ TARP Allocations and Spending for HHF Of the $7.6 billion in TARP funds available for HHF, states collectively had drawn down $5.2 billion (68%) as of June 30, 2015.268 As of March 31, 2015, the latest date for which spending analysis is available, states had drawn down $5.1 billion (67%).269 However, not all of that has been spent on direct assistance to homeowners. States had spent $4 billion (53% of the $7.6 billion) to assist 226,511 individual homeowners; and two states had spent another $50.5 million on blight elimination (which does not directly assist individual homeowners). States have spent the rest of the funds on administrative expenses or hold the money as cash-on-hand. States had spent $525.7 million (7%) on administrative expenses; and held $585.6 million (8%) as unspent cash-on-hand, as of March 31, 2015, the latest data available.270,xxi There remains $2.5 billion (33%) in undrawn funds available for HHF, as of March 31, 2015.271 As of March 31, 2015, the latest data available, in aggregate, after more than four years, states had spent 53% ($4 billion) of the $7.6 billion in TARP funds that Treasury allocated for the HHF program to provide assistance to 269,762 program participants (which translates to 226,511 individual homeowners), or 49% of the number of homeowners the states anticipated helping with HHF in 2011.272,xxii As of March 31, 2015, 77.8% of the HHF funds spent by states was for unemployment assistance, including past-due payment assistance.273 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 xxi 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. xxii 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. 187 188 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM For more information on the Blight Elimination Program, please see “The Update on the Hardest Hit Funds Blight Elimination Program” on pages 194–211. participate. The remaining assistance can be broken down to 20.4% for mortgage modification, including principal reduction assistance, 0.4% for second-lien reduction assistance, and 0.1% for transition assistance. As of March 31, 2015, two states (Michigan and Ohio, the only states to report demolition activity under the Blight Elimination Program) had spent $50.5 million (up from $27.6 million as of the prior quarter) to eliminate 3,885 properties, representing 0.7% of all HHF funds.274 According to information reported to Treasury by those states as of March 31, 2015, Michigan has spent $42.9 million in removing and greening 3,220 properties, while Ohio spent $7.6 million removing 665 properties; Indiana reported that it had not removed any properties as of that date.275 Figure 4.16 shows state uses of TARP funds obligated for HHF by percent, as of March 31, 2015, the most recent figures available. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 FIGURE 4.16 STATE USES OF $7.6 BILLION OF TARP FUNDS AVAILABLE FOR HHF, BY PERCENT, AS OF 3/31/2015 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 80 100 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 March 31, 2015, are the most recent available; Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, states have drawn down $5.2 billion. Oregon’s cash-on-hand excludes $19.5 million received from lien satisfaction recoveries and other sources. Under several of its HHF programs, Oregon extends new mortgage loans to homeowners, receiving principal and interest payments while the state holds the new loans, and principal recoveries if and when the state sells the loans to third parties. Accordingly, the nature and scale of the amounts received by Oregon under these structures differ from other states and, because the funds are recycled into the HHF, enable the state to report increased amounts expended for homeowner assistance and held as cash-on-hand. a Sources: Treasury, Transactions Report-Housing Programs, 6/26/2015; 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, 4/6/2015, and 7/6/2015. 189 190 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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. State Estimates of Homeowner Participation in HHF According to Treasury, as of March 31, 2015, states had spent $4 billion to help 226,511 homeowners. For the quarter ended March 31, 2015 alone, states spent $234.6 million to help 8,388 homeowners.276 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.277 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.278 As of March 31, 2015, the states estimated helping 305,493 homeowners with HHF, which is 241,069 fewer homeowners than the states estimated helping with HHF in 2011, a reduction of 44%. Importantly, the states collectively estimate that HHF will help 305,493 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 March 31, 2015, 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.279 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.280 As of March 31, 2015, the states reported that 269,762 homeowners participated in HHF programs.281 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, 226,511 individual homeowners participated in HHF programs.282 Table 4.30 provides each state’s estimate of the number of homeowners it projects it will help and the actual number of homeowners helped as of March 31, 2015.xxiii xxiii Program 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 JULY 29, 2015 TABLE 4.30 HHF ESTIMATED AND ACTUAL NUMBER OF BORROWERS ASSISTED AND ASSISTANCE PROVIDED BY STATE AS OF 3/31/2015 Estimated Number of Participating Households to be Assisted by 12/31/2017* Actual Borrowers Receiving Assistance as of 3/31/2015** Assistance Provided as of 3/31/2015** Alabama 6,600 3,947 $31,592,748 Arizona 7,606 3,728 120,178,539 California 71,970 48,864 961,908,280 Florida 39,000 22,400 495,556,699 Georgia 13,500 6,245 110,848,670 Illinois 13,500 13,798 325,469,851 Indiana 10,184 5,198 65,453,140 Kentucky 7,700 6,668 83,435,693 Michigan 9,444 25,573 197,915,106 Mississippi 3,500 3,187 48,890,754 Nevada 7,565 5,282 86,461,853 New Jersey 6,500 6,000 215,487,603 North Carolina 21,310 19,060 305,876,920 Ohio 41,201 24,485 405,209,422 Oregon 15,150 11,740 184,083,412 3,413 3,075 63,656,158 18,350 9,209 135,716,730 Tennessee 7,700 7,355 148,510,080 Washington, DC 1,300 697 13,577,099 305,493 226,511 $3,999,828,757 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 3/31/2015. 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, 7/6/2015; First Quarter 2015 HFA Performance Data quarterly reports and First Quarter 2015 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 44%. 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 first quarter of 2015, California was the only state to change its estimate of homeowners to be helped, increasing the estimate by 4,000 to 71,970. Collectively, as of March 31, 2015, the states have spent $4 billion on direct assistance to homeowners, or 53% of the $7.6 billion in TARP funds obligated to HHF.283,xxiv Of the 19 HHF states, Oregon has spent the highest percentage, 84%, of its obligated funds on homeowner assistance.xxv Alabama has spent the lowest percentage, 19%. In addition to Alabama, two other states have spent 33% 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.284 They include Tennessee, Rhode Island, Illinois, New Jersey, Oregon, Ohio, and Washington, DC. Rhode Island stopped accepting applications after January 31, 2013.285 Illinois stopped accepting applications after September 30, 2013.286 New Jersey stopped accepting applications after November 30, 2013.287 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, 2014.288 Table 4.31 below provides a snapshot of states’ HHF activity by program type. xxiv 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. xxv Under several of its HHF programs, Oregon extends new mortgage loans to homeowners, receiving principal and interest payments while the state holds the new loans, and principal recoveries if and when the state sells the loans to third parties. Accordingly, the nature and scale of the amounts received by Oregon under these structures differ from other states and, because the funds are recycled into the HHF, enable the state to report increased amounts expended for homeowner assistance and held as cash-on-hand. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 TABLE 4.31 HHF ACTIVE PROGRAMS BY STATE, AS OF 3/31/2015 State Unemploymenta Transitionb Modificationc X X X ALABAMA Second Lien Reductiond ARIZONA X X X X CALIFORNIA X X X X FLORIDA X GEORGIA ILLINOIS Past-Due Paymente Blight Eliminationf Total Programs X 4 4 XX 6 XX XX 5g X X X 3 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 XXXh X 7 1i X X X 4j XXX XXk 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 On April 21, 2015, Florida added a sixth program, for Down Payment Assistance. h On June 25, 2015, Nevada defunded two of its modification programs, the Home Retention Fund and the Recast Refinance and Modification Program. i On May 21, 2015, New Jersey added a second program, the Home Saver Program. j On June 25, 2015, North Carolina added a fifth program, the Principal Reduction Recast Lien Extinguishment for Unaffordable Mortgages (PRRLE) Program. k 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, responses to SIGTARP data calls, 4/6/2015 and 7/6/2015. 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 initially approved by Treasury for assistance to homeowners in five categories: (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-inlieu of foreclosure, or relocation assistance. As SIGTARP reported in its April 2012 in-depth audit report, HHF was slow in getting assistance to homeowners.i 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 single-family and multi-family structures.ii 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 June 30, 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 following pages, 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 As SIGTARP found in its recent April 2015 Audit,iii 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, nonprofit 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. SIGTARP’s 2015 Blight Elimination Program audit also noted that much of the decisionmaking and actual blight elimination activities are in the hands of city or county land banks, non-profits or for-profit partners, whose identities are unknown to Treasury. SIGTARP recommended, among other things, that Treasury keep itself informed of the critical activities taking place in this new program (including knowing the identities of the program partners), and develop and implement appropriate oversight tools as well as target outcomes for the program. Effective oversight by Treasury is critical to protecting taxpayers, while continuing to allow states ample flexibility to tailor and operate their HHF i SIGTARP, “Factors Affecting Implementation of the Hardest Hit Fund Program,” 4/12/2012, www.sigtarp.gov/Audit%20Reports/SIGTARP_HHF_Audit. pdf. ii Treasury, Action Memorandum for Assistant Secretary Massad, Approval for HFA Hardest-Hit Fund Program Change Requests, 6/5/2013. On April 21, 2015, Treasury approved a seventh category of HHF assistance for Florida’s HHF, the Down Payment Assistance Program, which provides up to $15,000 for first time homebuyers in the state. HHF Florida Amendment Eleven, April 21, 2015, www.treasury.gov/initiatives/financial-stability/TARPPrograms/housing/Documents/Redacted%2011th%20Amendment%20to%20HPA%20-%20FL.PDF, accessed 6/18/2015. iii SIGTARP Audit Report, “Treasury Should Do More to Increase the Effectiveness of the TARP Hardest Hit Fund Blight Elimination Program,” April 21, 2015, www.sigtarp.gov/Audit%20Reports/SIGTARP_Blight_Elimination_Report.pdf. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 programs to suit local needs. Treasury should not wait until the end of the program to measure progress and success toward the goals set by Congress for TARP. SIGTARP also recommended that Treasury increase transparency, including publicizing blight elimination activity on its website and requiring detailed quarterly accounting by state housing finance agencies (“HFAs”) on how TARP funds are spent reimbursing local partners for blightrelated activities. Tracking the program on a periodic basis, according to the audit report, would allow Treasury and the HFAs to give guidance to the city, county, and other partners that could allow for a greater impact for homeowners. 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. Although as noted in the following pages individual states continue to ramp up their HHF Blight Elimination Program activities (including demolitions), in most cases the state reports to date continue to show zero or limited activity. As of March 31, 2015, Michigan and Ohio are the only states to report actual demolitions to Treasury, while Indiana has reported “structures submitted for eligibility review” that continue to be in process. Both Illinois and South Carolina filed Blight Elimination Program reports to Treasury for the first time as of March 31, 2015, each showing zero activity. Alabama has not yet filed a Blight Elimination Program report with Treasury, although it was approved for the program in Q3 2014. As of March 31, 2015, 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, 12% 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 expenditures. 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 March 31, 2015), 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. SIGTARP is also publishing a list for each state of entities approved as “partners” for the Blight Elimination Program, based on information SIGTARP has been able to obtain from the respective state HFAs. Treasury has told SIGTARP that it does not obtain or have information about the partners approved in each state. 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 3/31/2015):** Applications Received: 7,272 Denied: 0 (0%); Approved: 3,220 (44%); In Process: 3,118 (43%); Withdrawn: 934 (13%) Total Assistance Provided: $42,931,026 Median Assistance Spent on Acquisition: $0 Median Assistance Spent on Demolition: $11,048 Median Assistance Spent on Greening:iv $0 Through March 31, 2015, the latest data available, Michigan reported to Treasury that it had spent $42.9 million (25% of the $175 million allocated for blight elimination as of March 31, 2015) to remove and green 3,220 properties—nearly double the 1,887 reported removed as of the fourth quarter of 2014—yielding an average cost of $13,333 per property (up from the $12,080 average cost through December 31, 2014). As shown in the following chart, for the first time Michigan reported for the quarter ended March 31, 2015, more demolitions funded under the Blight Elimination Program (1,333) than unique homeowners assisted under all its other HHF programs combined (1,006). 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 5,503 properties had been removed as of June 15, 2015v—more than one and half times the number shown on the Treasury report for the entire state as of March 31, 2015. According to a third-party website, another city, Pontiac, reports having demolished 50 properties as of March 10, 2015, the latest data updated on that site.vi Treasury approved Michigan’s request to increase its Blight Elimination Program allocation from iv Michigan reports that prior to March 31, 2015, “site restoration expenses” were reported as part of demolition costs, so “Median Assistance Spent on Greening” reflects $0. According to Michigan, these expenses will be classified as “Greening” beginning with the second quarter 2015. v The Detroit Land Bank reports 3,821 properties removed as of June 15, 2015 (www.buildingdetroit.org/wp-content/ uploads/2014/07/Copy-of-Demolished-6_5_15.xlsx, accessed 6/25/2015); the Genesee County Land Bank (Flint, MI) reports 1,682 properties removed as of June 4, 2015 (www.thelandbank.org/downloads/hhfdemolist_642015.pdf, accessed 06/25/2015). vi ADR Consultants, LLC, “Hardest Hit Funds,” www.mlbdemo.us/Hardest_Hit_Funds.php, accessed 7/14/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 $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 March 31, 2015, these additional jurisdictions had not yet been added to the state’s quarterly report to Treasury. MICHIGAN HHF BLIGHT ELIMINATION PROGRAM PARTNERS AND DEMOLITION ACTIVITY AS OF 3/31/2015** Most Recent Quarter Cumulative Applications Submitted 5,009 7,272 Properties Demolished/Removed 1,333 3,220 Demolished in Most Recent Quarter Demolished, Cumulative City/County Partnera Detroit Detroit Land Bank Authority 751 1,527 Flint Genesee County Land Bank Authority 529 1,213 Grand Rapids Kent County Land Bank Authority Habitat for Humanity of Kent County 10 69 Pontiac Michigan Land Bank Authority 0 0 Saginaw Saginaw Land Bank Authority City of Saginaw 43 411 Adrian Lenawee County Land Bank b b Hamtramck Michigan Land Bank b b Highland Park Michigan Land Bank b b Inkster Michigan Land Bank b b Ironwood Gogebic County Land Bank City of Ironwood b b Lansing Ingham County Land Bank b b Muskegon Hgts City of Muskegon Heights b b Port Huron Port Huron Neighborhood Housing Corporation b b Wayne Metro Wayne Metro Community Action Agency b b River Rouge City of River Rouge b b Michigan Homeowner Assistance Nonprofit Housing Corporation (MHA). b Michigan State Housing Finance Development Authority has announced these cities/counties are participating in the program, but has not yet reported activity to Treasury for them, as of March 31, 2015. a *Michigan Homeowner Assistance Nonprofit Housing Corporation, Seventh and Tenth Amendments to Agreements, 6/6/2013 and 3/6/2015. ** Michigan Homeowner Assistance Nonprofit Housing Corporation, Hardest Hit U.S. Treasury Reports, Quarterly Performance Report Q1 2015, no date. 197 198 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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 1,721 1,333 1,019 Q1'14 501 190 124 0 Q2'14 Blight Elimination Program, Properties Removed Other HHF Programs, Unique Homeowners Assisted 1,006 Q3'14 Q4'14 Q1'15 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. Sources: Michigan Homeowner Assistance Nonprofit Housing Corporation, Hardest Hit U.S. Treasury Reports, Quarterly Performance Reports, Q1 2014 through Q1 2015, no date; Michigan Homeowner Assistance Nonprofit Housing Corporation, Eighth through Tenth Amendments to Agreements, 12/12/2013, 10/10/2014, and 3/6/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 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.” Initial Allocation: $60 Million (11% of total HHF allocation) (8/28/2013) Current Allocation: $66.5 Million 12% of total HHF allocation)vii Eligibility: 1-4 unit residential properties, as well as “mixed use” propertiesviii 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 3/31/2015):** Applications Received: 836 Denied: 0 (0%); Approved: 665 (80%); In Process: 162 (19%); Withdrawn: 9 (1%) Total Assistance Provided: $7,597,702 Median Assistance Spent on Acquisition: $325 Median Assistance Spent on Demolition: $8,163 Median Assistance Spent on Greening: $550ix As of the first quarter of 2015, besides Michigan, Ohio is the only other state to have reported completed demolitions to Treasury on their HHF Blight Elimination Program report. As of March 31, 2015, Ohio reported that it had spent $7.6 million, 11% of the $66.5 million allocated for blight elimination as of that date to remove and green 665 properties, up from the 428 properties reported as of the fourth quarter of 2014, for an average cost of $11,425 per property (compared to a $11,294 average cost through December 31, 2014). 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 nine counties that had not previously received funding: Ashtabula, Belmont, Butler, Clark, Columbiana, Erie, Fairfield, Jefferson and Lake.x As of March 2015, these additional jurisdictions had not yet been added to the state’s quarterly report to Treasury. vii Treasury, response to SIGTARP data call, 7/6/2015. viii Neighborhood Initiative Guidelines, 2/6/2015, ohiohome.org/savethedream/NeighborhoodInitiative-Guidelines.pdf, accessed 7/1/2015. ix According to Ohio, prior to 12/1/2014, “site restoration expenses” were reported as demolition costs, but were reclassified as “Greening” effective as of that date. x Ohio 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 7/1/2015. 199 200 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM OHIO HHF BLIGHT ELIMINATION PROGRAM PARTNERS AND DEMOLITION ACTIVITY AS OF 3/31/2015** Most Recent Quarter Cumulative Applications Submitted 405 836 Properties Demolished/Removed 237 665 Demolished in Most Recent Quarter 165 Demolished, Cumulative 581 0 0 0 0 City/County Cuyahoga Partnera Cuyahoga County Land Reutilization Corp. Franklin Lorain Central Ohio Community Improvement Corp. Port of Greater Cincinnati Development Authority Hamilton County Land Reutilization Corporation Lorain County Port Authority Lucas Lucas County Land Reutilization Corp. Mahoning Montgomery Richland Hamilton 0 0 60 60 Mahoning County Land Reutilization Corp. 0 0 Montgomery County Land Reutilization Corp. 0 0 0 0 0 0 Summit Richland County Land Reutilization Corp. City of Canton Stark County Land Reutilization Corporation Summit County Land Reutilization Corp. 0 0 Trumbull Trumbull County Land Reutilization Corp. 12 24 Ashtabula Ashtabula County Land Reauthorization Corporation b b Belmont Belmont County Land Reutilization Corporation b b Butler Butler County Land Reutilization Corporation b b Clark Clark County Land Reutilization Corporation b b Columbiana Columbiana County Land Reutilization Corporation b b Erie Erie County Land Reutilization Corporation b b Fairfield Fairfield County Land Reutilization Corporation b b Jefferson Jefferson County Regional Planning Commission b b Lake Lake County Land Reutilization Corp. b b Stark 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 7/1/2015; Ohio 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 7/1/2015. b The Ohio Housing Finance Agency has announced these cities/counties are participating in the program, but has not yet reported activity to Treasury for them, as of March 31, 2015. a * Ohio Homeowner Assistance LLC, Eleventh Amendment to Agreement, 12/18/2014. ** Ohio Homeowner Assistance LLC, Save the Dream Ohio: Quarterly Reports, Quarterly Performance Report, Q1 2015, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 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 2,604 2,354 0 0 Q1'14 14 Q2'14 Blight Elimination Program, Properties Removed Other HHF Programs, Unique Homeowners Assisted 130 Q3'14 1,294 284 Q4'14 271 237 Q1'15 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. Sources: Ohio Homeowner Assistance LLC, Save the Dream Ohio: Quarterly Reports, Quarterly Performance Reports, Q1 2014 through Q1 2015, no date; Ohio Homeowner Assistance LLC, ninth through eleventh Amendment to Agreement, 12/12/2013, 2/27/2014, and 12/18/2014. 201 202 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 3/31/2015):** Applications Received: 3,078 Denied: 0 (0%); Approved: 0 (0%); In Process:xi 3,078 (100%); 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 March 31, 2015, 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 March 31, 2015, state HHF reports to Treasury are one quarter behind. According to Indiana state press releases, demolitions commenced as early as September 2014, including in Gary and later in Fort Wayne.xii xi Indiana only reports as “in process” the number of applications that were submitted in the most recent quarter. The cumulative number of applications still in process as of the reporting date is the cumulative “Total Number of Structures Submitted for Eligibility Review” less the sum of the cumulative number approved, denied and withdrawn. xii 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=syndic ate, accessed 7/1/2015; Press Release, “Lt. Governor Joins City and State Officials for Gary Kickoff of Blight Elimination Program,” 9/16/2014, www.in.gov/core/news_events.html, accessed 6/29/2015. 