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SIGTARP BY THE NUMBERS INVESTIGATIONS 402 324 222 Criminally Charged Convicted Sentenced to Prison Including 97 Wall Street brokers criminally charged with securities fraud Bankers criminally charged with fraud 10Billion Recovered from Investigations Defendants criminally charged with scamming homeowners Borrowers criminally charged with defrauding banks 35x Return on Investment Convictions include one reversed on appeal and two vacated due to death or cooperation | Prison sentences include one reversed on appeal | Charges are not evidence of guilt Many defendants await trial and sentencing | Recoveries include homeowner relief | Return on investment based on SIGTARP’s budget 2010 – 2017 | As of June 30, 2017 SIGTARP SIGTARP BYTHE THE BY NUMBERS NUMBERS INVESTIGATIONS INVESTIGATIONS SIGTARP investigations have led to enforcement actions against NINE 402 324 222 Criminally Charged Convicted Sentenced to Prison Including 97 Wall Street brokers criminally charged with securities fraud financial institutions. Bankers criminally charged with fraud 10Billion Recovered from Investigations Defendants criminally charged with scamming homeowners Borrowers criminally charged with defrauding banks 35x Return on Investment Convictions include one reversed on appeal and two vacated due to death or cooperation | Prison sentences include one reversed on appeal | Charges are not evidence of guilt Many defendants await trial and sentencing | Recoveries include homeowner relief | Return on investment based on SIGTARP’s budget 2010 – 2017 | As of June 30, 2017 LETTER FROM THE SPECIAL INSPECTOR GENERAL This quarter, I am pleased to report that SIGTARP’s criminal investigations have resulted in 50 bankers sentenced to prison. With dozens of additional bankers charged and investigations continuing, more bankers are likely to be sentenced to prison in the future. 50 bankers have been sentenced to prison because of SIGTARP SIGTARP’s criminal investigations have resulted in the Justice Department and one state attorney general bringing criminal charges against 97 bankers, about half of which were in last three years. Prosecutions of bankers investigated by SIGTARP bring justice, provide general deterrence, and allow taxpayers to recover losses in TARP. By removing bad actors who committed crimes in banks, these prosecutions make the banking system stronger. Strengthening Banks through Law Enforcement The impact of law enforcement investigations of bank fraud and other unlawful conduct at banks is often out of the limelight, but is critical. At small and midsized banks, SIGTARP has learned how bankers hide fraud in cooked books, and the red flags that point to such crime. This expertise helps us find and investigate hidden crime quicker, as evidenced by the uptick in charged bankers in recent years. Law enforcement makes banks and the banking system stronger Bank examiners did not detect the crimes SIGTARP found, but in some cases they should have, given existing red flags. Forty of the 50 bankers sentenced to prison were at failed or acquired banks, evidencing that fraud harms the safety and soundness of banks. Many of these prosecutions involved crime unrelated to the financial crisis. Given that similar crimes can occur in times of economic recovery, it is important that examiners are armed with knowledge about when to refer to law enforcement. SIGTARP is ready and willing to provide information sessions to help bank examiners identify red flags and know when to bring in law enforcement. With the largest banks, our investigations and resulting Justice Department enforcement actions have had a deterrent impact and led to important industry changes to unlawful practices. These changes strengthen banks. SIGTARP’s investigations and resulting Justice Department enforcement actions in Fiscal 2016 and 2017 against Goldman Sachs, Morgan Stanley, and Ally Financial for misrepresentations in residential mortgage backed securities have led to increased due diligence of mortgage backed securities. Also as part of a Justice Department action, in 2017, Ally Financial closed down the part of its business involved in unlawful conduct. SIGTARP’s investigation resulting in the Justice Department 2015 action against Fifth Third Bank for selling defective mortgages with false representations to the Department of Housing and Urban Development led to changes in its quality control program, and the termination of quality control management employees. At SunTrust Bank, unopened Home Affordable Modification Program (HAMP) application packages were piled so high in a room that the floor buckled. SIGTARP’s investigation resulting in the Justice Department 2014 action against SunTrust led to changes to prevent unlawful practices and removed a number of management employees. Each of these changes made banks and the banking system stronger by reducing risk in problem areas that contributed to the crisis and the resulting TARP bailout. These changes reduce the likelihood that future taxpayer bailouts are needed. SIGTARP’s Current Investigative Priorities We remain focused on our mission to investigate bankers who commit crimes at TARP banks, particularly where taxpayers lost TARP dollars or where the crime is egregious (such as alleged money laundering for international narcotics trafficking charged in one TARP bank). When SIGTARP finds crime where taxpayers or TARP programs are victims, we do not close the investigation just because the bank fails, is acquired, or Treasury sells its TARP stock. Treasury’s investment decisions to sell TARP stock cannot, and will not, relieve a banker of criminal accountability for crimes when the bank was in TARP We are also investigating corruption, bid rigging, and fraud in current demolition contracts in the Hardest Hit Fund, and investigating mortgage servicers in HAMP. And with the expiration of the homeowner HAMP application period, we are