203 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 INDIANA HHF BLIGHT ELIMINATION PROGRAM AND DEMOLITION ACTIVITY AS OF 3/31/2015** Applications Submitted Properties Demolished/Removed City/County City of Alexandria City of Anderson City of Arcadia City of Auburn City of Austin Partnera Alexandria Redevelopment Commission Madison County Council of Governments Anderson Redevelopment Commission South Meridian Church of God Bethesda Missionary Baptist Church Habitat for Humanity of Madison County Curtis and Mary Parr Habitat for Humanity of Northeast Indiana City of Auburn Redevelopment Corp. Austin Redevelopment Commission (ARC) Southern Indiana Housing & Community Development Corp. Most Recent Quarter Cumulative 323 3,078 0 0 Demolished in Most Recent Quarter Demolished, Cumulative 0 0 0 0 0 0 0 0 0 0 City of Bicknell City of Auburn Redevelopment Commission 0 0 City of Brazil Clay County Economic Redevelopment Commission 0 0 City of Coatesville South Meridian Church of God National Road Heritage Trail 0 0 City of Columbus ARA (Administrative Resources Association) 0 0 City of Connersville House of Ruth Connersville Urban Enterprise Association U.E.A. 0 0 City of Delphi Not Available 0 0 City of Dunkirk Not Available 0 0 City of East Chicago East Chicago Department of Redevelopment 0 0 City of Elwood Elwood Redevelopment Commission 0 0 City of Evansville Comfort Homes Community One, Inc. Evansville Brownfields Corp. Evansville Housing Authority ECHO Housing Corporation Full Gospel Mission Gethsemane Church Habitat for Humanity of Evansville, Inc. Hope of Evansville JBELL Properties, LLC Memorial Community Development Corporation New Odyssey Investments, LLC Ozanam Family Shelter Corp. 0 0 City of Fort Wayne Housing and Neighborhood Devt. Svcs, Inc. 0 0 City of Garrett Garrett State Bank 0 0 City of Gary Broadway Area Community Development Corp. Fuller Center for Housing of Gary The Gary Redevelopment Commission The Sojourner Truth House 0 0 City of Hammond United Neighborhoods, Inc. 0 0 Continued on next page 204 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM INDIANA HHF BLIGHT ELIMINATION PROGRAM PARTNERS AND DEMOLITION ACTIVITY AS OF 3/31/2015 City/County City of Hartford City City of Indianapolis Partnera Rosalie Adkins Jay Dawson Blackford Development Corp. Community & Family Services Community Alliance of Far Eastside Near East Area Renewal Near North Development Corporation Riley Area Development Corporation Renew Indianapolis (CONTINUED) Demolished in Most Recent Quarter Demolished, Cumulative 0 0 0 0 City of Knox Starke County Economic Devt. Foundation, Inc. 0 0 City of Kokomo Kokomo Community Development Corp. 0 0 City of Lawrence Lawrence/Fort Harrison Development Corporation dba Lawrence Community Development Corporation 0 0 City of Lebanon Not Available 0 0 City of Logansport Logansport Municipal Building Corporation 0 0 City of Marion Marion Redevelopment Commission 0 0 City of Montpelier Blackford Development Corp Community & Family Services 0 0 City of Muncie Muncie Redevelopment Commission 0 0 City of New Castle Healthy Communities of Henry County Interlocal Community Action Program, Inc. New Castle Housing Authority Westminster Community Center 0 0 City of Peru Not Available 0 0 City of Portland Community & Family Services 0 0 0 0 0 0 City of Richmond City of Rising Sun Habitat for Humanity of Greater Richmond, Neighborhood Services Clearinghouse Redevelopment Commission of City of Rising Sun RSOC Senior Citizen Housing Inc. City of Rushville Southern Indiana Housing & Community Development Corp 0 0 City of Seymour Southern Indiana Housing & Community Development Corp 0 0 0 0 0 0 0 0 City of South Bend City of Terre Haute City of Vincennes Near Northwest Neighborhood Inc. South Bend Heritage Foundation, Inc. Urban Enterprise Assoc. of South Bend, Inc. Terre Haute Department of Redevelopment West Terre Haute Redevelopment Commission Dan Vories Jack Stilwell Leonard Stevenson Larry Stuckman Priscilla Wissell Rick Szudy Thursday Church William Ridge Mark Loveman Carol Anderson Chris Case Karen Evans Randall E. Madison Matt McCoy Continued on next page 205 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 INDIANA HHF BLIGHT ELIMINATION PROGRAM PARTNERS AND DEMOLITION ACTIVITY AS OF 3/31/2015 City/County City of Washington County of Dearborn Partnera Davies County Economic Development Foundation, Inc. Habitat for Humanity of Daviess County, Inc. Washington Housing Authority City of Aurora Redevelopment Commission Casey Kaiser John & Darlene Albright Laura Williams Town of Moores Hill Redevelopment Commission (CONTINUED) Demolished in Most Recent Quarter Demolished, Cumulative 0 0 0 0 County of Elkhart LaCasa Inc. 0 0 County of Gibson Princeton Redevelopment Commission Kenneth L. Wolf Leslie T. Marshall Mark A. Tooley Nicholas Burns Ralph B DeBord Richard Ellis Sheryl Walker-Isakson/Allen Isakson Steve & Brian Dyson Sheiln J. Besing Timothy A. Beadles Thomas R. Johnstone, Sr. Tim Thompson Anna Marie Kiel Brenda Boyer Billy Ray Walden Brandon Taylor David O. Hill Daniel R. Engler John D. Young Joseph H. Gardner Jason Spindler Brian Dawson 0 0 County of Greene Greene Redevelopment Commission 0 0 County of Howard Not Available 0 0 County of Posey Mt. Vernon Redevelopment Dale Reuter Beverly Stone/Katrina Wagner James C. Welch, Jr 0 0 County of Pulaski White’s General Contracting 0 0 County of Sullivan Sullivan City Redevelopment Commission Sullivan County Redevelopment Commission 0 0 County of Vigo West Terre Haute Redevelopment Commission 0 0 Continued on next page 206 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM INDIANA HHF BLIGHT ELIMINATION PROGRAM PARTNERS AND DEMOLITION ACTIVITY AS OF 3/31/2015 City/County County of Warrick Partnera Habitat for Humanity of Warrick County Charles L. Allen Larry & Karen Willis Andy R & Donna VanWinkle Brian Hendrickson Boonville Now, Inc. Christopher Lunn Josh Barnett James B. Decker, II Lori Lamar Ronald Evans Scott Speicher Tim A. McKinney Zachary Lee Bailey (CONTINUED) Demolished in Most Recent Quarter Demolished, Cumulative 0 0 Monroe City Not Available 0 0 Noble County /Kendallville Not Available 0 0 Richland City The Friends of Richland 0 0 Shelby County/City of Shelbyville Habitat for Humanity For Shelby Co. 0 0 Town of Brookville Not Available 0 0 Town of Cambridge City Not Available 0 0 Town of Daleville Daleville Parks, Inc. 0 0 Town of Decker Community Center Cathy Griffith David & Bonnie Wehmeirer Delora Koenig Darrell & Robin Lindsay 0 0 Town of Edwardsport Not Available 0 0 Town of Greens Fork Not Available 0 0 Town of Hagerstown Not Available 0 0 Town of Lagro Not Available 0 0 Town of Oaktown Knox County Housing Authority 0 0 Town of Silver Lake Not Available 0 0 Town of St. Joe Habitat for Humanity of Northeast Indiana Michael Mills 0 0 Town of Sweetser Sweetser Redevelopment Corp. 0 0 City of Walton Cass County Redevelopment Commission 0 0 Town of Waterloo Habitat for Humanity of Northeast Indiana RP Wakefield Co. Waterloo Redevelopment Commission 0 0 a Indiana Housing and Community Development Authority, accessed as of 6/30/2015 (partners). Data is as of 3/31/2015. * 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, Q1 2015, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 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 3/31/2015):** Applications Received: 0 Denied: 0 (0%); Approved: 0 (0%); In Process: 0 (0%); 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 March 31, 2015, Illinois reports it had not expended any of the $1.9 million blight elimination allocation approved by Treasury, and had not removed any properties as of that date. While Illinois’ Blight Elimination report to Treasury reveals no actual demolitions as of March 31, 2015, state HHF reports to Treasury are one quarter behind. 207 208 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM ILLINOIS HHF BLIGHT ELIMINATION PROGRAM PARTNERS AND DEMOLITION ACTIVITY AS OF 3/31/2015** Most Recent Quarter Cumulative Applications Submitted 0 0 Properties Demolished/Removed 0 0 Demolished in Most Recent Quarter Demolished, Cumulative City/County Partnera Aurora Fox Valley Habitat for Humanity 0 0 Chicago Heights Cook County Land Bank Authority 0 0 Chicago (Cook County Land Bank Authority) Greater Englewood CDC Sunshine Gospel Ministries 0 0 Freeport NW Homestart, Inc. 0 0 Joliet South Suburban Land Bank and Devt. Authority 0 0 Moline Moline Community Development Corporation 0 0 Ottawa Starved Rock Homes Development Corp 0 0 Park Forest South Suburban Land Bank and Devt. Authority 0 0 Riverdale Cook County Land Bank Authority 0 0 Rock Island Rock Island Economic Growth Corp. 0 0 Springfield The Springfield Project Enos Park Neighborhood Improvement Association 0 0 Sterling Rock Island Economic Growth Corp. 0 0 Urbana Habitat for Humanity of Champaign County 0 0 Rockford (Winnebago County) Comprehensive Community Solutions, Inc. 0 0 a Illinois Housing Development Authority, 3/31/2015 and 6/30/2015. * Treasury, response to SIGTARP data call, 7/6/2015; Illinois Housing Development Authority, Tenth Amendment to Agreement, 4/11/2014. **Illinois Housing Development Authority, Illinois Hardest Hit Program, Reporting, Quarterly Performance Report, Q1 2015, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 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 fee to cover management and maintenance expenses for a period of three years. SC Estimate: 1,000-1,300 properties Cumulative Program Activity Reported by South Carolina (as of 3/31/2015):** Applications Received: 0 Denied: 0 (0%); Approved: 0 (0%); In Process: 0 (0%); 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 March 31, 2015, South Carolina reports it had not expended any of the $35 million blight elimination allocation approved by Treasury, and had not removed any properties as of that date. While South Carolina’s Blight Elimination report to Treasury reveals no actual demolitions as of March 31, 2015, state HHF reports to Treasury are one quarter behind. 209 210 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SOUTH CAROLINA HHF BLIGHT ELIMINATION PROGRAM PARTNERS AND DEMOLITION ACTIVITY AS OF 3/31/2015** Most Recent Quarter Cumulative Applications Submitted 0 0 Properties Demolished/Removed 0 0 Demolished in Most Recent Quarter Demolished, Cumulative City/County Partnera Aiken County Second Baptist CDC Nehemiah Community Revitalization Corp. 0 0 Allendale County Southeastern Housing Foundation Allendale County Alive 0 0 Anderson County Pelzer Heritage Commission Nehemiah Community Revitalization Corp. Anderson Community Development Corp. 0 0 Bamberg County Southeastern Housing Foundation 0 0 Barnwell County Southeastern Housing Foundation Blackville, CDC 0 0 Charleston County Sea Island Habitat for Humanity PASTORS, Inc. 0 0 Chester County Not Available 0 0 Chesterfield County Town of Cheraw Community Development Corp. 0 0 Florence County Downtown Development Corporation 0 0 Greenville County Allen Temple Community Economic Devt. Corp. Habitat for Humanity of Greenville County Homes of Hope, Inc. Nehemiah Community Revitalization Corp. Neighborhood Housing Corp. of Greenville, Inc. United Housing Connections Genesis Homes 0 0 Hampton County Southeastern Housing Foundation 0 0 Horry County Myrtle Beach Community Land Trust 0 0 Kershaw County Santee-Lynches Regional Development Corp. 0 0 Lancaster County Not Available 0 0 Richland County Columbia Housing Development Corporation Eau Claire Development Corporation Columbia Development Corporation 0 0 Spartanburg County Homes of Hope Habitat for Humanity Nehemiah Community Revitalization Corp. Northside Development Group Upstate Housing Partnership 0 0 Sumter County Santee-Lynches Regional Development Corp 0 0 Union County Not Available 0 0 York County Housing Development Corporation of Rock Hill Catawba Regional Development Corp. 0 0 a SC Housing Corp., “Neighborhood Initiative Program,” www.schousing.com/Housing%20Partners/Neighborhood%20Initiative%20Program, accessed 7/1/2015. *SC Housing Corp., Seventh Amendment to Agreement, 7/31/2014. **SC Housing Corp., SC HELP, Reports, Quarterly Performance Reports, Q1 2015, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 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 3/31/2015):** 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, Q1 2015, no date. 211 212 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.17 Alabama’s HHF Programs AL HHF EXPENDITURES, BY PROGRAM CATEGORY Treasury obligated $162,521,345 in HHF funds to Alabama.289 At the end of 2010, Alabama estimated that it would help as many as 13,500 with HHF but, as of March 31, 2015, had reduced that peak estimate by 51%, to 6,600 homeowners. As of March 31, 2015, 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 March 31, 2015, Alabama has helped 3,947 individual homeowners with HHF programs, almost all of them with the Unemployed Homeowners Program.290 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 15 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. For more information about blight elimination in Alabama, please see the “Update on the Hardest Hit Fund’s Blight Elimination Program” discussion on page 211 of this Quarterly Report. As of March 31, 2015, Alabama has only spent 19% of its HHF funds to help homeowners, the lowest amount of any state in the HHF program.291 The state had drawn down $40 million (25%) of those funds as of March 31, 2015, the most recent data available, and spent $31.6 million (19% of its obligated funds).292,xxvi,xxvii The remaining $7.9 million (5%) was spent on administrative expenses, and $1 million (1%) is held as cash-on-hand.293,xxviii No HHF funds have yet been spent on the Blight Elimination Program. Figure 4.18 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 March 31, 2015. 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 4.19 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 March 31, 2015. PROGRAM THROUGH MARCH 31, 2015 1% 99% Unemployment ($31,336,877) Transition ($0) Modification ($308,294) 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 Q1 2015, no date. xxvi Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, Alabama had drawn down $47 million. xxvii 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. xxviii 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 JULY 29, 2015 FIGURE 4.18 ALABAMA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 3/31/2015 15,000 Peak estimate: 13,500 3/31/2015 estimate: 6,600 3/31/2015 program participation: 3,949 Homeowners assisted: 3,947 12,000 9,000 6,000 3,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 Q4 Q1 2013 Q2 Q3 2014 Q4 Q1 2015 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 ninth 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, 9/3/2014, and 1/30/2015; Alabama Housing Finance Authority, Treasury Reports, Quarterly Performance Reports Q1 2011 - Q1 2015, no date. 213 214 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.19 ALABAMA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 3/31/2015 HARDEST HIT FOR ALABAMA'S UNEMPLOYED HOMEOWNERS (UNEMPLOYMENT) SHORT SALE ASSISTANCE PROGRAM (TRANSITION) Program approved: September 2010 Peak estimate: 13,500 3/31/15 estimate: 5,000 3/31/15 program participation: 3,934 15,000 12,000 9,000 1,600 Program approved: March 2013 Peak estimate: 1,500 3/31/15 estimate: 400 3/31/15 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 Q2 2013 State Estimated Program Participation Q3 Q4 2014 Q1 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 2014 Q1 2015 Program Participation BLIGHT ELIMINATION PROGRAM (BLIGHT) 1,000 Program approved: March 2013 Peak estimate: 1,200 3/31/15 estimate: 1,200 3/31/15 program participation: 15 1,200 Q2 2010 Program Participation LOAN MODIFICATION ASSISTANCE PROGRAM (MODIFICATION) 1,600 Q1 2015 800 Program approved: September 2014 3/31/15 blighted homes proposed to be eliminated: 1,000 3/31/15 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 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Q1 2015 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 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 ninth 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, 9/3/2014, and 1/30/2015; Alabama Housing Finance Authority, Treasury Reports, Quarterly Performance Reports Q1 2011 - Q1 2015, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Arizona’s HHF Programs FIGURE 4.20 Treasury obligated $267,766,006 in HHF funds to Arizona.294 At the end of 2010, Arizona estimated that it would help as many as 11,959 homeowners with HHF but, as of March 31, 2015, had reduced that peak estimate by 36%, to 7,606. As of March 31, 2015, 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 March 31, 2015, Arizona has helped 3,728 homeowners with its HHF programs, with the largest numbers in the unemployment/underemployment and the principal reduction assistance programs.295 As of March 31, 2015, the state had drawn down $155.8 million (58%) of its HHF funds.296,xxix As of March 31, 2015, the most recent data available, Arizona had spent $120.2 million (45% of its obligated funds) to help individual homeowners with its HHF programs.297,xxx The remaining $17.1 million (6%) was spent on administrative expenses, and $19.1 million (7%) is held as cash-on-hand.298,xxxi Figure 4.21 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 March 31, 2015. 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 4.22 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 March 31, 2015. AZ HHF EXPENDITURES, BY PROGRAM CATEGORY xxix Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, Arizona had drawn down $155.8 million. xxx 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. xxxi 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. PROGRAM THROUGH MARCH 31, 2015 1% 54% 38% 7% Modification ($50,530,679) Second-Lien Reduction ($6,657,979) Unemployment ($35,641,222) Transition ($677,519) 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 Q1 2015, no date. 215 216 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.21 ARIZONA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 3/31/2015 12,000 10,000 8,000 6,000 Peak estimate: 11,959 3/31/2015 estimate: 7,606 3/31/2015 program participation: 4,019 Homeowners assisted: 3,728 4,000 2,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 Q4 Q1 2013 Q2 Q3 2014 Q4 Q1 2015 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 - Q1 2015, no date; Treasury, responses to SIGTARP data calls, 10/3/2013 and 10/7/2013. 217 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 FIGURE 4.22 ARIZONA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 3/31/2015 PRINCIPAL REDUCTION ASSISTANCE (MODIFICATION) SECOND MORTGAGE ASSISTANCE COMPONENT (SECOND-LIEN REDUCTION) Program approved: June 2010 Peak estimate: 7,227 3/31/15 estimate: 1,849 3/31/15 program participation: 971 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 2014 Q1 4,000 3,000 Q1 2015 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 3/31/15 estimate: 1,279 3/31/15 program participation: 234 2,000 Q2 Q3 Q4 2014 Q1 2015 Program Participation SHORT SALE ASSISTANCE COMPONENT (TRANSITION) Program approved: June 2010 Peak estimate: 4,140 3/31/15 estimate: 4,140 3/31/15 program participation: 2,696 1,200 Program approved: May 2011 Peak estimate: 1,200 3/31/15 estimate: 338 3/31/15 program participation: 118 900 600 2,000 300 1,000 0 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 Q1 2015 Program Participation Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 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 - Q1 2015, no date; Treasury, responses to SIGTARP data calls, 10/3/2013 and 10/7/2013. 218 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.23 California’s HHF Programs CA HHF EXPENDITURES, BY PROGRAM CATEGORY Treasury obligated $1,975,334,096 in HHF funds to California.299 At the end of 2010, California estimated that it would help as many as 101,337 homeowners with HHF but, as of March 31, 2015, had reduced that peak estimate by 29%, to 71,970. As of March 31, 2015, 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 past-due payment assistance to homeowners, and a sixth to provide HHF second-lien assistance to homeowners. As of March 31, 2015, 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).300 Both programs ended without helping a single homeowner. As of March 31, 2015, California has helped 48,864 individual homeowners, with the largest number in unemployment and past due payment assistance.301 As of March 31, 2015, California had drawn down $1,217.5 million (62%) of its HHF funds.302,xxxii As of March 31, 2015, California had spent $961.9 million (49% of its obligated funds) to help individual homeowners with its HHF programs.303,xxxiii The remaining $104.7 million (5%) was spent on administrative expenses, and $174.7 million (9%) is held as cash-on-hand.304,xxxiv Figure 4.24 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 March 31, 2015. 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 4.25 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 March 31, 2015. PROGRAM THROUGH MARCH 31, 2015 0.1% 0.3% 12.2% 53.3% 34.1% Unemployment ($512,751,190) Modification ($328,411,073) Past-Due Payment ($117,466,086) Transition ($2,996,389) 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 Q1 2015, no date. xxxii Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, California had drawn down $1,217.5 million. xxxiii 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. xxxiv 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 JULY 29, 2015 FIGURE 4.24 CALIFORNIA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 3/31/2015 120,000 100,000 80,000 60,000 Peak estimate: 101,337 3/31/2015 estimate: 71,970 3/31/2015 program participation: 53,983 Homeowners assisted: 48,864 40,000 20,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 Q4 Q1 2013 Q2 Q3 2014 Q4 Q1 2015 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 sixteenth 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, 11/13/2014, and 3/6/2015; CalHFA Mortgage Assistance Corporation, “Keep Your Home California, Reports & Statistics, Quarterly Reports,” Quarterly Performance Reports Q4 2010 - Q1 2015, no date. 219 220 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.25 CALIFORNIA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 3/31/2015 UNEMPLOYMENT MORTGAGE ASSISTANCE PROGRAM (UNEMPLOYMENT) Program approved: June 2010 Peak estimate: 60,531 3/31/15 estimate: 44,700 3/31/15 program participation: 38,847 75,000 60,000 MORTGAGE REINSTATEMENT ASSISTANCE PROGRAM (PAST-DUE PAYMENT) Program approved: June 2010 Peak estimate: 17,293 3/31/15 estimate: 10,400 3/31/15 program participation: 8,704 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 2014 2015 20,000 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 2014 Q1 2015 Program Participation TRANSITION ASSISTANCE PROGRAM (TRANSITION) Program approved: June 2010 Peak estimate: 6,471 3/31/15 estimate: 1,700 3/31/15 program participation: 843 10,000 Program approved: June 2010 Peak estimate: 25,135 3/31/15 estimate: 13,400 3/31/15 program participation: 5,519 25,000 Q2 2010 Program Participation PRINCIPAL REDUCTION PROGRAM (MODIFICATION) 30,000 Q1 Q1 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 2014 Q1 Q1 2015 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 2014 Q1 2015 Program Participation REVERSE MORTGAGE ASSISTANCE PILOT PROGRAM (PAST-DUE PAYMENT) 500 2,000 375 1,500 Program approved: September 2014 Peak estimate: 1,400 3/31/15 estimate: 1,400 3/31/15 program participation: 36 1,000 Program approved: August 2011 Peak estimate: 370 3/31/15 estimate: 370 3/31/15 program participation: 34 125 Q3 2010 Program Participation COMMUNITY SECOND MORTGAGE PRINCIPAL REDUCTION PROGRAM (SECOND-LIEN REDUCTION) 250 Q2 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 2014 Q1 Q1 2015 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 State Estimated Program Participation Program Participation Q3 Q4 Q1 2013 Q2 Q3 Q4 2014 Q1 2015 Program Participation LOS ANGELES HOUSING DEPARTMENT PRINCIPAL REDUCTION PROGRAM (MODIFICATION) NEIGHBORWORKS SACRAMENTO SHORT SALE GATEWAY PROGRAM (TRANSITION) 200 100 Program Ended September 2013 75 Program approved: August 2011 Peak estimate: 91 3/31/15 estimate: 0 3/31/15 program participation: 0 50 25 150 Program approved: August 2011 Peak estimate: 166 3/31/15 estimate: 0 3/31/15 program participation: 0 100 50 Program Ended February 2014 0 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 Q1 2015 Program Participation Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 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 sixteenth 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, 11/13/2014, and 3/6/2015; CalHFA Mortgage Assistance Corporation, “Keep Your Home California, Reports & Statistics, Quarterly Reports,” Quarterly Performance Reports Q4 2010 - Q1 2015, no date; Treasury, response to SIGTARP data call, 10/3/2013. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Florida’s HHF Programs FIGURE 4.26 Treasury obligated $1,057,839,136 of HHF funds to Florida.305 At the start of 2011, Florida estimated that it would help as many as 106,000 homeowners with HHF but, as of March 31, 2015, had reduced that peak estimate by 63%, to 39,000. As of March 31, 2015, 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.xxxv As of March 31, 2015, Florida has helped 22,400 individual homeowners with its HHF programs, with the largest numbers in the unemployment and reinstatement programs.306 The state’s Modification Enabling Program, approved in April 2013, had only assisted 92 homeowners as of March 31, 2015, in the nearly two years of its existence. As of March 31, 2015, the state had drawn down $596.3 million (56%) of its HHF funds.307,xxxvi As of March 31, 2015, the most recent data available, Florida had spent $495.6 million (47% of its obligated funds) to help individual homeowners with its HHF programs.308,xxxvii The remaining $52.2 million (5%) was spent on administrative expenses, and $51.2 million (5%) is held as cash-on-hand.309,xxxviii Figure 4.27 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 March 31, 2015. 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 4.28 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 March 31, 2015. FL HHF EXPENDITURES, BY PROGRAM CATEGORY xxxv On April 21, 2015, Florida added a sixth program, for Down Payment Assistance. xxxvi Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, Florida had drawn down $626.3 million. xxxvii 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. xxxviii 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. PROGRAM THROUGH MARCH 31, 2015 27% 42% 31% Past-Due Payment ($132,803,053) Unemployment ($154,458,756) Modification ($208,291,981) 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 Q1 2015, no date. 221 222 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.27 FLORIDA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 3/31/2015 120,000 Peak estimate: 106,000 3/31/2015 estimate: 39,000 3/31/2015 program participation: 34,807 Homeowners assisted: 22,400 100,000 80,000 60,000 40,000 20,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 Q4 Q1 2013 Q2 Q3 2014 Q4 Q1 2015 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 tenth 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, 7/11/2014, and 1/29/2015; Florida Housing Finance Corporation, Florida Hardest Hit Fund (HHF) Information, Quarterly Reports, Quarterly Performance Reports Q3 2010 - Q1 2015, no date; Treasury, response to SIGTARP data call, 10/3/2013. 223 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 FIGURE 4.28 FLORIDA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 3/31/2015 UNEMPLOYMENT MORTGAGE ASSISTANCE PROGRAM (UNEMPLOYMENT) Program approved: June 2010 Peak estimate: 53,000 3/31/15 estimate: 25,000* 3/31/15 program participation: 14,952 60,000 50,000 MORTGAGE LOAN REINSTATEMENT PROGRAM Program approved: December 2010 (PAST-DUE PAYMENT) Peak estimate: 53,000 3/31/15 estimate: 25,000* 3/31/15 program participation: 14,244 60,000 50,000 40,000 40,000 300,00 30,000 20,000 20,000 10,000 10,000 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 Q1 2015 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 State Estimated Program Participation Program Participation MODIFICATION ENABLING PILOT PROGRAM (MODIFICATION) Q3 Q4 Q1 2013 Q2 Q3 Q4 2014 Q1 2015 Program Participation PRINCIPAL REDUCTION PROGRAM (MODIFICATION) 2,000 10,000 8,000 Program approved: April 2013 Peak estimate: 1,500 3/31/15 estimate: 1,500 3/31/15 program participation: 92 1,500 1,000 Program approved: September 2013 Peak estimate: 10,000 3/31/15 estimate: 10,000 3/31/15 program participation: 4,969 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 2014 Q1 Q1 2015 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 Program Participation ELDERLY MORTGAGE ASSISTANCE PROGRAM (PAST-DUE PAYMENT) 2,500 2,000 Program approved: September 2013 Peak estimate: 2,500 3/31/15 estimate: 2,500 3/31/15 program participation: 550 1,500 1,000 500 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 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 tenth 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, 7/11/2014, and 1/29/2015; Florida Housing Finance Corporation, Florida Hardest Hit Fund (HHF) Information, Quarterly Reports, Quarterly Performance Reports Q3 2010 - Q1 2015, no date; Treasury, response to SIGTARP data call, 10/3/2013. 224 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.29 Georgia’s HHF Programs GA HHF EXPENDITURES, BY PROGRAM CATEGORY Treasury obligated $339,255,819 in HHF funds to Georgia.310 At the end of 2010, Georgia estimated that it would help as many as 18,300 homeowners with HHF but, as of March 31, 2015, had reduced that peak estimate by 26%, to 13,500. As of March 31, 2015, 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 March 31, 2015, Georgia has helped 6,245 individual homeowners with its HHF program, the vast majority with the unemployment program.311 As of March 31, 2015, Georgia’s Recast/Modification program had helped only 13 homeowners (compared to an estimate of 1,000), and its Mortgage Reinstatement program had assisted only 70 homeowners (compared to a current estimate of 3,500), since those programs were approved in December 2013. As of March 31, 2015, the state had drawn down $194 million (57%) of its HHF funds.312,xxxix As of March 31, 2015, the most recent data available, Georgia had spent $110.8 million (33% of its obligated funds) to help individual homeowners with its HHF programs.313,xl The remaining $21.2 million (6%) was spent on administrative expenses, and $62.6 million (18%) is held as cash-on-hand.314,xli Figure 4.30 shows the number of homeowners estimated to participate in Georgia’s program and the number of homeowners who have been assisted, as of March 31, 2015. Figure 4.31 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 March 31, 2015. PROGRAM THROUGH MARCH 31, 2015 0.3% 0.6% 99.1% Unemployment ($109,801,451) Past-Due Payment ($699,370) Modification ($349,591) 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 Q1 2015, no date. xxxix Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, Georgia had drawn down $194 million. xl 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. xli 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 JULY 29, 2015 FIGURE 4.30 GEORGIA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 3/31/2015 20,000 15,000 Peak estimate: 18,300 3/31/2015 estimate: 13,500 3/31/2015 program participation: 6,248 Homeowners assisted: 6,245 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 Q115 Q1 Q110 2010 2011 2012 State Estimated Program Participation 2013 2014 2015 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 - Q1 2015, no date. 225 226 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.31 GEORGIA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 3/31/2015 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 3/31/15 estimate: 9,000 3/31/15 program participation: 6,165 10,000 Program approved: December 2013 Peak estimate: 5,000 3/31/15 estimate: 3,500 3/31/15 program participation: 70 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 2014 Q1 Q1 2015 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 Program Participation RECAST/MODIFICATION (MODIFICATION) 1,000 Program approved: December 2013 Peak estimate: 1,000 3/31/15 estimate: 1,000 3/31/15 program participation: 13 750 500 250 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 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 - Q1 2015, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Illinois’s HHF Programs FIGURE 4.32 Treasury obligated $445,603,557 in HHF funds to Illinois.315 In mid-2011, Illinois estimated that it would help as many as 29,000 homeowners with HHF but, as of March 31, 2015, reduced that peak estimate by 53%, to 13,500. As of March 31, 2015, 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 March 31, 2015, Illinois has helped 13,798 individual homeowners with HHF programs with the largest numbers in the unemployment and home preservation modification programs.316 According to Treasury, Illinois stopped accepting new applications from struggling homeowners seeking help from the state’s HHF programs after September 30, 2013.317,xlii 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. For more information about blight elimination in Illinois, please see the “Update on the Hardest Hit Fund’s Blight Elimination Program” discussion on pages 207-208 of this Quarterly Report. As of March 31, 2015, the state had drawn down $395 million (89%) of its HHF funds.318,xliii As of March 31, 2015, the most recent data available, Illinois had spent $325.5 million (73% of its obligated funds) to help individual homeowners with its HHF programs.319,xliv The remaining $32.1 million (7%) was spent on administrative expenses, and $43.6 million (10%) is held as cash-on-hand.320,xlv No funds had yet been spent on blight elimination. Figure 4.33 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 March 31, 2015. 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 4.34 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 March 31, 2015. IL HHF EXPENDITURES, BY PROGRAM CATEGORY xlii 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. xliii Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, Illinois had drawn down $395 million. xliv 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. 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. PROGRAM THROUGH MARCH 31, 2015 15% 85% Unemployment ($271,449,100) Modification ($46,960,225) 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 Q1 2015, no date. 227 228 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.33 ILLINOIS ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 3/31/2015 30,000 Peak estimate: 29,000 3/31/2015 estimate: 13,500 3/31/2015 program participation: 13,842 Homeowners assisted: 13,798 25,000 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 Q115 Q1 Q110 2010 2011 2012 State Estimated Program Participation 2013 2014 2015 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 - Q1 2015, no date. 229 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 FIGURE 4.34 ILLINOIS ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 3/31/2015 MORTGAGE RESOLUTION FUND PROGRAM (MODIFICATION) HARDEST HIT FUND HOMEOWNER EMERGENCY LOAN PROGRAM (UNEMPLOYMENT) 30,000 2,000 Program approved: September 2010 Peak estimate: 27,000 3/31/15 estimate: 12,000 3/31/15 program participation: 13,284 25,000 20,000 1,500 15,000 Program approved: August 2011 Peak estimate: 2,000 3/31/15 estimate: 1,000 3/31/15 program participation: 172 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 2014 Q1 Q1 2015 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 State Estimated Program Participation Program Participation HARDEST HIT FUND HOME PRESERVATION PROGRAM (MODIFICATION) 500 Q3 Q4 Q1 2013 Q2 Q3 Q4 2014 Q1 2015 Program Participation HARDEST HIT FUND BLIGHT REDUCTION PROGRAM (BLIGHT) 100 375 75 Program approved: September 2012 Peak estimate: 500 3/31/15 estimate: 500 3/31/15 program participation: 386 250 Program approved: April 2014 3/31/15 blighted homes proposed to be eliminated: 50 3/31/15 actual blighted homes eliminated: 0 50 125 25 0 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Q1 2015 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 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 - Q1 2015, no date. 230 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.35 Indiana’s HHF Programs IN HHF EXPENDITURES, BY PROGRAM CATEGORY Treasury obligated $221,694,139 in HHF funds to Indiana.321 At the start of 2011, Indiana estimated helping as many as 16,257 homeowners with HHF but, as of March 31, 2015, had reduced that peak estimate by 37%, to 10,184. As of March 31, 2015, 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 March 31, 2015, Indiana has helped 5,198 individual homeowners with HHF programs with the largest number in its unemployment program.322 Indiana’s Recast Program, which began in March 2013, has only 76 participants, while the Transition Assistance Program, also started on the same date, has just seven participants.323 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. For more information about blight elimination in Indiana, please see the “Update on the Hardest Hit Fund’s Blight Elimination Program” discussion on pages 202-206 of this Quarterly Report. As of March 31, 2015, the state had drawn down $110.7 million (50%) of its HHF funds.324,xlvi As of March 31, 2015, the most recent data available, Indiana had spent $65.5 million (30% of its obligated funds) to help individual homeowners with its HHF programs; no funds had yet been spent on blight elimination.325,xlvii The remaining $19.3 million (9%) was spent on administrative expenses, and $26.3 million (12%) is held as cash-on-hand.326,xlviii Figure 4.36 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 March 31, 2015. Figure 4.37 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 March 31, 2015. PROGRAM THROUGH MARCH 31, 2015 0.04% 3.32% 96.64% Unemployment ($63,254,182) Modification ($2,173,958) Transition ($25,000) 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 Q1 2015, no date. xlvi Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, Indiana had drawn down $110.7 million. xlvii 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. 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. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 FIGURE 4.36 INDIANA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 3/31/2015 20,000 15,000 10,000 Peak estimate: 16,257 3/31/2015 estimate: 10,184 3/31/2015 program participation: 5,198 Homeowners assisted: 5,198 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 Q115 Q1 Q110 2010 2011 2012 State Estimated Program Participation 2013 2014 2015 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 - Q1 2015, no date. 231 232 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.37 INDIANA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 3/31/2015 HARDEST HIT FUND UNEMPLOYMENT BRIDGE PROGRAM (UNEMPLOYMENT) 20,000 HARDEST HIT FUND RECAST/MODIFICATION PROGRAM (MODIFICATION) 2,000 Program approved: September 2010 Peak estimate: 16,257 3/31/15 estimate: 8,000 3/31/15 program participation: 5,115 15,000 1,500 10,000 1,000 5,000 500 0 Program approved: March 2013 Peak estimate: 2,000 3/31/15 estimate: 2,000 3/31/15 program participation: 76 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 Q1 2015 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 State Estimated Program Participation Program Participation HARDEST HIT FUND TRANSITION ASSISTANCE PROGRAM (TRANSITION) Q3 Q4 Q1 2013 Q2 Q3 Q4 2014 Q1 2015 Program Participation HARDEST HIT FUND BLIGHT ELIMINATION PROGRAM (BLIGHT) 5,000 200 150 4,000 Program approved: March 2013 Peak estimate: 184 3/31/15 estimate: 184 3/31/15 program participation: 7 100 Program approved: December 2013 Peak estimate: 5,000 3/31/15 blighted homes proposed to be eliminated: 5,000 3/31/15 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 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Q1 2015 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 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 - Q1 2015, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Kentucky’s HHF Program FIGURE 4.38 Treasury obligated $148,901,875 in HHF funds to Kentucky.327 At the end of 2010, Kentucky estimated that it would help as many as 15,000 homeowners but, as of March 31, 2015, had reduced the number of homeowners it estimated helping with its single HHF program, the unemployment bridge program, by 49%, to 7,700. As of March 31, 2015, Kentucky had helped 6,668 homeowners with that program.328 As of March 31, 2015, the state had drawn down $104 million (70%) of its HHF funds.329,xlix As of March 31, 2015, the most recent data available, Kentucky had spent $83.4 million (56% of its obligated funds) to help 6,668 individual homeowners with its HHF program.330,l The remaining $12.4 million (8%) was spent on administrative expenses, and $9.1 million (6%) is held as cash-on-hand.331,li Figure 4.39 shows the number of homeowners estimated to participate in Kentucky’s program and the number of homeowners who have been assisted, as of March 31, 2015. KY HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH MARCH 31, 2015 100% Unemployment ($83,435,693) 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: Kentucky Housing Corporation, American Recovery and Reinvestment Act and Troubled Asset Relief Program, Kentucky Unemployment Bridge Program, Quarterly Performance Reports Q1 2015, no date. xlix Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, Kentucky had drawn down $104 million. l 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. li 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. 233 234 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.39 KENTUCKY’S UNEMPLOYMENT BRIDGE PROGRAM (UNEMPLOYMENT) ESTIMATED PROGRAM PARTICIPATION AND HOMEOWNERS ASSISTED, AS OF 3/31/2015 15,000 Program approved: September 2010 Peak estimate: 15,000 3/31/2015 estimate: 7,700 3/31/2015 program participation: 6,668 Homeowners assisted: 6,668 12,000 9,000 6,000 3,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 Q4 Q1 2013 Q2 Q3 2014 Q4 Q1 2015 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’s Unemployment Bridge Program, Quarterly Performance Reports Q4 2010 - Q1 2015, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Michigan’s HHF Programs FIGURE 4.40 Treasury obligated $498,605,738 in HHF funds to Michigan.332 At the end of 2010, Michigan estimated that it would help as many as 49,422 homeowners with HHF but, as of March 31, 2015, had reduced that peak estimate by 81%, to 9,444. As of March 31, 2015, 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 March 31, 2015, Michigan had helped 25,573 homeowners, with the largest numbers in the past-due payment assistance and unemployment programs.333 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. For more information about blight elimination in Michigan, please see the “Update on the Hardest Hit Fund’s Blight Elimination Program” discussion on pages 196-198 of this Quarterly Report. As of March 31, 2015, the state had drawn down $304.1 million (61%) of its HHF funds.334,lii As of March 31, 2015, the most recent data available, Michigan had spent $198 million (40% of its obligated funds) to help individual homeowners with HHF programs; it had also spent $42.9 million (9%) to demolish 3,220 vacant properties.335,liii The remaining $27.5 million (6%) was spent on administrative expenses, and $37.9 million (8%) is held as cash-on-hand.336,liv Figure 4.41 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 March 31, 2015. Figure 4.42 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 March 31, 2015. MI HHF EXPENDITURES, BY PROGRAM CATEGORY lii Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, Michigan had drawn down $341.1 million. liii 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. liv 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. PROGRAM THROUGH MARCH 31, 2015 17.8% 57.5% 22.1% 2.5% Past-Due Payment ($138,513,609) Modification ($6,066,718) Unemployment ($53,334,779) Blight ($42,931,026) 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 Q1 2015, no date. 235 236 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.41 MICHIGAN ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 3/31/2015 50,000 40,000 30,000 20,000 10,000 Peak estimate: 49,422 3/31/2015 estimate: 9,444 3/31/2015 program participation: 25,573 Homeowners assisted: 25,573 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 Q115 Q1 Q110 2010 2011 2012 State Estimated Program Participation 2013 2014 2015 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 tenth 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, 10/10/2014, and 3/6/2015; Michigan Homeowner Assistance Nonprofit Housing Corporation, Hardest Hit U.S. Treasury Reports, Quarterly Performance Reports Q3 2010 - Q1 2015, no date; Treasury, response to SIGTARP data call, 10/7/2013. 237 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 FIGURE 4.42 MICHIGAN ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 3/31/2015 PRINCIPAL CURTAILMENT PROGRAM (MODIFICATION) Program approved: June 2010 Peak estimate: 3,044 3/31/15 estimate: 300 3/31/15 program participation: 305 4,000 3,000 LOAN RESCUE PROGRAM (PAST-DUE PAYMENT) Program approved: June 2010 Peak estimate: 21,760 3/31/15 estimate: 4,567 3/31/15 program participation: 17,945 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 2014 Q1 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 2014 Q1 2015 Program Participation MODIFICATION PLAN PROGRAM (MODIFICATION) Program approved: June 2010 Peak estimate: 24,618 3/31/15 estimate: 4,282 3/31/15 program participation: 7,171 20,000 Q2 2010 Program Participation UNEMPLOYMENT MORTGAGE SUBSIDY PROGRAM (UNEMPLOYMENT) 25,000 Q1 2015 1,000 750 15,000 Program approved: June 2012 Peak estimate: 825 3/31/15 estimate: 295 3/31/15 program participation: 152 500 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 2015 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 Program Participation BLIGHT ELIMINATION PROGRAM (BLIGHT) Program approved: June 2013 3/31/15 blighted homes proposed to be eliminated: 7,000 3/31/15 actual blighted homes eliminated: 3,220 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 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 tenth 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, 10/10/2014, and 3/6/2015; Michigan Homeowner Assistance Nonprofit Housing Corporation, Hardest Hit U.S. Treasury Reports, Quarterly Performance Reports Q3 2010 - Q1 2015, no date; Treasury, response to SIGTARP data calls, 10/7/2013 and 7/8/2014. 238 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.43 Mississippi’s HHF Program MS HHF EXPENDITURES, BY PROGRAM CATEGORY Treasury obligated $101,888,323 in HHF funds to Mississippi.337 At the end of 2010, Mississippi estimated that it would provide HHF unemployment assistance to as many as 3,800 homeowners but, as of March 31, 2015, 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 March 31, 2015, Mississippi had helped 3,187 homeowners through that unemployment program.338 As of March 31, 2015, the state had drawn down $65.8 million (65%) of its HHF funds.339,lv As of March 31, 2015, the most recent data available, Mississippi had spent $48.9 million (48% of its obligated funds) to help 3,187 individual homeowners with its HHF program.340,lvi The remaining $9 million (9%) was spent on administrative expenses, and $8.1 million (8%) is held as cash-on-hand.341,lvii Figure 4.44 shows the number of homeowners estimated to participate in Mississippi’s program and the number of homeowners who have been assisted, as of March 31, 2015. PROGRAM THROUGH MARCH 31, 2015 100% Unemployment ($48,890,754) 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 Q1 2015, no date. lv Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, Mississippi had drawn down $65.8 million. lvi 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. lvii 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 JULY 29, 2015 FIGURE 4.44 MISSISSIPPI’S HOME SAVER PROGRAM (UNEMPLOYMENT) ESTIMATED PROGRAM PARTICIPATION AND HOMEOWNERS ASSISTED, AS OF 3/31/2015 4,000 3,500 3,000 Program approved: September 2010 Peak estimate: 3,800 3/31/15 estimate: 3,500 3/31/15 program participation: 3,187 Homeowners assisted: 3,187 2,500 2,000 1,500 1,000 500 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 Q4 Q1 2013 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. 