completing our investigations of scammers who stole homeowner dollars with promises of admission into HAMP. Just last week, three of these defendants who stole $11 million from 3,000 homeowners were sentenced to 20 years in prison, 12 years in prison, and 7 years in prison. They are three of the 110 con artists in these schemes who were convicted as a result of SIGTARP’s investigations. Two recent cases illustrate SIGTARP’s current efforts to bring justice and recover lost TARP dollars. President and Vice President of GulfSouth Bank sentenced to prison: On June 28, 2017, the President of GulfSouth Private Bank Anthony Atkins was sentenced to more than five years in prison and ordered to pay $2.4 million. Bank Vice President Sam Cobb was also sentenced to prison. When the bank failed, taxpayers lost $7.5 million in TARP. SIGTARP agents flipped Atkins’ co-conspirators who were bank customers; each pled guilty in 2013 and provided information to SIGTARP. SIGTARP agents arrested bankers Atkins and Cobb in December 2016. We are identifying Atkins’ assets to pay the $2.4 million to recoup some taxpayer losses. Recovery of luxury cars, cash in bank accounts, and stock proceeds from the estate of the CEO of One Bank: SIGTARP was investigating Layton Stuart, the CEO and Chairman of One Financial and its subsidiary One Bank, when he died. In October 2015, the Justice Department filed a false claims act complaint and forfeiture action. The bank remains in TARP today. The investigation uncovered that within two weeks of receiving TARP, CEO Stuart took $2.1 million from the bank and bought a Range Rover and a Cadillac performance sport utility vehicle for his wife and children, and a house for his daughter. He diverted tens of millions of dollars from the bank for his personal use, including using bank dollars to buy a life insurance policy. As a result of the investigation, Treasury received $4 million of the proceeds of Stuart’s life insurance policy. The cars were seized and sold for $115,474, and $133,065 in bank accounts was seized. As Stuart owned 99.4% of the stock in the bank, his bank stock was seized, and Treasury now holds 99% of stock in the bank. It is SIGTARP’s duty to protect taxpayers against crimes that undermine a core rational for TARP investments in banks: lending to Americans. Layton Stuart’s family cannot keep a Range Rover and Cadillac after he stole TARP dollars. Anthony Atkins cannot go free when he intentionally used cooked books to apply for TARP dollars, and continued the scheme in TARP, with taxpayers losing millions. Without SIGTARP’s focus, expertise, and dedicated resources, many of these bankers who committed crimes in TARP banks might not be caught or prosecuted. We anticipate more arrests and more recoveries in our ongoing investigations. We appreciate the strong support we have received. I would welcome a chance to meet with you to discuss SIGTARP’s work. Respectfully, CHRISTY GOLDSMITH ROMERO Special Inspector General CONTENTS Section 1 SIGTARP LAW ENFORCEMENT Investigative Results and Return on Investment Countering Threats to Public Safety and Government Interests Defendants Sentenced to Prison Section 2 SIGTARP AUDITS AND RECOMMENDATIONS Cost Savings to the Government Key Issue and High Risks in TARP Programs Priority Recommendations 3 5 11 14 21 25 26 28 Section 3 IN THE HARDEST HIT FUND, TREASURY RECENTLY GAVE UP NEARLY 10 MILLION DOLLARS TO STATE AGENCIES AND INCREASED THE RISK OF FRAUD, WASTE AND ABUSE, RISKS THAT SHOULD BE MITIGATED Recent Treasury Changes to the Blight Demolition Program in the Hardest Hit Fund That Increase the Risk of Fraud, Waste, and Abuse Section 4 SIGTARP’S OVERSIGHT BY TARP PROGRAM SIGTARP’s Oversight Over the Bank Bailout SIGTARP Investigations Related to TARP Banks SIGTARP’s Oversight Over Trading in Mortgage-Backed Securities SIGTARP’S Oversight of the Making Home Affordable Program SIGTARP’s Oversight Over The Hardest Hit Fund Endnotes 33 40 45 47 47 59 63 77 139 SECT IO N 1 SIGTARP LAW ENFORCEMENT 4 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 LAW ENFORCEMENT MISSION SIGTARP is primarily a federal law enforcement agency with investigations as more than 80% of our resources. SIGTARP uses an analytical, experiencebased approach to identify hidden crime at financial institutions or other TARP recipients. Our special agents have the authority to search, seize, and arrest. SIGTARP primarily investigates crime at financial institutions that received TARP funds or TARP recipients in housing programs, to recover dollars lost to fraud and bring accountability through prosecution. We also investigate crime being committed right now. Treasury is currently spending TARP dollars at a rate of at least $4 billion per year paid primarily to large banks in HAMP and demolition contractors and sub-contractors in eight states. In the last quarter, Treasury spent $1.49 billion in TARP. Once our special agents, investigators, and forensic agents build a strong case against an individual or institution, we work with the Justice Department and other prosecutors to bring justice to individuals and institutions that break the law, by taking the case to trial or securing a guilty plea. SIGTARP’s Investigative Results and Return on Investment 10Billion Recovered from Investigations 402 Criminally Charged 35x Return on Investment 324 222 Convicted Sentenced to Prison Convictions include one reversed on appeal and two vacated due to death or cooperation | Prison sentences include one reversed on appeal Charges are not evidence of guilt Many defendants await trial and sentencing | Recoveries include homeowner relief | Return on investment based on SIGTARP; budget 2010–2017 | As of June 30, 2017 Finding crime in TARP and investigating to uncover evidence the DOJ needs to prosecute takes time. In fiscal year 2016 and 2017 alone, 96 defendants were charged with a crime. 