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 - Q1 2015, no date. Q1 2015 239 240 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.45 Nevada’s HHF Programs NV HHF EXPENDITURES, BY PROGRAM CATEGORY Treasury obligated $194,026,240 in HHF funds to Nevada.342 In mid-2011, Nevada estimated that it would help as many as 23,556 homeowners with HHF but, as of March 31, 2015, had reduced that peak estimate by 68%, to 7,565. As of March 31, 2015, 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 March 31, 2015, Nevada had helped 5,282 individual homeowners with HHF programs (down from 5,539 reported last quarter due to a revision of its previously reported Unique Borrower count data), with the largest numbers in the unemployment and the principal reduction programs.343 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.344,lviii As of March 31, 2015, the state had drawn down $112 million (58%) of its HHF funds.345,lix As of March 31, 2015, the most recent data available, Nevada had spent $86.5 million (45% of its obligated funds) to help individual homeowners with its HHF programs.346,lx The remaining $14.3 million (7%) was spent on administrative expenses, and $12.1 million (6%) is held as cash-on-hand.347,lxi Figure 4.46 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 March 31, 2015. Figure 4.47 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 March 31, 2015. PROGRAM THROUGH MARCH 31, 2015 57.9% 36.3% 0.3% 5.4% Modification ($50,100,394) Second-Lien Reduction ($4,680,948) Transition ($289,179) Unemployment ($31,391,332) 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 Q1 2015, no date. lviii On June 25, 2015, Nevada defunded both the Home Retention Fund and the Recast Refinance and Modification Program. lix Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, Nevada had drawn down $112 million. lx 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. 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 JULY 29, 2015 FIGURE 4.46 NEVADA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 3/31/2015 25,000 Peak estimate: 23,556 3/31/2015 estimate: 7,565 3/31/2015 program participation: 5,608 Homeowners assisted: 5,282 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 Q115 Q1 Q110 2010 2011 2012 State Estimated Program Participation 2013 2014 2015 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. As of March 31, 2015, Nevada reported 5,282 individual homeowners helped with HHF programs, revised down from 5,539 reported as of the previous quarter. 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 thirteenth 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, 6/11/2014, and 2/19/2015; Nevada Affordable Housing Assistance Corporation, Nevada Hardest Hit Fund, US Treasury Reports, Quarterly Performance Reports Q1 2011 - Q1 2015, no date. 241 242 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.47 NEVADA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 3/31/2015 PRINCIPAL REDUCTION PROGRAM (MODIFICATION) SECOND MORTGAGE REDUCTION PLAN (SECOND-LIEN REDUCTION) Program approved: June 2010 Peak estimate: 3,016 3/31/15 estimate: 1,205 3/31/15 program participation: 1,208 4,000 3,000 3,000 Program approved: June 2010 Peak estimate: 2,200 3/31/15 estimate: 404 3/31/15 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 2014 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 Q2 2012 Q3 Q4 Q1 Q2 2013 State Estimated Program Participation Q3 Q4 2014 Q1 2015 Program Participation MORTGAGE ASSISTANCE PROGRAM (UNEMPLOYMENT) 20,000 Program approved: June 2010 Peak estimate: 1,713 3/31/15 estimate: 100 3/31/15 program participation: 104 1,500 Q2 2010 Program Participation SHORT-SALE ACCELERATION PROGRAM (TRANSITION) 2,000 Q1 Q1 2015 Program approved: September 2010 Peak estimate: 16,969 3/31/15 estimate: 4,065 3/31/15 program participation: 3,658 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 2014 Q1 Q1 2015 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 State Estimated Program Participation Program Participation MORTGAGE ASSISTANCE PROGRAM ALTERNATIVE (UNEMPLOYMENT) Q3 Q4 Q1 Q2 2013 Q3 Q4 2014 Q1 2015 Program Participation HOME RETENTION PROGRAM (MODIFICATION) 1,200 500 1,000 375 Program approved: August 2013 Peak estimate: 1,150 3/31/15 estimate: 615 3/31/15 program participation: 0 800 Program approved: February 2012 Peak estimate: 416 3/31/15 estimate: 176 3/31/15 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 2014 Q1 Q1 2015 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 Program Participation NEVADA RECAST REFINANCE AND MODIFICATION PROGRAM (MODIFICATION) 1,000 750 Program approved: June 2014 Peak estimate: 1,000 3/31/15 estimate: 1,000 3/31/15 program participation: 0 500 250 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 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 thirteenth 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, 6/11/2014, and 2/19/2015; Nevada Affordable Housing Assistance Corporation, Nevada Hardest Hit Fund, US Treasury Reports, Quarterly Performance Reports Q1 2011 - Q1 2015, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 New Jersey’s HHF Program FIGURE 4.48 Treasury obligated $300,548,144 in HHF funds to New Jersey.348 From the end of 2010 to the end of 2013, New Jersey estimated helping 6,900 homeowners with HHF but, as of March 31, 2015, had reduced the number of homeowners it estimated helping in its single HHF program, the Homekeeper unemployment program, by 6%, to 6,500.lxii As of March 31, 2015, New Jersey helped 6,000 individual homeowners with HHF through its program.349 According to Treasury, New Jersey stopped accepting new applications from struggling homeowners seeking help from their HHF programs submitted after November 30, 2013.350,lxiii As of March 31, 2015, New Jersey has drawn down $245.5 million (82%) of its HHF funds and spent $215.5 million (72%) of its obligated funds on program expenses to help individual homeowners.351,lxiv,lxv The remaining $23.4 million (8%) was spent on administrative expenses, and $8.6 million (3%) is held as cash-on-hand.352,lxvi Figure 4.49 shows the number of homeowners estimated to participate in New Jersey’s program and the number of homeowners who have been assisted, as of March 31, 2015. NJ HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH MARCH 31, 2015 100% Unemployment ($215,487,603) 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: New Jersey Housing and Mortgage Finance Agency, The New Jersey HomeKeeper Program, About the Program, Performance Reports, Quarterly Performance Report Q1 2015, no date. lxii On May 21, 2015, New Jersey added a new program, its second, the Home Saver Program. lxiii 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. lxiv Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, New Jersey had drawn down $270.5 million. lxv 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. lxvi 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. 243 244 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.49 NEW JERSEY’S HOMEKEEPER PROGRAM (UNEMPLOYMENT) ESTIMATED PROGRAM PARTICIPATION AND HOMEOWNERS ASSISTED, AS OF 3/31/2015 8,000 7,000 6,000 Program approved: September 2010 Peak estimate: 6,900 3/31/2015 estimate: 6,500 3/31/2015 program participation: 6,000 Homeowners assisted: 6,000 5,000 4,000 3,000 2,000 1,000 0 Q1 Q210 Q2Q310 Q3 Q410 Q4 Q111 Q1Q211 Q2Q311 Q3Q411 Q4Q112 Q1Q212 Q2Q312 Q3Q412 Q4 Q113 Q1Q213 Q2 Q313 Q3Q413 Q4Q114 Q1 Q214 Q2Q314 Q3Q414 Q4Q115 Q1 Q110 2010 2011 2012 State Estimated Program Participation 2013 2014 2015 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 - Q1 2015, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 North Carolina’s HHF Programs FIGURE 4.50 Treasury obligated $482,781,786 in HHF funds to North Carolina.353 From mid2011 to mid-2013, North Carolina estimated that it would help as many as 22,290 homeowners with HHF but, as of March 31, 2015, had reduced that peak estimate to 21,310. As of March 31, 2015, North Carolina had four active HHF programs: two to provide unemployment assistance to homeowners, a third to provide secondlien reduction assistance to homeowners, and a fourth to modify homeowners’ mortgages with principal reduction.lxvii As of March 31, 2015, North Carolina has helped 19,060 individual homeowners with its HHF programs, with the largest number in the two unemployment programs.354 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, has just one participant as of March 31, 2015. As of March 31, 2015, the state had drawn down $395.2 million (82%) of its HHF funds and spent $305.9 million (63%) of their obligated funds on program expenses to help individual homeowners.355,lxviii,lxix The remaining $52.2 million (11%) was spent on administrative expenses, and $41.8 million (9%) is held as cash-on-hand.356,lxx Figure 4.51 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 March 31, 2015. 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 4.52 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 March 31, 2015. NC HHF EXPENDITURES, BY PROGRAM CATEGORY lxvii On June 25, 2015, North Carolina added a fifth program, the Prinicipal Reduction Recast Lien Extinguishment for Unaffordable Mortgages. lxviii Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, North Carolina had drawn down $395.2 million. lxix 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. lxx 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. PROGRAM THROUGH MARCH 31, 2015 1% 0.1% 98.9% Modification ($5,755) Second-Lien Reduction ($3,067,767) Unemployment ($302,803,397) 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 Q1 2015, no date. 245 246 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.51 NORTH CAROLINA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 3/31/2015 25,000 20,000 Peak estimate: 22,290 3/31/2015 estimate: 21,310 3/31/2015 program participation: 19,188 Homeowners assisted: 19,060 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 Q115 Q1 Q110 2010 2011 2012 State Estimated Program Participation 2013 2014 2015 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 - Q1 2015, no date; Treasury, response to SIGTARP data call, 10/7/2013. 247 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 FIGURE 4.52 NORTH CAROLINA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 3/31/2015 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 3/31/15 estimate: 14,100 3/31/15 program participation: 14,495 9,000 3,000 Program approved: September 2010 Peak estimate: 5,750 3/31/15 estimate: 5,410 3/31/15 program participation: 4,542 2,000 1,000 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 6,000 3,000 0 Q4 2014 Q1 Q1 2015 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 State Estimated Program Participation Program Participation SECOND MORTGAGE REFINANCE PROGRAM (SECOND-LIEN REDUCTION) Q3 Q4 Q1 2013 Q2 Q3 Q4 2014 Q1 2015 Program Participation MODIFICATION ENABLING PILOT PROJECT (MODIFICATION) 2,000 1,000 1,500 750 Program approved: September 2010 Peak estimate: 2,000 3/31/15 estimate: 1,000 3/31/15 program participation: 150 1,000 500 Program approved: December 2013 Peak estimate: 800 3/31/15 estimate: 800 3/31/15 program participation: 1 500 250 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 375 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 Q2 Q3 Q4 2014 Q1 2015 Program Participation PRINCIPAL REDUCTION RECAST PROGRAM (MODIFICATION) Program Ended December 2013 2,000 1,500 Program approved: September 2010 Peak estimate: 440 3/31/15 estimate: 0 3/31/15 program participation: 0 125 Q3 State Estimated Program Participation Program Ended August 2013 500 Q2 2010 Program Participation PERMANENT LOAN MODIFICATION PROGRAM (MODIFICATION) 250 Q1 2015 Program approved: August 2013 Peak estimate: 680 3/31/15 estimate: 0 3/31/15 program participation: 0 1,000 500 0 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 Q1 2015 Program Participation Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 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 - Q1 2015, no date; Treasury, response to SIGTARP data call, 10/7/2013. 248 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.53 Ohio’s HHF Programs OH HHF EXPENDITURES, BY PROGRAM CATEGORY Treasury obligated $570,395,099 in HHF funds to Ohio.357 At the end of 2010, Ohio estimated that it would help as many as 63,485 homeowners with HHF but, as of March 31, 2015, had reduced that peak estimate by 35%, to 41,201. As of March 31, 2015, Ohio had eight active HHF programs: three to modify homeowners’ mortgages, a fourth and fifthlxxi 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 March 31, 2015, Ohio has helped 24,485 individual homeowners, with the largest numbers in the past due payment and unemployment assistance programs.358 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 75 homeowners during nearly five years of operation. According to Treasury, Ohio stopped accepting new applications after April 30, 2014.359 In addition to decreasing the number of homeowners it estimated helping with HHF, Ohio has shifted $66.5 million (12%) 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. For more information about blight elimination in Ohio, please see the “Update on the Hardest Hit Fund’s Blight Elimination Program” discussion on pages 199-201 of this Quarterly Report. As of March 31, 2015, the state had drawn down $499.2 million (88%) of its HHF funds.360,lxxii As of March 31, 2015, the most recent data available, Ohio had spent $405.2 million (71% of its obligated funds) to help individual homeowners with its HHF programs; it had also spent $7.6 million to demolish and remove 665 properties under its blight elimination program, which was approved in August 2013.361,lxxiii The remaining $46.3 million (8%) was spent on administrative expenses, and $42.2 million (7%) is held as cash-on-hand.362,lxxiv Figure 4.54 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 March 31, 2015. Because homeowners may participate in more than one program, PROGRAM THROUGH MARCH 31, 2015 1.9% 43.8% 0.1% 36.3% 17.9% Past-Due Payment ($177,797,277) Modification ($72,663,686) Unemployment ($147,276,493) Transition ($360,966) Blight ($7,597,702) 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 Q1 2015, no date. lxxi 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. lxxii Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, Ohio had drawn down $499.2 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 JULY 29, 2015 the reported program participation numbers are higher than the total number of individual homeowners assisted. Figure 4.55 shows the number of homeowners estimated to participate in each of Ohio’s programs (estimated program participation) and the reported number of homeowners who participated in each of Ohio’s programs (program participation), as of March 31, 2015. FIGURE 4.54 OHIO ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 3/31/2015 80,000 Peak estimate: 63,485 3/31/2015 estimate: 41,201 3/31/2015 program participation: 40,015 Homeowners assisted: 24,485 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 Q115 Q1 Q110 2010 2011 2012 State Estimated Program Participation 2013 2014 2015 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 - Q1 2015, no date; Treasury, response to SIGTARP data call, 10/7/2013. 249 250 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.55 OHIO ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 3/31/2015 RESCUE PAYMENT ASSISTANCE PROGRAM Program approved: September 2010 (PAST-DUE PAYMENT) Peak estimate: 21,000 MORTGAGE PAYMENT ASSISTANCE PROGRAM (UNEMPLOYMENT) Program approved: September 2010 3/31/15 estimate: 21,000 3/31/15 program participation: 20,219 25,000 Peak estimate: 31,900 3/31/15 estimate: 15,500 3/31/15 program participation: 14,854 40,000 20,000 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 2014 Q1 Q1 2015 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 State Estimated Program Participation Program Participation MODIFICATION WITH CONTRIBUTION ASSISTANCE PROGRAM (MODIFICATION) Q3 Q4 Q1 2013 Q2 Q3 Q4 2014 Q1 2015 Program Participation LIEN ELIMINATION ASSISTANCE (MODIFICATION) 7,500 3,000 6,000 2,500 Program approved: September 2010 Peak estimate: 2,350 3/31/15 estimate: 1,150 3/31/15 program participation: 1,199 2,000 4,500 1,500 Program approved: December 2011 Peak estimate: 6,400 3/31/15 estimate: 1,300 3/31/15 program participation: 1,562 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 2014 2015 4,000 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 2014 Q1 2015 Program Participation HOMEOWNERSHIP RETENTION ASSISTANCE (PAST-DUE PAYMENT) Program approved: September 2010 Peak estimate: 4,900 3/31/15 estimate: 63 3/31/15 program participation: 75 5,000 Q2 2010 Program Participation TRANSITION ASSISTANCE PROGRAM (TRANSITION) 6,000 Q1 Q1 4,000 Program approved: December 2012 Peak estimate: 3,100 3/31/15 estimate: 1,738 3/31/15 program participation: 1,924 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 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Q1 2015 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Program Participation Q1 2015 251 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 OHIO ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 3/31/2015 (CONTINUED) HOMEOWNER STABILIZATION ASSISTANCE PROGRAM (MODIFICATION) NEIGHBORHOOD INITIATIVE PROGRAM (BLIGHT) 6,000 1,000 750 5,000 Program approved: March 2013 Peak estimate: 900 3/31/15 estimate: 450 3/31/15 program participation: 182 500 4,000 Program approved: August 2013 3/31/15 blighted homes proposed to be eliminated: 5,000 3/31/15 actual blighted homes eliminated: 665 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 2014 Q1 2015 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 Program Participation SHORT REFINANCE PROGRAM (TRANSITION) 8,000 6,000 Program Ended December 2012 Program approved: December 2010 Peak estimate: 6,500 3/31/15 estimate: 0 3/31/15 program participation: 0 4,000 2,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 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 - Q1 2015, no date; Treasury, response to SIGTARP data call, 10/7/2013. 252 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.56 Oregon’s HHF Programs OR HHF EXPENDITURES, BY PROGRAM CATEGORY Treasury obligated $220,042,786 in HHF funds to Oregon.363 As of March 31, 2014, Oregon estimated that it would help as many as 15,280 homeowners with HHF, but as of March 31, 2015, reduced that estimate to 15,150. As of March 31, 2015, 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 March 31, 2015, Oregon has helped 11,740 individual homeowners with its HHF programs, with the largest numbers in the unemployment and past due payment assistance programs.364 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, 2014.365 As of March 31, 2015, the state had drawn down 100% of its HHF funds.366,lxxv As of March 31, 2015, the most recent data available, Oregon had spent $184.1 million to help individual homeowners, $33.2 million was spent on administrative expenses, and $21.4 million is held as cash-on-hand.367,lxxvi,lxxvii The unique structures of two of Oregon’s HHF programs, the Loan Refinance Asssistance Program and the Rebuilding American Homeownership Assistance Pilot Project— under which Oregon extends new mortgage loans to homeowners, receives principal and interest payments while it holds the new loans and recovers principal when it sells the loans to third parties—allow the state to recycle larger amounts back into HHF, which can then be either used to provide additional homeowner assistance or held as cash-on-hand. At March 31, 2015, Oregon had recovered $17.3 million in funds from homeowners who left the program before their HHF award was fully forgiven (lien release), including under these programs.368 Figure 4.57 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 March 31, 2015. 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 4.58 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 March 31, 2015. PROGRAM THROUGH MARCH 31, 2015 7.8% 20.6% 71.6% Past-Due Payment ($14,357,470) Unemployment ($131,787,534) Modification ($37,937,881) 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: Oregon Affordable Housing Assistance Corporation, Oregon Homeownership Stabilization Initiative, Reporting, Quarterly Performance Reports Q1 2015, no date. lxxv Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, Oregon had drawn down $220 million, 100% of its obligated funds. lxxvi 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. lxxvii 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 JULY 29, 2015 FIGURE 4.57 OREGON ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 3/31/2015 20,000 Peak estimate: 15,280 3/31/2015 estimate: 15,150 3/31/2015 program participation: 15,825 Homeowners assisted: 11,740 15,000 10,000 5,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 Q4 Q1 2013 Q2 Q3 2014 Q4 Q1 2015 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 - Q1 2015, no date. 253 254 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.58 OREGON ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 3/31/2015 MORTGAGE PAYMENT ASSISTANCE PROGRAM (UNEMPLOYMENT) LOAN PRESERVATION ASSISTANCE PROGRAM Program approved: September 2010 (PAST-DUE PAYMENT) Program approved: September 2010 Peak estimate: 11,000 3/31/15 estimate: 11,000 3/31/15 program participation: 11,256 15,000 12,000 9,000 Peak estimate: 4,000 3/31/15 estimate: 3,900 3/31/15 program participation: 4,335 5,000 4,000 3,000 6,000 2,000 3,000 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 2014 Q1 Q1 2015 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 State Estimated Program Participation Q2 Q3 Q4 2014 Q1 2015 Program Participation REBUILDING AMERICAN HOMEOWNERSHIP ASSISTANCE PILOT PROJECT (MODIFICATION) 400 100 300 75 Program approved: March 2011 Peak estimate: 330 3/31/15 estimate: 200 3/31/15 program participation: 170 100 Q3 2010 Program Participation LOAN REFINANCE ASSISTANCE PROGRAM (MODIFICATION) 200 Q2 Program approved: February 2013 Peak estimate: 50 3/31/15 estimate: 50 3/31/15 program participation: 64 50 25 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 2014 2015 2,000 1,500 500 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 Q2 Q3 Q4 2014 Q1 2015 Program Participation TRANSITION ASSISTANCE PROGRAM (TRANSITION) 3,000 Program approved: September 2010 Peak estimate: 2,515 3/31/15 estimate: 0 3/31/15 program participation: 0 2,500 2,000 1,500 Program Ended June 2013 1,000 Q3 State Estimated Program Participation Program approved: September 2010 Peak estimate: 2,600 3/31/15 estimate: 0 3/31/15 program participation: 0 2,500 Q2 2010 Program Participation LOAN MODIFICATION ASSISTANCE PROGRAM (MODIFICATION) 3,000 Q1 Q1 Program Ended December 2011 1,000 500 0 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 Q1 2015 Program Participation Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 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 - Q1 2015, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Rhode Island’s HHF Program FIGURE 4.59 Treasury obligated $79,351,573 in HHF funds to Rhode Island.369 At the end of 2010, Rhode Island estimated that it would help as many as 13,125 homeowners with HHF but, as of March 31, 2015, 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 March 31, 2015, Rhode Island has helped 3,075 individual homeowners with HHF programs, with the largest numbers in the unemployment and past due payment programs.370 According to Treasury, Rhode Island stopped accepting new applications from struggling homeowners seeking help from their HHF programs submitted after January 31, 2013.371,lxxviii As of March 31, 2015, the state had drawn down 100% of its HHF funds.372,lxxix As of March 31, 2015, the most recent data available, Rhode Island had spent $63.7 million (80% of its obligated funds) to help individual homeowners with its HHF programs.373,lxxx The remaining $8.2 million (10%) was spent on administrative expenses, and $8.3 million (10%) is held as cash-on-hand.374,lxxxi Figure 4.60 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 March 31, 2015. 