5 6 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 1.00 NEARLY 100 DEFENDANTS CRIMINALLY CHARGED IN FY2016–2017 450 402 400 378 306 300 250 +24 +72 233 +73 200 168 150 121 100 61 50 +65 +47 +60 0 2009-2011 2012 2013 2014 2015 2016 2017 SIGTARP investigations have also resulted in significant DOJ enforcement actions finding violations of the law by large corporations that received TARP dollars, such as Goldman Sachs, Bank of America, JP Morgan Chase, Morgan Stanley, Ally Financial, Sun Trust Bank, Fifth Third Bank, Jefferies and Company, and General Motors. SIGTARP IS A 35 TIMES RETURN ON INVESTMENT SIGTARP continues to assess strategically current and future operations to ensure it meets mission requirements while not serving as a burden on taxpayers. SIGTARP’s investigations have recovered $10 billion (including nearly $9 billion recovered in 2016), which translates to a 35-times return on investment from our annual budget in actual dollars recovered.i This is in addition to $2 billion in cost savings recommendations by SIGTARP auditors. Through SIGTARP’s unique expertise, we have targeted our oversight work to recover dollars and save money for taxpayers, as our record proves. We maximize recoveries—dollars that the Government can use to fund operations or decrease the cost of Government. i Recoveries include homeowner relief. Return on investment based on SIGTARP's budget 2010–2017. QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 Recovering Lost Taxpayer Dollars in TARP Through Criminal and Civil Investigations SIGTARP is ensuring that crime (and civil fraud) does not pay by taking the profit out of crime (and civil fraud). SIGTARP investigations resulted in recoveries to the government greater than our annual budget in each of the last three fiscal years (FY 2015, 2016, 2017). These recoveries offset taxpayer losses in TARP. • In FY2015, SIGTARP’s investigation found that General Motors committed a crime that led to a DOJ enforcement action where GM paid $900 million. These dollars offset the $11 billion in TARP losses that taxpayers suffered on the TARP investment in GM. SIGTARP’s investigation with DOJ found criminal conduct by General Motors related to a faulty ignition switch that caused the deaths of many young drivers, which led to a complete overhaul in the recalls of auto parts, improving safety. In the wake of our investigation, auto manufacturers now have a quicker response to rectify automobile defects, with vehicle recalls increasing from 20.2 million in 2013, to 50.9 million in 2014, to 51.2 million in 2015, to 53.2 million in 2016. • In FY2016, SIGTARP’s investigations led to Department of Justice enforcement actions against Goldman Sachs and Morgan Stanley for violations of the law that caused losses for investors. Taxpayers suffered losses as investors when the securities traded through a TARP program. Goldman Sachs paid $5 billion under DOJ’s enforcement action, and Morgan Stanley paid $2.6 billion. • In FY2017, our investigation into Ally Financial led to a DOJ enforcement action in which Ally paid $52 million, exceeding SIGTARP’s $41 million budget and helping offset $2.47 billion in TARP losses. Taxpayers suffered losses as investors when the securities traded through a TARP program. We have a significant number of investigations of recipients of TARP dollars that will yield future recoveries for the government. Government Recovery through Property Seizure and Forfeitures SIGTARP’s culture includes maximizing recoveries of losses to the Government. SIGTARP assists in tracing proceeds of the crime, such as land, houses, cars, boats, and artwork purchased with the proceeds of the crime, as well as cash. Property already seized or ordered to be forfeited in SIGTARP cases include: • Nearly 30 businesses and waterfront homes, • More than 70 bank accounts (including a bank account located in the Cayman Islands), • Bitcoin cryptocurrency, bags of silver, U.S. currency, antique and collector coins (including gold, silver, and copper coins), artwork, antique furniture, Civil War memorabilia, 7 8 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM • NetSpend Visa and CashPass MasterCard debit cards, and Western Union money orders with the “Pay To” line blank, • A 1963 Rolls Royce, a 2012 Aston Martin, a 2010 Aston Martin DBS Volante Convertible, a 2008 Maserati Granturismo Coupe, a 1969 Shelby Mustang, a 1932 Ford Model A, a 1954 Cadillac Eldorado convertible, a 1965 Shelby Cobra, a 2013 Ferrari 458 Italia, a 1948 Pontiac Silver Streak, a 2007 Ferrari, a 2014 Jaguar convertible, a 1997 Dodge Viper, a 1957 Chevrolet Nomad, a 1957 Chevrolet BelAir, a 2011 Mercedes Benz SLS, a 2008 Cadillac Escalade, a 2013 Range Rover, a 2011 Cadillac SRX Performance and a 1957 Cadillac Coup de Ville, • Other property in Figure 1.1. QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 FIGURE 1.1 ORDERED FORFEITED AND SEIZED 2013 Ferrari 458 Italia 2005 54’ Hylas yacht “Swept Away” 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) 1958 Mercedes-Benz Cabriolet 220. Estimated value in 2013: $185,000. (Source Hagerty.com) 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. 9 10 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Cash seized from safe, $158,000. 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. Bitcoin Cryptocurrency 2008 Maserati Grandturismo 2014 Jaguar Convertible Cash 2013 Range Rover 2008 Cadillac Escalade 2011 Cadillac SRX Performance QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 Seizures and forfeitures bring money back to victims and the Government and ensure that crime does not pay, as defendants are unable to keep the proceeds of their crime. This money can then be used for other Government spending or to reduce the Government budget. Countering Threats to Public Safety and Government Interests SIGTARP’s law enforcement counters threats to public safety by investigating criminal actors, and neutralizing the threat they pose through referrals to the Department of Justice for prosecution.ii SIGTARP has concurrent responsibility with the Federal Bureau of Investigations over criminal activity related to TARP. With more than 220 people sentenced to prison resulting from a SIGTARP investigation at an average prison sentence of nearly five years, the threat these crimes pose is significant. SIGTARP current investigations counter threats including: • Public Corruption • Antitrust/Unfair Competition • Contract Fraud • Financial Institution Fraud • Mortgage Fraud Public Corruption: State and local officials in awarded contracts under the Hardest Hit Fund blight demolition program. The corruption of local officials threatens public safety. Antitrust Violations: Unfair competitive practices—including bid rigging and contract steering for demolition contracts—threatens public safety and the Government’s interests. Contract Fraud: Demolition contractors. State agencies. HAMP servicers. Fraud in any of these high risk areas are harmful. Financial Institution Fraud: SIGTARP investigates fraud in current TARP banks and banks where taxpayers suffered a loss in TARP. The bank fraud SIGTARP has found, and continues to find, hurts bank lending. Already, 97 bankers have been charged with a crime resulting from a SIGTARP investigation, 78 of them convicted. ii SIGTARP made 3 referrals for prosecution this reporting period. 11 12 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 120 BANKERS CHARGED 97 Bankers Criminally Charged 23 Bankers Civilly Charged Criminal charges for bankers in banks where Treasury still holds TARP securities: There are 34 banks and credit unions where Treasury holds TARP securities for the TARP investment and Treasury also holds TARP warrants in nine banks for a total of $164 million. SIGTARP’s investigations into some of these banks have led to indictments. For example, as a result of a SIGTARP investigation, the former CEO of Saigon Bank was indicted, charged with orchestrating a money-laundering scheme for international narcotics trafficking allegedly involving a drug cartel.iii In another bank where Treasury holds TARP warrants, SIGTARP’s investigation uncovered an alleged financial fraud that led to the pending indictment against the bank and its top officers. The trials in both of these cases are currently scheduled for FY2018. Criminal charges for bankers in banks where taxpayers through Treasury took a loss in TARP: A TARP bank President and the bank’s Vice President were sentenced to prison in June, 2017. The court ordered the President to pay $2.4 million. When GulfSouth Private Bank failed, taxpayers lost $7.5 million in TARP, and the FDIC estimates losses of $36.1 billion. DOJ will seek restitution of certain losses at sentencing. Also in FY2017, the Department of Justice criminally charged and convicted another banker at a TARP-recipient bank that failed. The bank’s failure caused losses to Treasury (and taxpayers) of $30 million. DOJ Criminal or civil fraud charges related to mortgage backed securities: SIGTARP also investigates crime related to mortgage-backed securities related to TARP. This crime can involve a TARP recipient or it can involve a defendant involved in securities trading through TARP’s Public Private Investment Program. We have referred to the Justice Department for prosecution our investigations of TARP’s PPIP Program. In the first case of this type of securities fraud, in January 2017, a jury convicted a Wall Street trader for increasing the firm’s profit by defrauding a PPIP manager. The trader was sentenced to two years in prison. Five mortgagebacked securities traders have already been convicted resulting from a SIGTARP investigation and others have been indicted, two in fiscal year 2017. In addition, iii Criminal charges contain an allegation that a defendant committed a crime. Every defendant is presumed innocent until and unless proven guilty. QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 DOJ has brought enforcement actions resulting from a SIGTARP investigation involving mortgage backed securities against Goldman Sachs, Morgan Stanley, and Ally Financial. Mortgage Fraud: SIGTARP investigates banks and non-bank services in HAMP. With the HAMP application period over, we are ending investigations into con artists that stole from homeowners seeking admission into the program. SIGTARP brought justice through 110 defendant convicted for these crimes with victims across all 50 states. In these crimes 80 defendants have been sentenced to prison. Three defendants also were sentenced to 20 years, 12 years, and 7 years in prison, last week. One victim testified that after her servicer lost her application, she fell prey to a scam promising admission into the program. Her home and thousands of dollars were lost. Her story underscores the harm caused when mortgage servicers do not follow HAMP’s rules, and why they must be held accountable to the rules and law. SIGTARP is currently analyzing data and conducting trend analysis (rather than solely relying on tips and referrals) to find crime proactively for more than $800 million in TARP-funded demolitions, under TARP’s Hardest Hit Fund. This program operates in eight Rust Belt and southern states (Michigan, Ohio, Indiana, Illinois, South Carolina, Tennessee, Alabama, and Mississippi). TARP-funded demolitions are fairly recent. They first began in April 2014, in Michigan, and were slow to start in other states. Illinois had no reported demolitions until March 31, 2016 (when they reported 10 houses). Of the eight states, one has no reported demolitions (Mississippi), and three (Alabama, South Carolina, and Tennessee) recently reported starting demolitions. These TARP dollars are paid to over 400 local partners who reimburse their payments to contractors. Hundreds of these local partners are individuals (152), for-profit companies (8) or non-profit entities (151), or land banks (60), increasing the risk of fraud. 