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 4.61 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 March 31, 2015. RI HHF EXPENDITURES, BY PROGRAM CATEGORY lxxviii 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. lxxix Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, Rhode Island had drawn down 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 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. PROGRAM THROUGH MARCH 31, 2015 20% 1% 18% 61% Modification ($12,948,679) Transition ($340,227) Past-Due Payment ($11,567,405) Unemployment ($38,799,848) 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 Q1 2015, no date. 255 256 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.60 RHODE ISLAND ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 3/31/2015 15,000 Peak estimate: 13,125 3/31/2015 estimate: 3,413 3/31/2015 program participation: 3,362 Homeowners assisted: 3,075 12,000 9,000 6,000 3,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 Q4 Q1 2013 Q2 Q3 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. 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 - Q1 2015, no date; Treasury, response to SIGTARP data call, 10/7/2013. Q4 Q1 2015 257 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 FIGURE 4.61 RHODE ISLAND ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 3/31/2015 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 3/31/15 estimate: 477 3/31/15 program participation: 490 3,000 2,500 2,000 Program approved: September 2010 Peak estimate: 2,750 3/31/15 estimate: 681 3/31/15 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 2014 Q1 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 2015 Program Participation MORTGAGE PAYMENT ASSISTANCE – UNEMPLOYMENT (UNEMPLOYMENT) Program approved: September 2010 Peak estimate: 875 3/31/15 estimate: 70 3/31/15 program participation: 65 750 Q2 Program Participation MOVING FORWARD ASSISTANCE (TRANSITION) 1,000 Q1 2015 6,000 Program approved: September 2010 Peak estimate: 6,000 3/31/15 estimate: 2,153 3/31/15 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 2014 Q1 Q1 2015 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 Program Participation PRINCIPAL REDUCTION PROGRAM (MODIFICATION) 100 75 Program approved: May 2011 Peak estimate: 100 3/31/15 estimate: 32 3/31/15 program participation: 28 50 25 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 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 - Q1 2015, no date; Treasury, response to SIGTARP data call, 10/7/2013. 258 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.62 South Carolina’s HHF Programs SC HHF EXPENDITURES, BY PROGRAM CATEGORY Treasury obligated $295,431,547 in HHF funds to South Carolina.375 At the end of 2010, South Carolina estimated that it would help as many as 34,100 homeowners with HHF but, as of March 31, 2015, reduced that peak estimate by 46%, to 18,350. As of March 31, 2015, 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 March 31, 2015, South Carolina had helped 9,209 individual homeowners with HHF programs, with the largest numbers in the past-due assistance and unemployment programs.376 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 63 participants as of March 31, 2015. In addition to decreasing the number of homeowners it estimated helping with HHF, South Carolina has shifted 12% 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. For more information about blight elimination in South Carolina, please see the “Update on the Hardest Hit Fund’s Blight Elimination Program” discussion on page 209 of this Quarterly Report. As of March 31, 2015, the state had drawn down $162.5 million (55%) of its HHF funds, and had spent $135.7 million (46% of its obligated funds) to help individual homeowners with its HHF programs; no HHF funds had been spent on blight elimination.377,lxxxii,lxxxiii The remaining $24.6 million (8%) was spent on administrative expenses, and $3.1 million (1%) is held as cash-on-hand.378,lxxxiv Figure 4.63 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 March 31, 2015. 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 4.64 shows the number of homeowners estimated to participate in each of South Carolina’s programs PROGRAM THROUGH MARCH 31, 2015 51.6% 46.6% 0.9% 1% Past-Due Payment ($69,974,967) Modification ($1,352,859) Transition ($1,160,504) Unemployment ($63,228,400) 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: SC Housing Corp., SC HELP, Reports, Quarterly Performance Reports Q1 2015, no date. lxxxii Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, South Carolina had drawn down $175 million. lxxxiii 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. lxxxiv 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 JULY 29, 2015 (estimated program participation) and the reported number of homeowners who participated in each of South Carolina’s programs (program participation), as of March 31, 2015. FIGURE 4.63 SOUTH CAROLINA ESTIMATED PROGRAM PARTICIPATION, PROGRAM PARTICIPATION, AND INDIVIDUAL HOMEOWNERS ASSISTED, IN ALL HHF PROGRAMS, AS OF 3/31/2015 35,000 30,000 25,000 20,000 Peak estimate: 34,100 3/31/2015 estimate: 18,350 3/31/2015 program participation: 14,238 Homeowners assisted: 9,209 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 Q115 Q1 Q110 2010 2011 2012 State Estimated Program Participation 2013 2014 2015 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 - Q1 2015, no date. 259 260 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.64 SOUTH CAROLINA ACTUAL VS. ESTIMATED PROGRAM PARTICIPATION, BY PROGRAM, AS OF 3/31/2015 MONTHLY PAYMENT ASSISTANCE PROGRAM Program approval: September 2010 (UNEMPLOYMENT) DIRECT LOAN ASSISTANCE PROGRAM (PAST-DUE PAYMENT) Program approved: September 2010 Peak estimate: 14,000 3/31/15 estimate: 6,000 3/31/15 program participation: 5,101 15,000 12,000 Peak estimate: 11,500 3/31/15 estimate: 11,500 3/31/15 program participation: 8,841 15,000 12,000 9,000 9,000 6,000 6,000 3,000 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 2014 Q1 4,000 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 Q2 2013 State Estimated Program Participation Q3 Q4 2014 Q1 2015 Program Participation PROPERTY DISPOSITION ASSISTANCE PROGRAM (TRANSITION) Program approved: September 2010 Peak estimate: 6,000 3/31/15 estimate: 300 3/31/15 program participation: 233 6,000 Program approved: October 2013 Peak estimate: 3,500 3/31/15 estimate: 550 3/31/15 program participation: 63 5,000 Q2 2010 Program Participation MODIFICATION ASSISTANCE PROGRAM (MODIFICATION) 6,000 Q1 2015 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 2013 State Estimated Program Participation Q2 Q3 Q4 2014 Q1 Q1 2015 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 3,000 Q3 Q4 Q1 Q2 2013 Q3 Q4 2014 Q1 2015 Program Participation Program approved: September 2010 Peak estimate: 2,600 3/31/15 estimate: 0 3/31/15 program participation: 0 2,500 Program approved: July 2014 3/31/15 blighted homes proposed to be eliminated: 1,300 3/31/15 actual blighted homes eliminated: 0 750 Q2 SECOND MORTGAGE ASSISTANCE PROGRAM (SECOND-LIEN REDUCTION) 1,500 1,000 Q1 State Estimated Program Participation Program Participation NEIGHBORHOOD INITIATIVE PROGRAM (BLIGHT) 1,250 Q4 2012 2,000 1,500 500 1,000 250 500 Program Ended August 2011 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 2015 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 Program Participation HAMP ASSISTANCE PROGRAM (MODIFICATION) 6,000 Program approved: September 2010 Peak estimate: 6,000 3/31/15 estimate: 0 3/31/15 program participation: 0 5,000 4,000 Program Ended October 2013 3,000 2,000 1,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 State Estimated Program Participation Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 Q4 2014 Q1 2015 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 - Q1 2015, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Tennessee’s HHF Program FIGURE 4.65 Treasury obligated $217,315,593 in HHF funds to Tennessee.379 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 March 31, 2015, had reduced that peak estimate by 43%, to 7,700. As of March 31, 2015, Tennessee had helped 7,355 individual homeowners with its program.380 According to Treasury, as of September 30, 2014, Tennessee has stopped accepting new applications.381 As of March 31, 2015, the state had drawn down $177.3 million (82%) of its HHF funds and spent $148.5 million (68%) to help individual homeowners.382,lxxxv,lxxxvi The remaining $17 million (8%) was spent on administrative expenses, and $12.4 million (6%) is held as cash-on-hand.383,lxxxvii Figure 4.66 shows the number of homeowners estimated to participate in Tennessee’s program and the number of homeowners who have been assisted, as of March 31, 2015. TN HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH MARCH 31, 2015 100% Unemployment ($148,510,080) 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 Q1 2015, no date. lxxxv Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, Tennessee had drawn down $190.3 million. lxxxvi 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. lxxxvii 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. 261 262 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.66 TENNESSEE’S HARDEST HIT FUND PROGRAM (UNEMPLOYMENT) ESTIMATED PROGRAM PARTICIPATION AND HOMEOWNERS ASSISTED, AS OF 3/31/2015 15,000 12,000 9,000 Program approved: September 2010 Peak estimate: 13,500 3/31/2015 estimate: 7,700 3/31/2015 program participation: 7,355 Homeowners assisted: 7,355 6,000 3,000 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 Q4 Q1 2013 Q2 Q3 2014 Q4 Q1 2015 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 - Q1 2015, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Washington, DC’s HHF Program FIGURE 4.67 Treasury obligated $20,697,198 in HHF funds to Washington, DC.384 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 March 31, 2015, had increased that peak estimate to 1,300.lxxxviii As of March 31, 2015, Washington DC has helped 697 homeowners.385 According to Treasury, Washington, DC stopped accepting new applications after November 22, 2013.386 As of March 31, 2015, Washington, DC had drawn down $18.2 million (88%) of its HHF funds.387,lxxxix As of March 31, 2015, the most recent data available, Washington, DC had spent $13.6 million (66% of its obligated funds) to help individual homeowners.388,xc The remaining $3.1 million (15%) was spent on administrative expenses and $2.1 million (10%) is held as cash-on-hand.389,xci Figure 4.68 shows the number of homeowners estimated to participate in Washington, DC’s program and the number of homeowners who have been assisted, as of March 31, 2015. WASHINGTON, DC HHF EXPENDITURES, BY PROGRAM CATEGORY PROGRAM THROUGH MARCH 31, 2015 100% Unemployment ($13,577,099) 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: District of Columbia Housing Finance Agency, HomeSaver – A Foreclosure Prevention Program, Quarterly Performance Reports Q1 2015, no date. lxxxviii Washington, DC had previously reduced its estimate to helping 800 homeowners as of June 30, 2014. lxxxix Treasury has separately published June 30, 2015, figures for amounts drawn down; as of June 30, 2015, Washington, DC had drawn down $18.2 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 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. 263 264 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.68 WASHINGTON, DC’S HOMESAVER PROGRAM (UNEMPLOYMENT) ESTIMATED PROGRAM PARTICIPATION AND HOMEOWNERS ASSISTED, AS OF 3/31/2015 1,500 Program approved: September 2010 Peak estimate: 1,300 3/31/2015 estimate: 1,300 3/31/2015 program participation: 697 Homeowners assisted: 697 1,200 900 600 300 0 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 State Estimated Program Participation Q4 Q1 Q2 Q3 Q4 Q1 2013 Q2 Q3 2014 Q4 Q1 2015 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’s Housing Finance Agency, HomeSaver – A Foreclosure Prevention Program, Quarterly Performance Reports Q1 2011 Q1 2015, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 FHA Short Refinance Program 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.390 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, 2022.391 FHA Short Refinance is voluntary for servicers. Therefore, not all underwater homeowners who qualify may be able to participate in the program.392 As of June 30, 2015, according to Treasury, 6,176 loans had been refinanced under the program.393 As of June 30, 2015, Treasury has paid $145,330 on claims for six defaults under the program; however, it is possible that more loans have defaulted but FHA has not yet evaluated the claims.394 Treasury has deposited $50 million into a reserve account for future claims in March 2013, $40 million of which was returned to Treasury in in March 2015, leaving a $10 million in the reserve account.395 It has also spent approximately $10 million on administrative expenses associated with the letter of credit.396 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%.397 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.398 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%, and for loans refinanced between April 1, 2015 and June 30, 2015 Treasury’s loss coverage responsibility is 7.56%.399 For more information concerning FHA Short Refinance eligibility, see SIGTARP’s April 2011 Quarterly Report, pages 85-87. 265 266 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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 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. 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.400 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.401 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.402 Privately held institutions issued warrants to Treasury to purchase additional senior preferred stock worth 5% of Treasury’s initial preferred stock investment.403 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.404 Status of Program As of June 30, 2015, 36 of the 707 institutions remained in CPP; in 11 of them, Treasury holds only warrants to purchase stock. Treasury does not consider these 11 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 June 30, 2015, 25 of the 36 institutions had outstanding principal investments. Taxpayers were still owed $5.4 billion.405 According to Treasury, it had write-offs and realized losses of $5.1 billion in the program, leaving $314.4 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.406 As of June 30, 2015, 20 of the SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 25 banks with remaining principal investments had missed dividends and interest payments.407 As of June 30, 2015, Treasury has recovered $197.3 billion of the CPP principal (or 96.3%).408 Treasury converted $363.3 million in preferred stock for 28 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.409 However, only 257 of the 707 banks, or 36%, fully repaid CPP principal.410 Of the other banks that exited with less than full repayment, four CPP banks merged with other CPP banks; Treasury sold its investments in 34 banks for less than par and sold at auction its investments in 190 banks (Treasury sold 167 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.411 Figure 4.69 shows the status of the 707 CPP recipients as of June 30, 2015. As of June 30, 2015, Treasury had received approximately $12.1 billion in interest and dividends from CPP recipients. Treasury also had received $8.1 billion through the sale of CPP warrants that were obtained from TARP recipients.412 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.413 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 60%, having outstanding investments of less than $10 million.414 As of June 30, 2015, of the 25 banks with remaining principal investments in CPP, six were in the Southeast region, three were in the Southwest/South Central region, six were in the Midwest region, five were in the Mid-Atlantic/Northeast region, four were in the West region, and one were in the Mountain West/Plains region. The Southeast region and the Mid-Atlantic/Northeast region had the largest total remaining CPP investments; $176.4 billion and $45.9 million, respectively. These regions were followed in remaining CPP investments by the Midwest region ($34.1 million), the Southwest/South Central region ($30.9 million), the West region ($24.1 million), and the Mountain West/Plains region ($3.1 million). Table 4.32 and Figure 4.70 show the geographical distribution of the banks that remain in CPP as of June 30, 2015, by region. Tables 4.33–4.38 show the distribution by state. FIGURE 4.69 STATUS OF CPP RECIPIENTS, AS OF 6/30/2015 3% 24% 36% 1% 5% 5% 4% 19% 4% Fully Repaid Principal (257) Remaining Principal Investment in CPP (25) Refinanced into SBLF (137) Refinanced into CDCI (28) Sold for less than par (34) Failed/subsidiary failed (32) Merged (4) Auction: Sold at loss (167) Auction: Sold at par or profit (23) Note: 11 banks repaid CPP principal but remain in TARP with Treasury holding only warrants. Source: Treasury, response to SIGTARP data call, 7/10/2015. 267 268 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.32 BANKS WITH CPP PRINCIPAL REMAINING, BY REGION, AS OF 6/30/2015 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 $2,743,991 Moutain West/Plains 1 3,076,000 1 1,091,720 Southwest/South Central 3 30,868,000 2 6,422,646 Midwest 6 34,089,000 5 11,195,756 Mid-Atlantic/Northeast 5 45,862,000 5 15,023,873 Southeast Total 6 176,421,824 4 14,106,895 25 $314,382,824 20 $50,584,880 FIGURE 4.70 AMOUNT OF CPP PRINCIPAL INVESTMENT REMAINING, BY REGION, AS OF 6/30/2015 AK MOUNTAIN WEST/ PLAINS $3 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 $34 MILLION SC GA SOUTHEAST $176 MILLION LA FL SOUTHWEST/ SOUTH CENTRAL $31 MILLION WEST MOUNTAIN WEST/PLAINS SOUTHWEST/SOUTH CENTRAL MIDWEST MID-ATLANTIC/NORTHEAST SOUTHEAST PR SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 West TABLE 4.33 BANKS WITH CPP PRINCIPAL REMAINING, BY STATE, AS OF 6/30/2015 Principal Investment Remaining CA 4 $24,066,000 3 $2,743,991 Total 4 $24,066,000 3 $2,743,991 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 4.34 BANKS WITH CPP PRINCIPAL REMAINING, BY STATE, AS OF 6/30/2015 MT ID NV Banks with Remaining Principal 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 Principal Investment Remaining Number of Banks with Missed Value of Missed Dividend/Interest Dividend/Interest Payments Payments CO 1 $3,076,000 1 $1,091,720 Total 1 $3,076,000 1 $1,091,720 269 270 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Southwest/South Central TABLE 4.35 BANKS WITH CPP PRINCIPAL REMAINING, BY STATE, AS OF 6/30/2015 AZ OK NM LA TX SOUTHWEST/ SOUTH CENTRAL AR Number of Banks with Missed Value of Missed Dividend/Interest Dividend/Interest Payments Payments Banks with Remaining Principal Principal Investment Remaining AR 1 $17,300,000 1 $5,559,666 AZ 1 2,568,000 1 862,980 TX 1 11,000,000 0 0 Total 3 $30,868,000 2 $6,422,646 >$100 million $21-$100 million $1-$20 million $0 Principal investment remaining in CPP banks Midwest TABLE 4.36 BANKS WITH CPP PRINCIPAL REMAINING, BY STATE, AS OF 6/30/2015 MN WI IL MO MIDWEST Principal investment remaining in CPP banks IN Principal Investment Remaining 2 $18,652,000 2 $7,119,568 KY 1 6,300,000 1 2,289,263 MO 2 4,037,000 1 193,175 IL MI IA 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 WI 1 5,100,000 1 1,593,750 Total 6 $34,089,000 5 $11,195,756 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Mid-Atlantic/Northeast TABLE 4.37 BANKS WITH CPP PRINCIPAL REMAINING, BY STATE, AS OF 6/30/2015 NH MA NY CT NJ DE MD PA WV VA WV Principal Investment Remaining MA 1 $12,063,000 1 $4,372,838 MD 3 24,360,000 3 7,677,750 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 2,973,285 Total 5 $45,862,000 5 $15,023,873 >$100 million $21-$100 million $1-$20 million $0 Southeast TABLE 4.38 BANKS WITH CPP PRINCIPAL REMAINING, BY STATE, AS OF 6/30/2015 MS AL Principal Investment Remaining FL 1 $4,389,000 1 $1,371,360 GA 1 17,280,000 1 5,164,560 MS 1 2,443,320 0 0 PR 1 124,966,504 0 0 SC 2 27,343,000 2 7,570,975 Total 6 $176,421,824 4 $14,106,895 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 271 272 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Dividends and Interest As of June 30, 2015, Treasury had received $12.1 billion in dividends on its CPP investments.415 However, as of that date, missed dividend and interest payments by 174 institutions, including banks with missed payments that no longer have outstanding CPP principal investments, totaled approximately $526.7 million. Approximately $38.4 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.416 Four-fifths, or 20 of the 25 banks that had remaining CPP principal investments as of June 30, 2015, were not current on their dividend and interest payments to Treasury.417 The 20 banks were behind by as many as 26 payments and in total were overdue in payments to Treasury of $50.6 million.418 As of June 30, 2015, all 20 of the not current banks were overdue by at least ten payments.419 Of the banks with remaining principal investments that are not current on payments, 16 have unpaid dividend and interest payments that are cumulative, and four have unpaid dividend payments that are non-cumulative. Tables 4.33–4.38 show the distribution of missed payments and value of those payments by state. 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. 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 4.39 lists the remaining banks by date of dividend rate increase. As of June 30, 2015, of the 25 banks with remaining principal investments in CPP, 20 have overdue missed dividends and interest. For these banks, the amount overdue to Treasury will grow more quickly as a result of the increased dividend rates. 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 had 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. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 TABLE 4.39 CPP-RELATED DIVIDEND RATE INCREASES, AS OF 6/30/2015 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 $4,153,800 19 One United Bank Boston, MA 12/19/2008 12,063,000 4,372,838 25 Cecil Bancorp, Inc. Elkton, MD 12/23/2008 11,560,000 3,757,000 22 Citizens Commerce Bancshares, Inc. Versailles, KY 2/6/2009 6,300,000 2,289,263 23 Patapsco Bancorp, Inc. Dundalk, MD 12/19/2008 6,000,000 2,016,750 21 CalWest Bancorp Rancho Santa Margarita, CA 1/23/2009 4,656,000 1,438,208 19 US Metro Bank Garden Grove, CA 2/6/2009 2,861,000 688,770 14 Goldwater Bank, N.A. Scottsdale, AZ 1/30/2009 2,568,000 862,980 21 Institution Rate Increased 2/15/2014 Saigon National Bank Westminster, CA 12/23/2008 1,549,000 617,013 26 Calvert Financial Corporation Ashland, MO 1/23/2009 1,037,000 193,175 10 Liberty Shares, Inc. Hinesville, GA 2/20/2009 17,280,000 5,164,560 19 HCSB Financial Corporation Loris, SC 3/6/2009 12,895,000 3,417,175 18 Rate Increased 5/15/2014 Allegiance Bancshares, Inc. Houston, TX 3/6/2009 11,000,000 City National Bancshares Corporation Newark, NJ 4/10/2009 9,439,000 2,973,285 22 Capital Commerce Bancorp, Inc. Milwaukee, WI 4/10/2009 5,100,000 1,593,750 20 Pinnacle Bank Holding Company, Inc. Orange City, FL 3/6/2009 4,389,000 1,371,360 20 942,360 16 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 Little Rock, AR 6/5/2009 17,300,000 5,559,666 13 Rate Increased 8/15/2014 OneFinancial Corporationb Suburban Illinois Bancorp, Inc. Elmhurst, IL 6/19/2009 15,000,000 6,177,208 17 Harbor Bankshares Corporation Baltimore, MD 7/17/2009 6,800,000 1,904,000 20 Grand Mountain Bancshares, Inc. Granby, CO 5/29/2009 3,076,000 1,091,720 24 Hattiesburg, MS 9/25/2009 2,443,320 c 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). 