13 14 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM DEFENDANTS SENTENCED TO PRISON Already more than 200 defendants investigated by SIGTARP have been sentenced to prison. 51 BANKERS SENTENCED TO PRISON* Edward Woodard Stephen Fields Mark A. Conner Gilbert Lundstrom Shawn Leo Portmann Ebrahim Shabudin Troy Brandon Woodard Catherine Kissick Clayton A. Coe Gary Patton Hall Jerry J. Williams Adam Teague Anthony Atkins Jeffrey Levine Zulfakir Esmail William R. Beamon, Jr. Robert E. Maloney, Jr. Christopher Tumbaga James A. Laphen Melvin Rohs Jeff H. Bell Thomas Hebble Charles Antonucci Angel Guerzon 23 Years in Prison 5 Years Supervised Release CEO, President Bank of the Commonwealth 8 Years in Prison 5 Years Supervised Release Vice President Bank of the Commonwealth (Subsidiary) 5 Years and 3 Months in Prison 5 Years Supervised Release President, CEO Gulf South Private Bank 2 Years and 10 Months in Prison 2 Years Supervised Release Acting CEO, COO, President TierOne Bank 17 Years in Prison 5 Years Supervised Release Executive Vice President, Commercial Loan Officer Bank of the Commonwealth 8 Years in Prison 3 Years Supervised Release Senior Vice President Colonial Bank 5 Years in Prison 5 Years Supervised Release Executive Vice President Omni Bank 2 years and 9 months in Prison 5 years Supervised Release Senior Vice President, Senior Loan Officer Citizens Bank of Northern California 12 Years in Prison 5 Years Supervised Release Acting CEO, Chairman, Vice Chairman, President, COO First City Bank 7 Years and 3 Months in Prison 5 Years Supervised Release Vice President, Senior Commercial Loan Officer FirstCity Bank 5 Years in Prison CEO, Chairman; President Premier Bank; Premier Bancorp 2 Years and 6 Months in Prison 3 Years Supervised Release President; Head Factoring Division, Transportation Alliance Bank; Stearns Bank 11 Years in Prison 2 Years Supervised Release CEO, Chairman TierOne Bank 7 Years in Prison 3 Years Supervised Release CEO, President Tifton Bank 3 Years and 6 Months in Prison 5 Years Supervised Release Vice President Appalachian Community Bank 2 Years and 6 Months in Prison 3 Years Supervised Release Executive Vice President Orion Bank 10 Years in Prison 5 Years Supervised Release Senior Vice President, Loan Officer Pierce Commercial Bank 6 Years in Prison 3 Years Supervised Release CEO, President, Chairman Orion Bank 3 Years and 3 Months in Prison 3 Years Supervised Release In-house Attorney FirstCity Bank 2 Years and 6 Months in Prison 2 Years Supervised Release CEO, President Park Avenue Bank 8 Years and 1 Month in Prison 3 Years Supervised Release Chief Credit Officer, Executive Vice President, Chief Operating Officer United Commercial Bank (UCBH) 5 Years and 10 Months in Prison 5 Years Supervised Release Senior Vice President Appalachian Community Bank 3 Years in Prison 4 Years Supervised Release Commercial Loan Officer Colorado East Bank & Trust 2 Years in Prison 3 Years Supervised Release Senior Vice President Orion Bank QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 Reginald Harper James Ladio Karim Lawrence Don A. Langford Allen Reichman *David Weinmert Paul Ryan Poppi Metaxas Michael Sean Davis Brian Hartline Jose Martins Matthew L. Morris Barry Bekkedam Jeanette Salsi Brian W. Harrison Phillip Alan Owen 6 Months in Prison 5 Years Supervised Release Branch Manager Superior Bank Samuel Cobb 3 Months in Prison 5 Years Supervised Release Senior Vice President Front Range Bank Candice White Teresa Kelly Alice Lorrraine Barney Sonja Lightfoot Sam Tuttle Justin Brough Robert Pennington Ed Rounds Helene DeCillis Craig Meyer 2 Years in Prison 3 Years Supervised Release CEO, President First Community Bank 1 Year and 6 Months in Prison 3 Years Supervised Release Loan Officer Broadway Federal Bank 11 months in Prison 3 Years Supervised Release Former Chairman NOVA Bank/NOVA Financial Holdings 3 Months in Prison 3 Years Supervised Release Operations Supervisor Colonial Bank Time Served 5 Years Supervised Release Loan Officer Pierce Commercial Bank 2 Years in Prison 3 Years Supervised Release CEO, President; Chief Lending Officer MidCoast Community Bank; Artisan’s Bank 1 Year and 6 Months in Prison 3 Years Supervised Release CEO, President Gateway Bank 7 Months in Prison 3 Years Supervised Release Senior Underwriter Pierce Commercial Bank 2 Months in Prison 3 Years Supervised Release Assistant to Shawn Portmann Pierce Commercial Bank Time Served 3 Years Supervised Release Chief Operating Officer Lend America, Gateway Bank 1 Year and 9 Months in Prison 5 Years Supervised Release Vice President, Loan Officer Omni Bank 1 Year 3 Months in Prison 3 Years Supervised Release President Premier Community Bank of the Emerald Coast; Bank of America, Beach Community Bank 6 Months in Prison 6 Months Supervised Release Vice President, Loan Officer Farmer’s Bank 1 Month in Prison 3 Years Supervised Release Senior Vice President of Residential Lending Pierce Commercial Bank Time Served 1 Year Supervised Release Vice President, Principle, Loan Officer Pierce Commercial Bank 1 Year and 9 Months in Prison 2 Years Supervised Release Chief Credit Officer, Senior Vice President TierOne Bank 1 Year and 2 Months in Prison 3 Years Supervised Release CEO, President NOVA Bank 1 Day in Prison 3 Years Supervised Release Vice President, Loan Officer Pierce Commercial Bank 1 Year and 9 Months in Prison 2 Years Supervised Release Executive Director of Investments Oppenheimer 1 Year in Prison 3 Years Supervised Release Loan Officer Wells Fargo Time Served 5 Years Supervised Release Senior Vice President Bank of America 1 Year and 6 Months in Prison 3 Years Supervised Release Senior Vice President in Lending Administration; President, Anchor Bank; Investment Directions, Inc. (Subsidiary) Reversed on Appeal 1 Year in Prison 2 Years Supervised Release Senior Vice President Park Avenue Bank" 3 Months in Prison 5 Years Supervised Release Senior Vice President Front Range Bank Time Served 5 Years Supervised Release Vice President Citizens First National Bank 15 16 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 43 BANKER CO-CONSPIRATORS SENTENCED TO PRISON Lee Bently Farkas Mark Anthony McBride Delroy Davy George Hranowskyj Eric Menden Wilbur Anthony Huff Daniel Sexton Lawrence Wright Desiree Brown Francesco Mileto Richard Pinto [deceased] Jonathan Williams Paul Chemidlin Delton DeArmas Dwight Etheridge Peter Pinto Leonard Potillo Paul Allen Brent Merriell Brian Headle Delio Coutinho Ray Bowman Carmine Fusco Tommy Arney Sheila Flynn Kenneth Sweetman Christopher Woods Daryl Wesley Clements Matthew Amento Troy A. Fouquet Chester Peggese Salvatore Leone Carlos Peralta Derrick Cheung Alberto Solaroli 30 Years in Prison 3 Years Supervised Release Chairman, CEO Taylor, Bean & Whitaker (Colonial Bank Case) 6 Years and 3 Months in Prison 5 Years Supervised Release Bluewater Real Estate Investments, LLC (GulfSouth Private Bank Case) 4 Years and 2 Months in Prison 5 Years Supervised Release Owner/Operator Tivest Development and Construction LLC (Bank of the Commonwealth Case) 2 Years and 6 Months in Prison 2 Years Supervised Release President Taylor, Bean & Whitaker (Colonial Bank Case) 1 Year and 6 Months in Prison 3 Years Supervised Release Owner/Operator Residential Real Estate and Construction, LLC (Bank of America, CitiGroup, PNC Bank, U.S. Bank, Wells Fargo Case) 14 Years and 2 Months in Prison 5 Years Supervised Release (Omni National Bank Case) 6 Years in Prison 3 Years Supervised Release Vice President, Treasurer Taylor, Bean & Whitaker (Colonial Bank Case) 4 Years in Prison 3 Years Supervised Release CEO, President Oxford Collection Agency (Ally Financial, CitiGroup, JP Morgan, U.S. Bank, Webster Bank, Wells Fargo Case) 2 Years and 3 Months in Prison 3 Years Supervised Release Appraiser (Bank of America, CitiGroup, PNC Bank, U.S. Bank, Wells Fargo Case) 1 Year and 6 Months in Prison 3 Years Supervised Release Owner Team Mgmt LLC, TRISA (First Community Bank Case) 14 Years in Prison 5 Years Supervised Release Owner Quantum Builders LLC, Jamsen Properties LLC, Realty Group LLC, DNK Investment Group LLC (Omni National Bank Case) 5 Years and 5 Months in Prison 5 Years Supervised Release Owner Florida Metro One, LLC, Southeast Retail Portfolio, LLC, Trust Member, LLC, TMLS Heritage, LLC, (Orion Bank Case) 3 Years and 10 Months in Prison 3 Years Supervised Release Owner United Credit Recovery LLC (Ally Financial, CitiGroup, JP Morgan, U.S. Bank, Webster Bank, Wells Fargo Case) 2 Years and 3 Months in Prison 3 Years Supervised Release Owner/Operator Body Shop Go-Go club, Bootleggers, Maxwell’s Tavern (Bank of the Commonwealth Case) 1 Year in Prison 5 Years Supervised Release Loan Consultant (Broadway Federal Bank Case) 14 Years in Prison 3 Years Supervised Release Owner/Operator 345 Granby, LLC, Norfolk Property Development LLC (Bank of the Commonwealth Case) 5 Years in Prison 5 Years Supervised Release Chairman, co-founder Oxford Collection Agency (Ally Financial, CitiGroup, JP Morgan, U.S. Bank, Webster Bank, Wells Fargo Case) 3 Years and 4 Months in Prison 2 Years Supervised Release CEO Taylor, Bean & Whitaker (Colonial Bank Case) 2 years in Prison 5 years Supervised Release Operator DS Realty, DES Equipment Waste Mgmt. Solutions, Georgetown Mobile Home Sales of Central Kentucky (PBI Bank Case) 1 Year in Prison 3 Years Supervised Release Project Manager/Partner TBC Enterprises, LLC, North Dover Holdings, LLC, Shoppes at FieldStone Village, LLC (Wilmington Trust Case) 11 Years and 6 Months in Prison 3 Years Supervised Release Owner/Operator 345 Granby, LLC, Norfolk Property Development LLC (Bank of the Commonwealth Case) 5 years in Prison 5 years Supervised Release Accountant, Operator DS Realty, DES Equipment Waste Mgmt. Solutions, Georgetown Mobile Home Sales of Central Kentucky (PBI Bank Case) 3 Years and 3 Months in Prison 5 Years Supervised Release (Omni National Bank Case) 2 Years in Prison 3 Years Supervised Release Title Agent (Bank of America, CitiGroup, PNC Bank, U.S. Bank, Wells Fargo Case) 1 Year in Prison 3 Years Supervised Release (Park Avenue Bank Case) 12 Years in Prison 4 Years Supervised Release Owner O2HR, LLC, Oxygen Unlimited, LLC, General Employment Enterprises (Park Avenue Bank Case) 5 Years in Prison 3 Years Supervised Release (Bank of America, CitiGroup, PNC Bank, U.S. Bank, Wells Fargo Case) 3 Years in Prison 4 Years Supervised Release Owner Investment One LLC (ColoEast Bank and Trust Case) 1 Year and 6 Months in Prison 3 Years Supervised Release Owner/Operator Champ Construction LLC (Bank of America, CitiGroup, PNC Bank, U.S. Bank, Wells Fargo Case) 1 Year in Prison 2 Years Supervised Release (Saigon National Bank Case) 9 Years and 1 Month in Prison 3 Years Supervised Release Operator DS Realty, DES Equipment Waste Mgmt Solutions, Georgetown Mobile Home Sales of Central Kentucky (PBI Bank Case) 5 Years in Prison 3 Years Supervised Release CFO Taylor, Bean & Whitaker (Colonial Bank Case) 3 Years in Prison 3 Years Supervised Release Loan Officer Ameridream (Bank of America, CitiGroup, PNC Bank, U.S. Bank, Wells Fargo Case) 1 Year and 6 Months in Prison 5 Years Supervised Release Owner Link Resources Partner, LLC (Harbor Bank of Maryland Case) 1 Year in Prison 2 Years Supervised Release Owner CET Racing (OneFinancial Corporation Case) QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 Jose Luis Salguero Bedoya 10 Months in Prison 3 Years Supervised Release Owner New Jersey Real Estate Holding, New Jersey Property Management (Bank of America, CitiGroup, PNC Bank, U.S. Bank, Wells Fargo Case) Yazmin Soto-Cruz Time Served 3 Years Supervised Release (Bank of America, CitiGroup, PNC Bank, U.S. Bank, Wells Fargo Case) Christopher Ju 10 Months in Prison 2 Years Probation Title Agent (Bank of America, CitiGroup, PNC Bank, U.S. Bank, Wells Fargo Case) Jason Maurice Robinson 6 Months in Prison 5 years supervised release Used car salesman (Superior Bancorp Case) Sean Ragland 3 Months in Prison 3 Years Supervised Release