273 274 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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.420 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.”421 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.422 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.423 As of June 30, 2015, of the 25 institutions with remaining principal investments, 20 CPP institutions have missed at least six payments.424 As of June 30, 2015, Treasury had made director appointments to the boards of directors of 13 CPP banks, as noted in Table 4.41.425 Those banks no longer have remaining CPP principal investments. None of the 25 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.426 As of June 30, 2015, of the 25 CPP banks with remaining principal investments, 20 had missed at least five payments.427 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.”428 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.429 The findings of the observers are taken into account when Treasury evaluates whether to appoint individuals to an institution’s board of directors.430 As of June 30, 2015, Treasury had assigned observers to 10 current CPP recipients, as noted in Table 4.41.431 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 (26 missed payments); and Grand Mountain Bankshares, Granby, Colorado (24). SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 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.432 SIGTARP generally includes such activity in Table 4.41 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 June 30, 2015, for all CPP banks, including those that were missing payments when they exited, 94 banks had missed at least 10 dividend (or interest) payments and 137 banks had missed five dividend (or interest) payments totaling $440.8 million.433 Table 4.41 lists CPP recipients that had unpaid dividend (or interest) payments as of June 30, 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.434 The banks had initial CPP investments of as much as $27 million, have missed as many as 26 quarterly dividend payments to Treasury, and have been overdue in dividend payments by as much as $4.1 million.435 Six of these banks have since been sold at a loss to Treasury at auction.436 One of these banks has remaining CPP principal investments and continues to have missed payments.437 At 26 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.438 Table 4.40 lists the banks that rejected Treasury observers. 275 276 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.40 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 c Citizens Bank & Trust Company 2,400,000 5 163,500 9/23/2010 11/17/2010 Saigon National Bank 1,549,000 26 617,013 8/13/2010 9/20/2010 n 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. n Citizens Bank & Trust Company was sold at a loss at auction and its missed payments to Treasury were not repaid. Source: Treasury, Dividends and Interest Report, 7/10/2015. 277 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 TABLE 4.41 CPP-RELATED MISSED DIVIDEND AND INTEREST PAYMENTS, AS OF 6/30/2015 Company Dividend or Payment Type Number of Missed Payments Saigon National Bank Non-Cumulative One United Bank Observers Assigned to Board of Directors1 Value of Missed Payments2 Value of Unpaid Amounts2,3,4 26 $617,013 $617,013 Interest 25 4,372,838 4,372,838 Grand Mountain Bancshares, Inc. Cumulative 24 1,091,720 1,091,720 Citizens Commerce Bancshares, Inc. Cumulative 23 2,289,263 2,289,263 Cecil Bancorp, Inc. Cumulative 22 3,757,000 3,757,000 City National Bancshares Corporation Cumulative 22 2,973,285 2,973,285 Goldwater Bank, N.A. Non-Cumulative 21 862,980 862,980 Patapsco Bancorp, Inc. Cumulative 21 2,016,750 2,016,750 Capital Commerce Bancorp, Inc. Cumulative 20 1,593,750 1,593,750 Harbor Bankshares Corporation** Cumulative 20 2,074,000 1,904,000 Pinnacle Bank Holding Company Cumulative 20 1,371,360 1,371,360 CalWest Bancorp Cumulative 19 1,438,208 1,438,208 Liberty Shares, Inc. Cumulative 19 5,164,560 5,164,560 Tidelands Bancshares, Inc Cumulative 19 4,153,800 4,153,800 HCSB Financial Corporation Cumulative 18 3,417,175 3,417,175 Suburban Illinois Bancorp, Inc. Interest 17 6,177,208 6,177,208 Allied First Bancorp, Inc. Cumulative 16 942,360 942,360 ** *,** US Metro Bank Non-Cumulative 14 688,770 688,770 OneFinancial Corporation*,** Non-Cumulative 13 5,559,666 5,559,666 Calvert Financial Corporation Cumulative 10 193,175 193,175 Non-Cumulative 23 $1,059,242 $1,059,242 ** Exchanges, Sales, Recapitalizations, and Failed Banks Lone Star Bank***** Prairie Star Bancshares, Inc. Cumulative 21 913,150 913,150 United American Bank***** Non-Cumulative 21 2,482,702 2,482,702 U.S. Century Bank Non-Cumulative 21 15,378,590 15,378,590 Cumulative 20 1,749,960 1,749,960 Royal Bancshares of Pennsylvania, Inc. Cumulative 20 7,601,750 7,601,750 CSRA Bank Corp. Cumulative 19 717,300 717,300 Idaho Bancorp**** Cumulative 19 1,786,238 1,786,238 Cumulative 18 4,893,750 4,893,750 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 ***** Rising Sun Bancorp **** ***** ***** Blue Valley Ban Corp***** ***** ***** Continued on next page 278 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM CPP-RELATED MISSED DIVIDEND AND INTEREST PAYMENTS, AS OF 6/30/2015 Company Dividend or Payment Type Northern States Financial Corp***** Cumulative Western Community Bancshares, Inc. Number of Missed Payments Observers Assigned to Board of Directors1 (CONTINUED) Value of Missed Payments2 Value of Unpaid Amounts2,3,4 18 $3,872,475 $3,872,475 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 Pathway Bancorp Cumulative 15 761,588 761,588 Bridgeview Bancorp, Inc.***** Cumulative 15 7,766,250 7,766,250 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 Cumulative 14 27,859,720 27,859,720 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 PremierWest Bancorp***** Cumulative 14 7,245,000 7,245,000 Cumulative 14 609,270 609,270 **** ***** **** ***** **,***** ***** ***** ***** Dickinson Financial Corporation II ***** FC Holdings, Inc. ***** ***** ***** SouthFirst Bancshares, Inc. ***** Great River Holding Company Cumulative 14 2,466,660 2,466,660 Porter Bancorp, Inc. Cumulative 13 6,737,500 6,737,500 Cumulative 13 974,188 974,188 Tennessee Valley Financial Holdings, Inc. Cumulative 13 531,375 531,375 First Sound Bank***** Non-Cumulative 13 1,202,500 1,202,500 Pacific Commerce Bank**,***** Non-Cumulative 13 751,089 695,771 Patriot Bancshares, Inc.***** Cumulative 13 4,612,010 4,612,010 *,**,***** First Southwest Bancorporation, Inc. ***** ***** Continued on next page 279 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 CPP-RELATED MISSED DIVIDEND AND INTEREST PAYMENTS, AS OF 6/30/2015 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 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 Non-Cumulative 12 254,010 254,010 Non-Cumulative 12 474,150 474,150 ***** ***** ***** Gold Canyon Bank **** Santa Clara Valley Bank, N.A. ***** 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 Community First, Inc. 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 National Bancshares, Inc.***** Cumulative 9 3,024,383 3,024,383 Cumulative 9 1,581,863 1,581,863 Cumulative 9 1,275,300 ***** *,**,***** ***** SouthCrest Financial Group, Inc. Citizens Bancorp **** ***** 1,275,300 Continued on next page 280 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM CPP-RELATED MISSED DIVIDEND AND INTEREST PAYMENTS, AS OF 6/30/2015 Number of Missed Payments Observers Assigned to Board of Directors1 (CONTINUED) Company Dividend or Payment Type 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 ***** *** ***** **** ***** **** **** Value of Missed Payments2 Value of Unpaid Amounts2,3,4 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 Citizens Bank & Trust Company Non-Cumulative 5 163,500 163,500 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 Cumulative 5 4,239,200 4,239,200 Cumulative 5 13,547,550 — **** ***** *** Midwest Banc Holdings, Inc. Pacific Capital Bancorp***,9 5 Continued on next page 281 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 CPP-RELATED MISSED DIVIDEND AND INTEREST PAYMENTS, AS OF 6/30/2015 Company Dividend or Payment Type Number of Missed Payments GulfSouth Private Bank**** Non-Cumulative Northwest Commercial Bank**** Non-Cumulative IA Bancorp, Inc. Observers Assigned to Board of Directors1 (CONTINUED) Value of Missed Payments2 Value of Unpaid Amounts2,3,4 5 $494,063 $494,063 5 135,750 135,750 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 **,***** **** **** ***,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.***** ,7 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 Colonial American Bank***** Non-Cumulative 2 15,655 15,655 Fresno First Bank Non-Cumulative 2 33,357 33,357 *** Continued on next page 282 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM CPP-RELATED MISSED DIVIDEND AND INTEREST PAYMENTS, AS OF 6/30/2015 Company Dividend or Payment Type FBHC Holding Company*,***** Interest Gateway Bancshares, Inc. Cumulative CIT Group Inc. Number of Missed Payments Observers Assigned to Board of Directors1 (CONTINUED) Value of Missed Payments2 Value of Unpaid Amounts2,3,4 2 $123,127 $123,127 2 163,500 163,500 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 ****,8 **** Tifton Banking Company **** Total 51,775 51,775 $608,421,055 $526,666,033 Notes: Numbers may not total due to rounding. Approximately $38.4 million of the $526.7 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, 7/10/2015; 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, 4/6/2015, and 7/6/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 CPP Recipients: Bankrupt or with Failed Subsidiary Banks Despite Treasury’s stated goal of limiting CPP investments to “healthy, viable institutions,” as of June 30, 2015, 32 CPP participants had gone bankrupt or had a subsidiary bank fail, as indicated in Table 4.42.439 TABLE 4.42 CPP RECIPIENTS: BANKRUPT OR WITH FAILED SUBSIDIARY BANKS, AS OF 6/30/2015 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 283 284 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM CPP RECIPIENTS: BANKRUPT OR WITH FAILED SUBSIDIARY BANKS, AS OF 6/30/2015 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, 6/29/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 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 write-off. For these recorded losses, Treasury has no expectation of regaining any portion of the lost investment. According to Treasury, as of June 30, 2015, Treasury had realized losses and write-offs of $5.1 billion on its CPP investments. This total includes $1.1 million in realized losses this quarter. Table 4.43 shows all realized losses and write-offs by Treasury on CPP investments through June 30, 2015. TABLE 4.43 REALIZED LOSSES AND WRITE-OFFS IN CPP, AS OF 6/30/2015 ($ 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 285 286 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM REALIZED LOSSES AND WRITE-OFFS IN CPP, AS OF 6/30/2015 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 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 REALIZED LOSSES AND WRITE-OFFS IN CPP, AS OF 6/30/2015 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 287 288 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM REALIZED LOSSES AND WRITE-OFFS IN CPP, AS OF 6/30/2015 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 Century Financial Services Corporation Community Financial Shares, Inc. Sale of subordinated debentures at a loss Sale of preferred stock at a loss 7 4 12/21/2012 Sale of preferred stock at a loss 12 3 2/7/2013 Sale of preferred stock at a loss 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 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 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 REALIZED LOSSES AND WRITE-OFFS IN CPP, AS OF 6/30/2015 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 289 290 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM REALIZED LOSSES AND WRITE-OFFS IN CPP, AS OF 6/30/2015 Institution Meridian Bank TARP Investment ($ 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 7 1 10/24/2014 Sale of preferred stock at a loss Highlands Independent Bancshares, Inc. Lone Star Bank Porter Bancorp, Inc.(PBI) Louisville, KY NCAL Bancorp 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 First Bancorp (PR) 400 134 12/10/2014 3/6/2015 Sale of common stock at a loss Sale of preferred stock at a loss U.S. Century Bank 50 38 3/17/2015 Sale of preferred stock at a loss Citizens Bank & Trust Company 2 0.8 6/29/2015 Sale of preferred stock at a loss Metropolitan Capital Bancorp, Inc. 4 0.3 6/29/2015 Sale of preferred stock at a loss Southfirst Bancshares, Inc. 3 — 6/29/2015 Sale of preferred stock at a loss Total CPP Realized Losses $1,672 Write-Offs CIT Group Inc. Pacific Coast National Bancorp South Financial Group, Inc.a $2,330 $2,330 12/10/2009 Bankruptcy 4 4 2/11/2010 Bankruptcy 347 217 TIB Financial Corpa 37 25 UCBH Holdings Inc. 299 299 Midwest Banc Holdings, Inc. 9/30/2010 Sale of preferred stock at a loss 9/30/2010 Sale of preferred stock at a loss 11/6/2009 Bankruptcy 85 85 5/14/2010 Bankruptcy Sonoma Valley Bancorp 9 9 8/20/2010 Bankruptcy Pierce County Bancorp 7 7 11/5/2010 Bankruptcy Tifton Banking Company 4 4 11/12/2010 Bankruptcy Legacy Bancorp, Inc. 6 6 3/11/2011 Bankruptcy Superior Bancorp Inc. 69 69 4/15/2011 Bankruptcy Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 REALIZED LOSSES AND WRITE-OFFS IN CPP, AS OF 6/30/2015 ($ MILLIONS) (CONTINUED) TARP Investment Loss FPB Bancorp, Inc. $6 $6 7/15/2011 Bankruptcy One Georgia Bank 6 6 7/15/2011 Bankruptcy Institution Date Description Integra Bank Corporation 84 84 7/29/2011 Bankruptcy Citizens Bancorp 10 10 9/23/2011 Bankruptcy 10/14/2011 Bankruptcy CB Holding Corp. Tennessee Commerce Bancorp, Inc. Blue River Bancshares, Inc. 4 4 30 30 5 5 1/27/2012 Bankruptcy 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 Premier Bank Holding Company 8 8 10/19/2012 Bankruptcy Investors Financial Corporation of Pettis County, Inc. 4 4 10/19/2012 First Place Financial Corp. 73 73 Princeton National Bancorp, Inc. 25 25 Bankruptcy 10/29/2012 Bankruptcy 11/2/2012 Bankruptcy Gold Canyon Bank 2 2 4/5/2013 Bankruptcy Indiana Bank Corp. 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 Syringa Bancorp Idaho Bancorp Rising SunBancorp Western Community Bancshares, Inc. 7 7 400 103 10 6 Total CPP Write-Offs $3,386 Total of CPP Realized Losses and Write-Offs $5,058 1/31/2014 Bankruptcy 4/24/2014 Bankruptcy 12/5/2014 Sale of common stock at a loss 12/10/2014 Sale of preferred stock at a loss 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, 6/29/2015; Treasury, response to SIGTARP data call, 7/6/2015. 291 292 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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. 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.440 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.441 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.442 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.443 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.444 Table 4.44 shows all restructurings, recapitalizations, exchanges, and sales of CPP investments through June 30, 2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 TABLE 4.44 TREASURY RESTRUCTURINGS, RECAPITALIZATIONS, EXCHANGES, & SALES, AS OF 6/30/2015 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 loss in 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 293 294 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TREASURY RESTRUCTURINGS, RECAPITALIZATIONS, EXCHANGES, & SALES, AS OF 6/30/2015 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 loss in auction Eastern Virginia Bankshares, Inc. Severn Bancorp, Inc. 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 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 loss in 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 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 TREASURY RESTRUCTURINGS, RECAPITALIZATIONS, EXCHANGES, & SALES, AS OF 6/30/2015 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 Presidio Bank Crosstown Holding Company 11/20/2009 10.8 Sold at loss in auction 1/23/2009 10.7 Sold at loss in 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 loss in 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 loss in 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 loss in 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 loss in auction Metro City Bank 1/30/2009 7.7 Sold at loss in auction Continued on next page 295 296 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TREASURY RESTRUCTURINGS, RECAPITALIZATIONS, EXCHANGES, & SALES, AS OF 6/30/2015 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 Alarion Financial Services, Inc. 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 loss in auction 1/23/2009 6.5 Sold at loss in auction First Intercontinental Bank 3/13/2009 6.4 Sold at loss in 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 loss in 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 loss in 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 loss in auction CBB Bancorp 12/20/2009 4.4 Sold at loss in auction 4/10/2009 4.4 Sold at loss in auction Virginia Company Bank First Priority Financial Corp. Georgia Primary Bank Metropolitan Capital Bancorp, Inc. Bank of Southern California, N.A. Pacific Commerce Bank Carolina Trust Bank Capital Pacific Bancorp 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 12/23/2008 4.0 Sold at loss in auction Community Business Bank 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 Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 TREASURY RESTRUCTURINGS, RECAPITALIZATIONS, EXCHANGES, & SALES, AS OF 6/30/2015 Investment Date Original Investments First Alliance Bancshares, Inc. 6/26/2009 $3.4 Sold at loss in auction Madison Financial Corporation 3/13/2009 3.4 Sold at auction Company Congaree Bancshares, Inc. Combined Investments ($ MILLIONS) (CONTINUED) Investment Status 1/9/2009 3.3 Sold at loss in auction Mountain Valley Bancshares, Inc. 9/25/2009 3.3 Sold at loss in 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 3/6/2009 3.0 Sold at loss in auction Alliance Bancshares, Inc. 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 F&C Bancorp. Inc. 5/22/2009 3.0 Sold at loss in auction Layton Park Financial Group, 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 loss in auction 4/3/2009 2.8 Sold at auction 6/12/2009 2.8 Sold at loss in auction Prairie Star Bancshares, Inc. Southfirst Bancshares 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 6/19/2009 2.6 Sold at loss in auction Manhattan Bancshares, Inc. Plato Holdings Inc. 7/17/2009 2.5 Sold at loss in auction Brogan Bankshares, Inc. 5/15/2009 2.4 Sold at auction Citizens Bank & Trust Company 3/20/2009 2.4 Sold at loss in auction CSRA Bank Corp. 3/27/2009 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 2/20/2009 2.1 Sold at auction 12/29/2009 2.0 Sold at auction CenterBank Security Bancshares of Pulaski County, Inc. Market Bancorporation, Inc. Atlantic Bancshares, Inc. 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 Hyperion Bank 2/6/2009 1.6 Sold at loss in auction Regional Bankshares Inc. 2/13/2009 1.5 Sold at loss in auction Desoto County Bank 2/13/2009 1.2 Sold at loss in 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 Continued on next page 297 298 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TREASURY RESTRUCTURINGS, RECAPITALIZATIONS, EXCHANGES, & SALES, AS OF 6/30/2015 Company Investment Date Original Investments Combined Investments ($ MILLIONS) (CONTINUED) Investment Status 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 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 Freeport Bancshares, Inc. Sold at Loss South Financial Group, Inc. U.S. Century PremierWest Bancorp Capital Bank Corporation TIB Financial Corp. 8/7/2009 52.2 Sold 2/13/2009 41.4 Sold 12/12/2008 41.3 Sold 12/5/2008 37.0 Sold 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 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 First Federal Bankshares of Arkansas, Inc. 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 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 TREASURY RESTRUCTURINGS, RECAPITALIZATIONS, EXCHANGES, & SALES, AS OF 6/30/2015 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, 6/29/2015. 299 300 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM For more information on Treasury’s auctions of CPP shares, see “The Legacy of TARP’s Bank Bailout Known as the Capital Purchase Program,” in SIGTARP’s January 2015 Quarterly Report, pages 83102. 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. From March 2012 through June 30, 2015, Treasury has held 28 sets of auctions in which it has sold all of its preferred stock investments in 190 CPP banks.445 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 23 of the banks sold at a discounted price and resulted in losses to Treasury.446 In the 28 auction sets, the range of discount on the investments was 1% to 90%.447 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 190 banks in which Treasury sold its stock through the auction process, 78 were overdue on payments to Treasury.448 For 67 of those 78 banks, which 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. As of June 30, 2015, Treasury lost a total of $1.1 billion in the auctions, which includes $813.5 million lost on principal investments sold at a discount and $253.5 million on forfeited missed dividends and interest owed by these institutions that will never be recovered.449 Less than a quarter of the banks, 38, bought back some of their shares at the discounted price.450 Table 4.47 shows details for the auctions of preferred stock in CPP banks through June 30, 2015. Buyers of CPP Shares at Treasury Auctions FIGURE 4.71 PERCENTAGES OF SHARES PURCHASED BY BUYER TYPE 4% Overview of CPP Preferred Stock Auctions 3% 3% 8% 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, 7/10/2015. 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 June 30, 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 (8%), other banks (4%), institutional investors (3%), and a small number of senior executives and board members of CPP banks (3%). Figure 4.71 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 178 of the 190 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 91 banks, and acquired 24% of all TARP shares in CPP community banks auctioned by Treasury. Another capital management company successfully bid on 109 banks, acquiring 13% of all TARP shares in CPP community banks auctioned by Treasury. An additional asset 301 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 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 8% of total TARP shares in CPP community banks auctioned by Treasury were repurchased by 38 CPP banks. Only half (53%) of those 38 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 38 CPP banks that repurchased their own shares at auction did so at discounts as large as 40%. Table 4.45 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 4% of total TARP shares auctioned in CPP community banks. Sixteen of these banks made successful bids in the auctions. Two banks were each successful in their 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 3% of total TARP shares in CPP community banks auctioned by Treasury. These shares were purchased by 72 senior executives and board members of 20 CPP banks. While only two CPP banks were able to repurchase 100% of their TARP shares Treasury auctioned, four 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 seven 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 127 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 34%, of successful bids were for ownership stakes in 5% or less of Treasury’s TARP shares in CPP community banks. Nearly nine in ten (86%) TABLE 4.45 PERCENTAGE OF SHARES REPURCHASED BY CPP BANKS, AS OF 6/30/2015 CPP Banks Percentage 2 0-10% 2 10-20% 6 20-30% 5 30-40% 3 40-50% 7 50-60% 2 60-70% 2 70-80% 3 80-90% 6 90-100% Source: Treasury, response to SIGTARP data call, 7/10/2015. TABLE 4.46 PERCENT OWNERSHIP STAKE IN TARP FUNDS FOR EACH SUCCESSFUL BID, AS OF 6/30/2015 Number of Successful Bids Percentage Ownership Stake in TARP Funds 328 0-5% 161 5-10% 132 10-20% 94 20-30% 64 30-40% 45 40-50% 36 50-60% 29 60-70% 23 70-80% 20 80-90% 27 90-100% Source: Treasury, response to SIGTARP data call, 7/10/2015. 