Senior Financial Analyst Taylor, Bean & Whitaker (Colonial Bank Case) Michael Bradley Bowen 1 Day in Prison 5 Years Supervised Release C-Note Development Company LLC (GulfSouth Private Bank Case) Bruce Houle 1 Day in Prison 5 Years Supervised Release Owner Bah Dev, LLC (GulfSouth Private Bank Case) Mark W. Shoemaker 1 Day in Prison 5 Years Supervised Release Burnt Pine Properties, LLC (GulfSouth Private Bank Case) 17 18 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 29 DEFENDANTS WHO DEFRAUDED TARP BANKS SENTENCED TO PRISON David McMaster Robert Egan Scott Powers Edward Shannon Polen Chung Yu Yeung Bernard McGarry Steven Pitchersky Michael Edward Filmore Winston Shillingford Selim Zherka Cheri Fu Marleen Shilingford Clint Dukes Joseph D. Wheliss, Jr. Joseph L. Capano Thomas Fu Steven Moorhouse Robert Ilunga Gregory Yates Harpreet Singh Shaima Hadayat Raj Maruvada Terrance Yates James Crews Michael Hilbert Pasquale Scarpa Genaro Morales Dahlanara Moran 15 Years and 8 Months in Prison 5 Years Supervised Release Vice President of Lending Operations AMS (Victim: BNC National Bank) 4 Years in Prison 5 Years Supervised Release Operator Healthcare Parnters Group, LLC (Victim: Pulaski Bank) 1 Year and 9 Months in Prison 5 Years Supervised Release Managing Member Riverbend Community LLC (Victim: Cecil Bank) 6 Months in Prison 1 year supervised release CPA, Raj Maruvada & Associates P.C. (Victim: TARP Bank) Hyacinth Bellerose Time Served 1 year supervised release Attorney (Victim: JPMorgan, Bank of America, First Horizon Corp.) 11 Years in Prison 5 Years Supervised Release President Mount Vernon Money Center (Victim: U.S. Bank, Webster Bank, Bank of America, NY Community Bank Corp) 4 Years in Prison 5 Years Supervised Release Co-owner Waikele Properties Corp (Victim: Goldman Sachs, Wells Fargo, JP Morgan, Deutsche Bank) 1 Year and 9 Months in Prison 5 Years Supervised Release CFO, Secretary, Treasurer Galleria USA (Victim: Bank of America, United Commercial Bank (UCBH), Cathay Bank, City National Bank, East National Bank, DBS Bank, United Overseas Bank) 1 day in Prison 3 years Supervised Release CFO Quality Concepts, LLC; CFO & VP of Operations Champion Development, LLC (Victim: Country Bank of Aledo, IL) 8 Years in Prison 5 Years Supervised Release CEO AMS (Victim: BNC National Bank) 3 Years and 1 Month in Prison 5 Years Supervised Release Owner, Publisher Cheetah’s Gentleman’s Club, V.I.P Club, The Westchester Guardian (Victim: Capital One, Signature Bank, Sovereign Bank) 1 Year and 9 Months in Prison 5 Years Supervised Release President Jefsco Manufacturing Co., Inc. (aka Fanplastic Molding Company) (Victim: Old Second National Bank) Time Served 5 Years Supervised Release (Victim: Excel Bank) 5 Years and 11 Months in Prison 5 Years Supervised Release Owner Polen’s Lawn Care (Victim: F&M Bank, U.S. Bank, Fifth Third Bank, Sumner Bank & Trust, Bank of Nashville, First Bank) 3 Years in Prison 5 Years Supervised Release President, owner Galleria USA (Victim: Bank of America, United Commercial Bank (UCBH), Cathay Bank, City National Bank, East National Bank, DBS Bank, United Overseas Bank) 1 Year and 6 Months in Prison 5 Years Supervised Release Operator Waikele Properties Corp (Victim: Goldman Sachs, Wells Fargo, JP Morgan, Deutsche Bank) Time Served 5 Years Supervised Release (Victim: Excel Bank) 5 Years and 3 Months in Prison 5 Years Supervised Release Vice President ETQ, Eastern Tools and Equipment (Victim: United Commercial Bank 3 Years in Prison 5 Years Supervised Release Co-owner Waikele Properties Corp (Victim: Goldman Sachs, Wells Fargo, JP Morgan, Deutsche Bank) 1 year in Prison 3 years Supervised Release CEO, President Quality Concepts LLC; Owner Champion Development, LLC; Owner QC Manufacturing, LLC (Victim: Country Bank of Aledo, IL) Time Served 5 Years Supervised Release (Victim: Capital One, Signature Bank, Sovereign Bank) 5 Years in Prison 5 Years Supervised Release COO Mount Vernon Money Center (Victim: U.S. Bank, Webster Bank, Bank of America, NY Community Bank Corp) 2 Years in Prison 5 Years Supervised Release Owner Dukes Auto Repair (Victim: First Community Bank, U.S. Bank) 6 Months in Prison 5 Years Supervised Release Real Estate Agent (Victim: Bank of America, Wells Fargo) Time Served 2 Years Supervised Release (Victim: Capital One, Signature Bank, Sovereign Bank) 4 Years and 3 Months in Prison 5 Years Supervised Release Owner/Operator Nationwide Mortgage Concepts (Victim: Ally Bank) 2 Years in Prison 5 Years Supervised Release Owner National Embrodiery Works, Inc. (Victim: Pinnacle National Bank) 6 Months in Prison 3 Years Supervised Release Real Estate Broker (Victim: Bank of America, Wells Fargo) Time Served 1 year supervised release Former Director of Human Resources of The Psychological Center Inc. (Victim: JPMorgan, Bank of America, First Horizon Corp.) QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 DEFENDANTS WHO DEFRAUDED HOMEOWNERS SENTENCED TO PRISON MORTGAGE SCAMMERS VICTIMIZING HOMEOWNERS 80 SENTENCES TO PRISON Ped Abghari 2 years and 6 months Catalina Deleon 2 years and 6 months Thomas J. Adams 364 days (suspended) Alberto DiRoberto 5 years Daniel Al Saffar 6 months Ruby Theresa Encina 1 year Ziad Nabil Mohammed Al Saffar 1 year and 9 months Nicholas Estilow 6 years and 8 months Kristen Ayala 11 years and 3 months Mark Farhood 11 years Michael Bates 1 year Dennis Fischer 7 years Anthony Blackwell 1 year Dionysius Fiumano 16 years Crystal Buck 5 years Gregory Flahive 1 year Vernell Burris, Jr. 1 year Christopher George 20 years David Cassuto Time served, 2 years supervised release Serj Geutssoyan 4 years and 4 months Jaime Cassuto Time served, 2 years supervised release Jacob J. Cunningham 8 months Raymund Oquendo Dacanay 5 years Frederic Gladle 5 years and 1 month Christopher S. Godfrey 7 years Angel Gonzalez Time served, 3 years supervised release David Gotterup 15 years David Green Time served, 3 years supervised release Jason Green Time served, 