302 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM successful bids were for ownership stakes of less than 50% of Treasury’s auctioned TARP shares in CPP community banks. See Table 4.46 for a breakdown of percent of ownership stake in Treasury’s auctioned TARP shares in community banks for each successful bid. TABLE 4.47 INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 6/30/2015 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 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 6/30/2015 Institution Auction Date 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 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 The Baraboo Bancorporation, Inc. 12/11/2012 20,749,000 13,399,227 7,349,773 35% 2 565,390 7,915,163 Citizens Bank & Trust Company 6/29/2015 2,400,000 1,560,312 839,688 35% 5 163,500 1,003,188 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 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 304 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 6/30/2015 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 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 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 6/30/2015 Institution Auction Date Investment Net Proceeds 305 (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 306 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 6/30/2015 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 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% 1,026,673 BNC Bancorp 2,894,315 SouthCrest Financial Group, Inc. 5,189,701 95% 2,523,604 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. 25% 69% 471,384 754,508 Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 6/30/2015 Institution Sound Banking Company Auction Date Investment Net Proceeds 307 (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% 4,722,829 Ameris Bancorp 6/13/2012 52,000,000 47,665,332 4,334,668 8% 4,334,668 Peoples Bancorp of North Carolina, Inc. 6/27/2012 25,054,000 23,033,635 2,020,365 8% 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% 4,391,006 Firstbank Corporation 6/27/2012 33,000,000 30,587,530 2,412,470 7% 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 48% $1,055,520 1,882,241 2,412,470 284,094 283,440 39% 133,490 Continued on next page 308 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 6/30/2015 Institution F&M Financial Corporation (NC) 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 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% 587,972 Metropolitan Capital Bancorp, Inc. 6/29/2015 4,388,000 4,135,655 252,345 6% 252,345 First Defiance Financial Corp. 6/13/2012 37,000,000 35,084,144 1,915,856 5% 1,915,856 F&C Bancorp, Inc. 11/9/2012 2,993,000 2,840,903 152,097 5% 152,097 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% MetroCorp Bancshares, Inc. 6/27/2012 45,000,000 43,490,360 1,509,640 3% 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% Community Investors Bancorp, Inc. The Queensborough Company 10 $1,049,250 99% 1,499,836 560,748 6 746,250 53% 1,288,037 229,370 506,100 25% 992,500 1,509,640 11 $1,798,500 12% $2,192,928 233,548 1,534,761 6 532,560 707,976 Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 6/30/2015 Institution Crosstown Holding Company Auction Date Investment Net Proceeds 309 (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 7/22/2013 10,650,000 10,356,564 293,436 3% 293,436 Century Financial Services Corporation 12/20/2012 10,000,000 9,751,500 248,500 2% 248,500 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 SouthFirst Bancshares, Inc. 6/29/2015 2,760,000 2,722,050 37,950 1% 14 609,270 647,220 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% Freeport Bancshares, Inc. 4/14/2014 301,000 301,000 0 0% Prairie Star Bancshares, Inc. 6/29/2015 2,800,000 2,800,000 0 0% 21 913,150 913,150 CSRA Bank Corp. 6/29/2015 2,400,000 2,400,000 0 0% 19 717,300 717,300 Reliance Bancshares, Inc. 9/25/2013 40,000,000 40,196,000 (196,000) 0% 11 5,995,000 5,799,000 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 Blue Valley Ban Corp Northwest Bancorporation, Inc. 91% 58,000 18 4,893,750 5,380,733 278,297 60% 63,000 6 1,754,475 78% 1,780,207 0 0 Continued on next page 310 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM INVESTMENTS IN CPP BANKS SOLD AT A LOSS AT AUCTION, AS OF 6/30/2015 Auction Date Institution 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 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 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 White River Bancshares Company Plumas Bancorp Boscobel Bancorp, Inc. Pacific City Financial Corporation Total Auction Losses Total Missed Dividends 58% 38% 53% $813,526,950 $253,511,885 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, 6/29/2015; SNL Financial LLC data. 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.451 Under CDCI, TARP made $570.1 million in investments in 84 eligible banks and credit unions.452 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.453 For more information on CDCI, see “Community Development Capital Initiative” in this section. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 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.454 According to Treasury, it received a total of 935 SBLF applications, of which 320 were TARP recipients under CPP (315) or CDCI (5).455 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.456 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.457 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.458 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.459 Treasury’s warrants constitute assets with a fair market value that Treasury estimates using relevant market quotes, financial models, and/or third- party valuations.460 As of June 30, 2015, Treasury had not exercised any of these warrants.461 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.462 Unsold and unexercised warrants expire 10 years from the date of the CPP investment.463 As of June 30, 2015, Treasury had received $8.1 billion through the sale of CPP warrants obtained by TARP recipients.464 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 June 30, 2015, 187 publicly traded institutions had bought back $3.9 billion worth of warrants, of which $26.4 million was purchased this quarter. As of that same date, 297 privately held institutions, the warrants of which had been immediately exercised, bought back the resulting additional preferred shares for a total of $180.6 million, of which $1.6 million was bought back this quarter.465 Table 4.48 lists publicly traded institutions that repaid TARP For a discussion of SIGTARP’s August 20, 2013, recommendation to Treasury regarding the inclusion of SBLF funds as TARP repayments, see SIGTARP’s October 2013 Quarterly Report, pages 281-282. For information on TARP banks that refinanced into SBLF, see SIGTARP’s April 9, 2013, audit report, “Banks that Used the Small Business Lending Fund to Exit TARP.” For a detailed list of CPP banks that refinanced into SBLF, see SIGTARP’s October 2012 Quarterly Report, pages 88-92. For a discussion of the impact of TARP and SBLF on community banks, see SIGTARP’s April 2012 Quarterly Report, pages 145-167. For more information on warrant disposition, see SIGTARP’s audit report of May 10, 2010, “Assessing Treasury’s Process to Sell Warrants Received from TARP Recipients.” Exercise Price: Preset price at which a warrant holder may purchase each share. For warrants in publicly traded institutions issued through CPP, this was based on the average stock price during the 20 days before the date that Treasury granted preliminary CPP participation approval. 311 312 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM and repurchased warrants in the quarter ended June 30, 2015. Table 4.49 lists privately held institutions that had done so in the same quarter.466 TABLE 4.48 CPP WARRANT SALES AND REPURCHASES (PUBLIC) FOR THE QUARTER ENDING 6/30/2015 Repurchase Date Company 5/13/2015 FirstMerit Corporation 5/6/2015 Premier Financial Bancorp, Inc. Number of Warrants Repurchased Amount of Repurchase ($ Thousands) 2,571,998 $12,150,120.4 636,378 5,675,000.0 5/13/2015 Southern Missouri Bancorp, Inc. 231,891 2,700,000.0 5/6/2015 WesBanco, Inc. 101,321 2,246,531.0 4/15/2015 Citizens First Corporation 254,218 1,705,802.8 5/6/2015 The Elmira Savings Banks, FSB 151,030 1,486,292.1 5/13/2015 The First Banchares, Inc. 54,705 302,410.0 5/13/2015 Eastern Virginia Bankshares, Inc. 384,041 115,000.0 5/13/2015 United Bancorporation of Alabama, Inc. 111,258 10,125.0 4,496,840 $26,391,281.3 Total Notes: Numbers may not total due to rounding. This table represents warrants for common stock issued to Treasury by publicly traded TARP recipients. Treasury may hold one warrant for millions of underlying shares rather than millions of warrants of an individual financial institution. Sources: Treasury, Transactions Report, 6/29/2015; Treasury, responses to SIGTARP data calls, 1/4/2011, 1/7/2011, 4/6/2011, 7/8/2011, 10/7/2011, 10/11/2011, 1/11/2012, 4/5/2012, 7/9/2012, 10/12/2012, 4/12/2013, 7/11/2013, 10/10/2013, 1/8/2014, 4/11/2014, 7/15/2014, 10/10/2014, 1/13/2015, 4/10/2015, and 7/16/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 TABLE 4.49 CPP WARRANT SALES AND REPURCHASES (PRIVATE) FOR THE QUARTER ENDING 6/30/2015 Number of Warrants Repurchased Amount of Repurchase ($ Thousands) Chambers Bancshares, Inc. 991,000 $991.0 6/29/2015 Prairie Star Bancshares, Inc./Bank of the Prairie 140,000 140.0 6/29/2015 SouthFirst Bancshares, Inc. 138,000 138.0 6/29/2015 Citizens Bank & Trust Company 120,000 120.0 6/29/2015 CSRA Bank Corp. / First State Bank 120,000 120.0 6/29/2015 Metropolitan Capital Bancorp, Inc. (Metropolitan Capital Bank) 102,000 102.0 1,611,000 $1,611.0 Repurchase Date Company 4/1/2015 Total 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, 6/29/2015; Treasury response to SIGTARP data call, 7/16/2015. 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.467 As of June 30, 2015, the combined proceeds from Treasury’s public and private warrant auctions totaled $5.5 billion.468 Public Warrant Auctions In November 2009, Treasury began selling warrants via public auctions.469 Through June 30, 2015, Treasury had held 26 public auctions for warrants it received under CPP, TIP, and AGP, raising a total of approximately $5.4 billion.470 Treasury did not conduct any public warrant auctions this quarter.471 Final closing information for all public warrant auctions is shown in Table 4.50. 313 314 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.50 PUBLIC TREASURY WARRANT AUCTIONS, AS OF 6/30/2015 Auction Date 3/3/2010 Number of Warrants Offered Minimum Bid Price Selling Price Proceeds to Treasury ($ 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 7/1/2015; Valley National Bancorp, “Final Prospectus Supplement,” 5/18/2010, www.sec.gov/Archives/edgar/data/714310/000119312510123896/d424b5.htm, accessed 7/1/2015; Comerica Incorporated, “Final Prospectus Supplement,” 5/6/2010, www.sec.gov/Archives/edgar/data/28412/000119312510112107/d424b5.htm, accessed 7/1/2015; Wells Fargo and Company, “Definitive Prospectus Supplement,” 5/20/2010, www.sec.gov/Archives/edgar/data/72971/000119312510126208/d424b5.htm, accessed 7/1/2015; First Financial Bancorp, “Prospectus Supplement,” 6/2/2010, www.sec.gov/Archives/edgar/data/708955/000114420410031630/v187278_424b5.htm, accessed 7/1/2015; Sterling Bancshares, Inc., “Prospectus Supplement,” 6/9/2010, www.sec.gov/Archives/edgar/data/891098/000119312510136584/dfwp.htm, accessed 7/1/2015; 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 7/1/2015; Texas Capital Bancshares, Inc., “Prospectus Supplement,” 3/11/2010, www.sec.gov/Archives/edgar/data/1077428/000095012310023800/d71405ae424b5.htm, accessed 7/1/2015; Bank of America, “Form 8-K,” 3/3/2010, www.sec.gov/Archives/edgar/ data/70858/000119312510051260/d8k.htm, accessed 7/1/2015; Bank of America, “Prospectus Supplement,” 3/1/2010, www.sec.gov/Archives/edgar/data/70858/000119312510045775/ d424b2.htm, accessed 7/1/2015; Washington Federal, Inc., “Prospectus Supplement,” 3/9/2010, www.sec.gov/Archives/edgar/data/936528/000119312510052062/d424b5.htm, accessed 7/1/2015; TCF Financial, “Prospectus Supplement,” 12/16/2009, www.sec.gov/Archives/edgar/data/814184/000104746909010786/a2195869z424b5.htm, accessed 7/1/2015; JPMorgan Chase, “Prospectus Supplement,” 12/11/2009, www.sec.gov/Archives/edgar/data/19617/000119312509251466/d424b5.htm, accessed 7/1/2015; Capital One Financial, “Prospectus Supplement,” 12/3/2009, www.sec.gov/Archives/edgar/data/927628/000119312509247252/d424b5.htm, accessed 7/1/2015; 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 7/1/2015; 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 7/1/2015; Lincoln National Corporation, Prospectus Supplement to Prospectus filed with SEC 3/10/2009, www.sec.gov/Archives/edgar/data/59558/000119312510211941/ d424b5.htm, accessed 7/1/2015; Lincoln National Corporation, 8-K, 9/22/2010, www.sec.gov/Archives/edgar/data/59558/000119312510214540/d8k.htm, accessed 7/1/2015; 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 7/1/2015; Citigroup, Prospectus, 1/24/2011, www.sec.gov/Archives/edgar/data/831001/000095012311004665/y89177b7e424b7.htm, accessed 7/1/2015; Citigroup, Prospectus, 1/24/2011, www.sec.gov/Archives/edgar/data/831001/000095012311004665/y89177b7e424b7.htm, accessed 7/1/2015; Boston Private Financial Holdings, Inc., Prospectus, 1/28/2011, www.sec.gov/Archives/edgar/data/821127/000119312511021392/d424b5.htm, accessed 7/1/2015; Boston Private Financial Holdings, Inc. 8-K, 2/7/2011, www.sec. gov/Archives/edgar/data/821127/000144530511000189/tarpwarrant020711.htm, accessed 7/1/2015; Wintrust Financial Corporation, Prospectus, 2/8/2011, www.sec.gov/Archives/edgar/ data/1015328/000095012311011007/c62806b5e424b5.htm, accessed 7/1/2015; 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 7/1/2015; Treasury, Citigroup Preliminary Prospectus – CPP Warrants, 1/24/2011, www.sec.gov/Archives/edgar/data/831001/000095012311004666/y89178b7e424b7.htm, accessed 7/1/2015; Citigroup, Preliminary Prospectus – TIP & AGP Warrants, 1/24/2011, www.sec.gov/Archives/edgar/data/831001/000095012311004665/y89177b7e424b7.htm, accessed 7/1/2015; 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 7/1/2015; “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 7/1/2015; 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 7/1/2015; 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 7/1/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Private Warrant Auctions On November 17, 2011, Treasury conducted a private auction to sell the warrants of 17 CPP institutions for $12.7 million.472 On June 6, 2013, it conducted a second private auction to sell the warrants of 16 banks for $13.9 million.473 On May 21, 2015, Treasury conducted a third private auction to sell the warrants of 10 banks for $49.3 million.474 Details from the auctions are listed in Table 4.51. 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.475 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.”476 TABLE 4.51 PRIVATE TREASURY WARRANT AUCTIONS AS OF 6/30/2015 Date Company Number of Warrants Offered Proceeds to Treasury 11/17/2011 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 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. 79,288 751,888 6/6/2013 Colony Bankcorp, Inc. 500,000 810,000 6/6/2013 Community West Bancshares 521,158 698,351 6/6/2013 Flagstar Bancorp, Inc. 645,138 12,905 Continued on next page 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. 315 316 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM PRIVATE TREASURY WARRANT AUCTIONS AS OF 6/30/2015 (CONTINUED) Date Company Number of Warrants Offered Proceeds to Treasury 462,963 $140,000 1,326,238 4,018,511 6/6/2013 Heritage Commerce Corp 6/6/2013 International Bancshares Corporation 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 128,663 20,000 5/28/2015 BBCN Bancorp, Inc. 350,767 1,115,500 5/28/2015 City Holding Company 61,796 873,485 5/28/2015 Community One Bancorp 22,071 10,357 5/28/2015 Fidelity Southern Corporation 2,693,747 31,429,313 5/28/2015 First United Corporation 326,323 117,162 5/28/2015 Parkvale Financial Corporation/ F.N.B. Corporation 819,640 6,025,650 5/28/2015 Annapolis Bancorp, Inc./F.N.B. Corporation 367,916 3,735,578 5/28/2015 HMN Financial, Inc. 833,333 5,529,582 5/28/2015 The First Bancorp, Inc. 226,819 389,078 5/28/2015 Valley National Bancorp Total 488,847 100,567 20,725,790 $75,893,102 Sources: “Treasury Announces Completion of Private Auction to Sell Warrant Positions,” 11/18/2011, www.treasury.gov/presscenter/press-releases/Pages/tg1365.aspx, accessed 7/1/2015; “Treasury Completes Auction to Sell Warrants Positions,” 6/6/2013, www.treasury.gov/press-center/press-releases/Pages/jl1972.aspx, accessed 7/1/2015; www.treasury.gov/ press-center/press-releases/Pages/jl10058.aspx, accessed 7/1/2015; “Treasury Completes Auction to Sell Warrant Positions,” 5/21/2015, www.treasury.gov/press-center/press-releases/Pages/jl10058.aspx, accessed 7/1/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 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.477 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.478 CDCI was open to certified, qualifying CDFIs or financial institutions that applied for CDFI status by April 30, 2010.479 According to Treasury, CPP-participating CDFIs that were in good standing could exchange their CPP investments for CDCI investments.480 CDCI closed to new investments on September 30, 2010.481 Treasury invested $570.1 million in 84 institutions under the program — 36 banks or bank holding companies and 48 credit unions.482 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 June 30, 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.483 As of June 30, 2015, taxpayers were still owed $462.2 million related to CDCI.484 According to Treasury, it had realized losses of $6.7 million in the program that will never be recovered, leaving $455.5 million outstanding.485 According to Treasury, $107.9 million of the CDCI principal (or 19%) had been repaid as of June 30, 2015.486 As of June 30, 2015, Treasury had received approximately $50.1 million in dividends and interest from CDCI recipients.487 Tables 4.52 through 4.58 show banks and credit unions remaining in CDCI by region and state as of June 30, 2015. Table 4.59 lists the current status of all CDCI investments as of June 30, 2015. 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. 317 318 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.52 BANKS AND CREDIT UNIONS WITH CDCI PRINCIPAL REMAINING, BY REGION, AS OF 6/30/2015 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 25,940,400 4 4 Mountain West/Plains Total 2 0 0 0 0 84 64 $455,468,400 28 36 Source: Treasury, Transactions Report, 6/29/2015. FIGURE 4.72 AMOUNT OF CDCI PRINCIPAL INVESTMENT REMAINING, BY REGION, AS OF 6/30/2015 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 319 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Mid-Atlantic/Northeast TABLE 4.53 BANKS AND CREDIT UNIONS WITH CDCI PRINCIPAL REMAINING, BY STATE, AS OF 6/30/2015 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, 6/29/2015. Southeast TABLE 4.54 BANKS AND CREDIT UNIONS WITH CDCI PRINCIPAL REMAINING, BY STATE, AS OF 6/30/2015 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, 6/29/2015. 320 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM West TABLE 4.55 BANKS AND CREDIT UNIONS WITH CDCI PRINCIPAL REMAINING, BY STATE, AS OF 6/30/2015 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, 6/29/2015. HI WEST Principal investment remaining in CDCI banks >$10 million $1 million-$10 million $1-$1 million $0 Southwest/South Central TABLE 4.56 BANKS AND CREDIT UNIONS WITH CDCI PRINCIPAL REMAINING, BY STATE, AS OF 6/30/2015 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, 6/29/2015. 321 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Midwest TABLE 4.57 BANKS AND CREDIT UNIONS WITH CDCI PRINCIPAL REMAINING, BY STATE, AS OF 6/30/2015 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, 6/29/2015. >$10 million $1 million -$10 million $1-$1 million $0 Principal investment remaining in CDCI banks Mountain West/Plains TABLE 4.58 BANKS AND CREDIT UNIONS WITH CDCI PRINCIPAL REMAINING, BY STATE, AS OF 6/30/2015 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, 6/29/2015. KS >$10 million $1 million-$10 million $1-$1 million $0 322 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.59 CDCI INVESTMENT SUMMARY, AS OF 6/30/2015 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 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 CDCI INVESTMENT SUMMARY, AS OF 6/30/2015 Amount from CPP Institution (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 Union 1,193,000 Opportunities Credit Union 1,091,000 1 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 Continued on next page 323 324 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM CDCI INVESTMENT SUMMARY, AS OF 6/30/2015 Amount from CPP Institution (CONTINUED) Additional Investment Total CDCI Investment Institutions Remaining in CDCI Union Baptist Church Federal Credit Union $10,000 East End Baptist Tabernacle Federal Credit Union Total $299,700,000 7,000 $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) Total 57,000 $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, 6/29/2015. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 Missed Dividends As of June 30, 2015, three institutions still in CDCI had unpaid dividend or interest payments to Treasury totaling $506,800.488 As a result of a bankrupt institution that exited CDCI without remitting its interest payments, the total value of all missed payments equals $823,424. 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.489 As of June 30, 2015, Treasury had not appointed directors to the board of any CDCI institution.490 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.491 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 June 30, 2015, rejected Treasury’s request.492 Table 4.60 lists CDCI institutions that are not current on dividend or interest payments. TABLE 4.60 CDCI-RELATED MISSED DIVIDEND AND INTEREST PAYMENTS, AS OF 6/30/2015 Institution Dividend or Payment Type Number of Missed Payments Value of Missed Payments Premier Bancorp, Inc.* Interest 6 $316,624 Tri-State Bank of Memphis Non-Cumulative 4 111,800 Community Bank of the Bay Non-Cumulative 1 20,300 First Vernon Bancshares, Inc. Cumulative 1 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, 7/10/2015. 374,700 $823,424 325 326 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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.493 On January 29, 2015, the Federal Deposit Insurance Corporation (“FDIC”) issued a consent order to TriState Bank of Memphis, Memphis, Tennessee.494 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. 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.495 Participating credit unions and S corporations issued subordinated debt to Treasury in lieu of the preferred stock issued by other CDFI participants.496 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.497 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%.498 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.499 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 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.”500 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.501 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.502 AIG has repaid the amounts owed to both Treasury and FRBNY. Treasury’s investment in AIG ended on March 1, 2013.503 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.504 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.505 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.506 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. 327 328 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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.507 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.”508 Both banks repaid TIP in December 2009.509 On March 3, 2010, Treasury auctioned the Bank of America warrants it received under TIP for $1.24 billion.510 On January 25, 2011, Treasury auctioned the Citigroup warrants it had received under TIP for $190.4 million.511 Asset Guarantee Program 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. 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”).512 Treasury received $4 billion of the TRUPS and FDIC received $3 billion.513 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.514 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.515 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.516 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.517 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 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 proceeds from the $2.2 billion sale of the Citigroup TRUPS, which occurred on September 30, 2010.518 On January 25, 2011, Treasury auctioned the Citigroup warrants it had received under AGP for $67.2 million.519 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.520 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.521 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.522 329 330 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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.”523 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.524 Overall, taxpayers lost $2.5 billion on the TARP investment in Ally Financial.525 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”).526 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.527 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.528 As of June 30, 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.529 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.530 Taxpayers also lost $2.9 billion on Treasury’s investment in Chrysler, which exited TARP in 2011.531 A fourth company, Chrysler Financial, repaid all its TARP money in 2009. AWCP and ASSP were terminated in July 2009, and April 2010, respectively.532 Treasury’s investments in AIFP and the two related programs and the companies’ principal repayments are summarized in Table 4.61. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 TABLE 4.61 TARP AUTOMOTIVE PROGRAM INVESTMENTS AND PRINCIPAL REPAYMENTS AND RECOVERIES, AS OF 6/30/2015 ($ 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, 6/29/2015; Treasury, response to SIGTARP data call, 7/6/2015; Treasury, Monthly TARP Update, 7/1/2015. 331 332 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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, 2009.533 Of AIFP-related loan principal repayments and recoveries, as of June 30, 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.534 In addition to principal repayments, Treasury had received approximately $5.6 billion in dividends and interest as of June 30, 2015.535 As of June 30, 2015, losses from GM, Chrysler and Ally are $16.6 billion.536 GM Between September 26, 2013 and December 9, 2013, Treasury sold its remaining 101.3 million shares of GM common stock. As of June 30, 2015, taxpayers had lost $11.2 billion on the investment in GM.537 Treasury provided approximately $49.5 billion to GM through AIFP, the largest of the automotive rescue programs.538 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 June 30, 2015, GM had made approximately $756.7 million in dividend and interest payments to Treasury under AIFP.539 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.540 For more on the results of GM’s November 2010 IPO, see SIGTARP’s January 2011 Quarterly Report, page 163. 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.541 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%.542 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.543 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.544 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.545 On January 18, 2013, Treasury announced the first of four pre-arranged written trading plans to divest its remaining shares.546 Under the first trading plan, which ended April SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 17, 2013, Treasury sold 58.4 million shares at an average share price of $28.05 for total proceeds of $1.6 billion.547 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.548 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.549 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.550 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.551 As of June 30, 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.552 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.553 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.554 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.555 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%.556 On May 10, 2010, GMAC changed its name to Ally Financial Inc.557 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%.558 In January 2014, Treasury sold 410,000 shares of Ally Financial common stock for approximately $3 billion, reducing Treasury’s ownership stake to 37%.559 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 overallotment shares, at the IPO price of $25, reducing Treasury’s ownership stake to 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. 333 334 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM approximately 16%.560 Treasury subsequently conducted two predefined trading plans between September and December 2014, which reduced its common stock ownership stake to approximately 11%.561 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.562 As of June 30, 2015, through stock sales and repayments taxpayers had recovered $14.7 billion of the initial investment in Ally Financial.563 The company also had paid a total of $3.7 billion in quarterly dividends to Treasury through June 30, 2015, as required by the terms of the preferred stock that Ally Financial issued to Treasury.564 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.565 In 2010, following the bankruptcy court’s approval of Chrysler’s liquidation plan, the $1.9 billion loan was extinguished without repayment.566 As of June 30, 2015, Treasury had recovered approximately $57.4 million from asset sales during bankruptcy.567 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.568 Treasury later accepted $1.9 billion in full satisfaction of the $3.5 billion loan.569 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.570 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.571 As of July 21, 2011, the Chrysler entities had made approximately $1.2 billion in interest payments to Treasury under AIFP.572 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.573 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.574 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, 2011.575 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 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 2010.576 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.577 335 336 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 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 For detailed discussion of TALF, see SIGTARP’s July 2014 Quarterly Report, pages 258-261. 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”).578 As of February 6, 2013, all TARP funding for TALF was either deobligated or recovered.579 Of the $71.1 billion in TALF loans, none defaulted and no loans remained outstanding as of June 30, 2015.580 Additionally, Treasury has received $671.1 million in income on the asset disposition facility it set up with the program through June 30, 2015.581 For more information on the UCSB, see SIGTARP’s October 2014 Quarterly Report, page 320. 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.582 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.583 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. 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. PPIP According to Treasury, the purpose of the Public-Private Investment Program (“PPIP”) was to purchase legacy securities, through Public-Private Investment Funds (“PPIFs”). 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.584 As of June 30, 2015, the entire PPIP portfolio had been liquidated, and all PPIP funds had been legally dissolved.585 All $18.6 billion in TARP funding that was drawn down was fully repaid by PPIP fund managers.586 Treasury also received approximately $3.5 billion in gross income payments and capital gains and warrants that it sold for $87 million.587 Equity: Investment that represents an ownership interest in a business. Debt: Investment in a business that is required to be paid back to the investor, usually with interest. SECT ION 5 TARP OPERATIONS AND ADMINISTRATION 338 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 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.588 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.589 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 June 30, 2015, Treasury has obligated $454 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, $152.9 million has been obligated in the year since June 30, 2014. According to Treasury, as of June 30, 2015, it had spent $406.3 million on TARP administrative costs and $1.2 billion on programmatic operating expenditures, for a total of $1.6 billion since the beginning of TARP. Of that, $152.7 million has been spent in the year since June 30, 2014.590 Much of the work on TARP is performed by private vendors rather than Government employees. Treasury reported that as of June 30, 2015, it employs 27 career civil servants, 46 term appointees, and 22 reimbursable detailees, for a total of 95 full-time employees.591 Between TARP’s inception in 2008 and June 30, 2015, Treasury had retained 156 private vendors — 21 financial agents and 135 contractors — to help administer TARP.592 According to Treasury, as of June 30, 2015, 40 private vendors were active — 7 financial agents and 36 contractors, some with multiple contracts.593 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 June 30, 2015, together they had about 455 people dedicated to working on their TARP contracts.594 According to Treasury, as of June 30, 2015 — the latest numbers available vary due to reporting cycles — at least another 152 people were working on other active OFS contracts, including financial agent and legal services contracts, for a total of approximately 607 private-sector employees working on TARP.595 Table 5.1 provides a summary of the expenditures and obligations for TARP administrative and programmatic operating costs through June 30, 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 June 30, 2015, excluding costs and obligations related to personnel services, travel, and transportation. 339 340 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 5.1 TARP ADMINISTRATIVE AND PROGRAMMATIC OBLIGATIONS AND EXPENDITURES Budget Object Class Title Obligations for Period Expenditures for Period Ending 6/30/2015 Ending 6/30/2015 Administrative Personnel Services Personnel Compensation & Benefits $143,446,597 $143,446,597 $143,446,597 $143,446,597 $2,649,627 $2,634,742 11,960 11,960 722,076 722,076 459 459 304,746,420 257,100,731 2,134,078 2,133,718 246,699 246,699 Land & Structures — — Investments & Loans — — Grants, Subsidies & Contributions — — Insurance Claims & Indemnities — — Total Personnel Services Non-Personnel Services Travel & Transportation of Persons Transportation of Things Rents, Communications, Utilities & Misc. Charges Printing & Reproduction Other Services Supplies & Materials Equipment Dividends and Interest Total Non-Personnel Services Total Administrative 640 640 $310,511,958 $262,851,024 $453,958,555 $406,297,621 Programmatic $1,255,786,218 $1,176,439,695 Total Administrative and Programmatic $1,709,744,733 $1,582,737,316 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, 7/10/2015. FINANCIAL AGENTS EESA requires SIGTARP to provide biographical information for each person or entity hired to manage assets acquired through TARP.596 Treasury hired no new financial agents in the quarter ended June 30, 2015.597 341 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 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 Custodian Financial Agent 60,864,185 59,845,435 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 2,702,441 2,702,441 11/9/2008 Internal Revenue Service (IRS) Detailees Interagency Agreement 97,239 97,239 11/17/2008 Internal Revenue Service (IRS) 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 102,769 102,769 12/10/2008 Thacher Proffitt & Wood LLP4 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 U.S. 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 342 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 Business 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 7,459,049 7,459,049 2/3/2009 Internal Revenue Service (IRS)2 Detailees Interagency Agreement 242,499 242,499 2/9/2009 Pat Taylor and 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 272,243 272,243 2/18/2009 Fannie Mae Homeownership Preservation Program Financial Agent 534,005,036 509,674,830 2/18/2009 Freddie Mac Homeownership Preservation Program Financial Agent 373,210,468 351,396,893 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 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 U.S. 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 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 143,893 143,893 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 343 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 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 $1,834,193 $1,834,193 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 Management Consulting relating to the Auto industry Contract 4,100,195 4,099,923 4/17/2009 Bureau of Engraving and Printing (BEP) Detailee for PTR Support Interagency Agreement 45,822 45,822 4/17/2009 Herman Miller, Inc. Aeron Chairs Contract 53,799 53,799 51,697,088 51,671,623 4/21/2009 AllianceBernstein L.P. 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 U.S. Department of State Detailees Interagency Agreement — — 5/5/2009 Federal Reserve Board Detailees Interagency Agreement 48,422 48,422 5/13/2009 Department of Treasury - US 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 U.S. 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 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 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 344 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, Swibel, Levin & Carroll, LLP Restructuring Legal Services Contract 26,493 26,493 8/10/2009 U.S. Department of Justice Detailees Interagency Agreement 54,569 54,679 8/10/2009 NASA Detailees Interagency Agreement 140,889 140,889 8/18/2009 The Mercer Group, Inc. Executive Compensation Data Subscription Contract 3,000 3,000 8/25/2009 U.S. 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 the 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 Professional Services Interagency Agreement 210,184 — 9/30/2009 Nna Incorporated 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 (IRS) 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 Document Production Services and Litigation Support Contract 2,053,503 1,173,733 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 5,041,936 5,026,612 12/22/2009 Raymond James & Associates Inc. (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 345 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 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 $7,304,722 $7,304,722 1/15/2010 Association of Govt Accountants CEAR Program Application Contract 5,000 5,000 2/16/2010 Internal Revenue Service (IRS) 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 the Treasury ARC Administrative Resource Center Interagency Agreement 1,221,140 1,221,140 3/8/2010 QualX Corporation FOIA Support Services 3/12/2010 Department of the Treasury Departmental Offices Contract 549,518 549,518 Administrative Support Interagency Agreement 671,731 671,731 3/22/2010 Financial Management Service IT Executives signature license Interagency Agreement 73,750 73,750 3/26/2010 Federal Maritime Commission 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.1 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 16,914,203 4/23/2010 RDA Corporation Data and Document Management Consulting Services Contract 11,661,725 10,308,095 5/4/2010 Internal Revenue Service (IRS) 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 PLC (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 2,975,197 7/21/2010 Regis & Associates, PC Program Compliance Support Services Contract 1,933,726 1,217,418 7/22/2010 Ernst & Young LLP Program Compliance Support Services Contract 9,992,449 7,243,089 Continued on next page 346 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 7,136,027 3,882,370 8/6/2010 Fox, Swibel, Levin & Carroll, 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 24,673 8/6/2010 Hughes Hubbard & Reed LLP Omnibus procurement for legal services Contract 3,196,109 1,426,751 8/6/2010 Love and 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 12,039,829 7,254,672 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 5,440,661 4,380,282 9/27/2010 Continued on next page 347 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 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 Coll & Univ 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 5,600,000 3,738,195 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., LLC 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 PLC (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 the Treasury ARC Administrative Support Interagency Agreement 1,090,859 1,090,860 1/26/2011 Association of Govt 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 348 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM OFS SERVICE CONTRACTS Date (CONTINUED) Vendor Purpose 3/10/2011 The Mercer Group, Inc. Executive Compensation Data Subscription 3/22/2011 Type of Transaction Obligated Value Expended Value Contract $3,600 $3,600 Harrison Scott Publications, Inc. Subscription Service Contract 5,894 5,894 4/20/2011 Federal Reserve Bank of New York 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 3,844,634 4/27/2011 Ernst & Young LLP Financial Services Omnibus Contract 1,746,470 558,069 4/27/2011 FI Consulting Inc. Financial Services Omnibus Contract 5,130,206 4,476,827 4/27/2011 Lani Eko & Company, CPAs, LLC Financial Services Omnibus Contract 50,000 — 4/27/2011 MorganFranklin Consulting, LLC Financial Services Omnibus Contract 1,772,714 796,557 4/27/2011 Oculus Group LLC Financial Services Omnibus Contract 4,587,723 3,307,186 4/28/2011 Booz Allen Hamilton Inc. Financial Services Omnibus Contract 2,781,821 1,049,075 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 PLC (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 14,195 14,195 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 The Winvale Group, LLC Anti-Fraud Protection and Monitoring Subscription Services Contract 711,698 708,273 7/28/2011 Internal Revenue Service (IRS) 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 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 (IRS) Detailees Interagency Agreement 168,578 84,289 Continued on next page 349 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 OFS SERVICE CONTRACTS Date (CONTINUED) Vendor Purpose 10/20/2011 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 68,006 68,006 Houlihan Lokey, Inc. Transaction Structuring Services Financial Agent 15,375,000 14,387,500 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 ARC 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 2,500,000 2,475,937 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 Govt 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 3,511,612 3/14/2012 Department of the Interior Federal Consulting Group Interagency Agreement 112,500 112,500 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 Technologies, Inc. Maintenance Agreement for Canon ImageRunner Contract 31,383 24,191 5/10/2012 Equilar, Inc. Executive Compensation Data Subscription Contract 44,995 44,995 6/12/2012 U.S. Department of Justice Litigation support for No. 10-647 (Fed.Cl.) and No. 11-100 (Fed. Cl.) Interagency Agreement 1,737,884 285,834 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 (IRS) Continued on next page 350 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM OFS SERVICE CONTRACTS (CONTINUED) Purpose Type of Transaction Date Vendor 8/3/2012 Subscription to Commercial Harrison Scott Publications, Inc. Mortgage Alert Online Service Obligated Value Expended Value Contract $3,897 $3,897 9/19/2012 Department of the Treasury ARC Administrative Resource Center Services 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 5,400,000 4,046,656 12/13/2012 Association of Govt 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 10,805,593 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 The Mercer Group, 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 (IRS) 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 25,632 16,668 8/1/2013 Evolution Management, Inc. Outplacement Services for OFS Contract 85,238 48,226 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 Treasury ARC Administrative Support Interagency Agreement 644,988 644,998 9/27/2013 SNL Financial LC Financial Data Subscription Services — Information Technology Contract 420,000 420,000 11/22/2013 Department of the Treasury Departmental Offices Administrative Support Interagency Agreement 9,453,973 8,092,671 11/22/2013 Internal Revenue Service (IRS) Legal Services Interagency Agreement 107,185 107,185 11/27/2013 Department of the Treasury Departmental Offices - WCF Administrative Support Interagency Agreement 1,886,578 1,884,147 Continued on next page 351 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 29, 2015 OFS SERVICE CONTRACTS (CONTINUED) Date Vendor Purpose Type of Transaction 12/12/2013 Association of Govt Accountants CEAR Program Application Contract 12/18/2013 U.S. Department of Justice Litigation Services 3/5/2014 U.S. Department of Justice 3/12/2014 Obligated Value Expended Value $5,000 $5,000 Interagency Agreement 1,459,000 8,546 Litigation Services Interagency Agreement 2,000,000 1,751,032 Department of the Treasury Departmental Offices Administrative Support Interagency Agreement 2,705,893 2,482,656 3/24/2014 The Mercer Group, 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 The Winvale Group, LLC Administrative Support Contract 362,781 172,563 10/1/2014 Internal Revenue Service Office of Procurement Administrative Support Interagency Agreement $142,262 $111,138 10/29/2014 Department of the Treasury Departmental Offices Administrative Support Interagency Agreement 2,230,003 1,469,392 11/6/2014 Department of the Treasury Departmental Offices Administrative Support Interagency Agreement 1,498,458 829,576 11/7/2014 Department of the Treasury ARC Administrative Support Interagency Agreement 641,859 481,394 11/17/2014 Department of the Treasury Departmental Offices Administrative Support Interagency Agreement 6,594,682 2,428,048 11/25/2014 Government Accountability Office Administrative Support Interagency Agreement 1,112,488 434,984 1/26/2015 Department of the Interior Administrative Support Interagency Agreement 25,000 — 4/2/2015 Integrated Federal Solutions, Inc. Administrative Support Contract 1,486,851 242,651 $1,565,817,789 $1,448,878,188 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, 7/16/2015. ENDNOTES 352 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. 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