5 years supervised release Philip Haas Time served, 3 years supervised release Justin D. Koelle 9 months Ray Kornfeld 5 years Harold E. Larson 2 years and 6 months Michelle Lefaoseu 1 year Walter Bruce Harrell 1 year and 6 months John Linderman 2 years Jonathan L. Herbert 11 years and 8 months Jonathan Lyons 1 year Mindy Holt 1 year and 6 months Lori Macakanja 6 years Najia Jalan 5 years and 10 months Aria Maleki 9 years and 4 months Joshua David Johnson 10 years and 1 month Jefferson Maniscan 10 years Roger Jones 2 years and 9 months Mehdi Moarefian 4 years and 4 months Brian M. Kelly 1 year Duy K. Nguyen 1 year Darrell Keys Time served, 3 years supervised release Dominic A. Nolan 6 months Isaak Khafizov 9 years Hamid Reza Shalviri 3 months Iris Pelayo 4 years Daniel Shiau 4 years and 10 months Isaac Joshua Perez 10 years and 10 months Howard Shmuckler 7 years and 6 months Andrew M. Phalen 1 year John D. Silva 8 months Sabrina Rafo 5 years Alan Tikal 24 years Andrea Ramirez 18 years Tamara Teresa Tikal 3 years and 9 months James Reese 364 days (suspended) Michael Trap 2 years and 6 months Robyn Reese 364 days (suspended) Roscoe Ortega Umali 18 years and 4 months Justin Romano 2 years John Vescera 1 year Sara Beth Bushore Rosengrant 1 year Glen Alan Ward 11 years Glenn Steven Rosofsky 5 years and 3 months Patthaya Wattanachinda 4 months Joshua Sanchez 12 years and 7 months Kowit Yuktanon 1 year and 6 months Jason Sant 6 years Lynn Nunes 1 year Scott Schreiber Time served, 3 years supervised release Yadira Padilla 4 years Cuong Huy King 1 year and 6 months Michael Lewis Parker 6 years DEFENDANTS WHO SCAMMED TARP OR USED TARP TO SCAM INVESTORS SENTENCED TO PRISON SCAMS USING TARP 15 SENTENCES TO PRISON Julius Blackwelder 3 years and 10 months Gordon Grigg 10 years Carla Lee Miller 8 months Michael Ramdat 1 year and 9 months David Tamman 7 years John Farahi 10 years Xue Heu 5 years and 3 months Jesus Fernando Montes 1 year and 6 months Eduardo Garcia Sabag 3 months Mark Steven Thompson 1 year and 6 months Leigh Farrington Fiske 3 years and 1 month Abraham Kirschenbaum 1 year and 6 months Thomas Dickey Price 1 year and 6 months Marvin Solis 2 years and 3 months Robert Wertheim 1 year and 6 months SIGTARP’s current investigative strategy priorities are in ongoing TARP recipients and programs, and recovering dollars where taxpayers suffered losses. 19 20 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SECT IO N 2 SIGTARP AUDITS AND RECOMMENDATIONS 22 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP BY THE NUMBERS AUDITS Major TARP Housing Programs at Risk of Fraud, Waste, and Abuse The Hardest Hit Fund (HHF) pays a The Home Affordable Modification Program (HAMP) pays mortgage servicers portion of mortgages held by unemployed or underemployed Americans. It also pays to demolish abandoned homes in challenged communities. and investors to lower interest rates for participating homeowners. $3.0 billion is left to be paid. Up to $10.34 billion is left to be paid. – Recipients include – – Recipients include – mortgage 19 state agencies 390 cities and local partners Hundreds of demolition contractors SIGTARP AUDITS HAVE IDENTIFIED $2 BILLION IN COST SAVINGS Recent Findings Including $223 million in fiscal year 2017 Open Audits Include Nevada’s HHF wasted $8.2 million while all but stopping admitting new homeowners Blight demolition costs in Flint, Michigan There are no competition requirements HHF administrative and operating expenses for demolition contracts Mortgage servicers have wrongfully terminated homeowners out of HAMP The average cost of demolitions in Michigan and Ohio have skyrocketed in the last few years Blight greening and maintenance activities SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 “SIGTARP identifies wasteful spending to help the Government recover taxpayer funds. We identify abuse and vulnerabilities that put Federal dollars at risk of fraud.” Special Inspector General Goldsmith Romero Under current TARP programs, Treasury is spending at least $4 billion each year. Last quarter, Treasury spent $1.49 billion in TARP, of which $880 million was through the Hardest Hit Fund program and $610 million was through the Making Home Affordable Program. Treasury is obligated or committed to pay up to $13 billion through 2023. As a watchdog over these dollars, SIGTARP audits ongoing TARP programs to prevent fraud, identify cost savings, wasteful spending, inefficiency and mismanagement. TARP housing programs are focused on America’s working class in towns that have not fully recovered. The Hardest Hit Fund $9.6 billion: $3 billion remains to be spent by December 31, 2021, see Table 2.1. This TARP program was scheduled to end December 2017, and is now in a ramp-up stage because of an additional $2 billion in the Consolidated Appropriations Act of 2016 and Treasury’s four-year extension. HHF originally provided TARP dollars for short-term mortgage assistance to unemployed/underemployed homeowners in 19 states (rust belt, south, sand states). In May 2013, Treasury added the Blight Elimination Program (demolishes abandoned houses) in Michigan, later expanded to 8 states (rust belt & south). In April 2015, Treasury added Down Payment Assistance Program initially in Florida, later expanded to 9 states. Recipients Unemployment Bridge: Homeowners modifying mortgages usually lowering their payments. The nature of this assistance has repeatedly changed and expanded, particularly in the last year. Currently this includes unemployment, principal reduction, second lien reduction, elderly SIGTARP’S OVERSIGHT IS VALUE ADDED TO CONGRESS • TABLE 2.1 FUTURE TARP PAYMENTS IN HHF State Alabama Arizona California Dist of Columbia Unspent 52,982,256 593,400,858 298,355,685 Georgia 167,621,393 Illinois 294,265,501 Indiana 92,966,903 Kentucky 54,782,702 Michigan 286,353,391 52,757,163 North Carolina 207,137,814 New Jersey 145,393,781 Nevada Ohio 91,071,451 222,519,708 Oregon 99,726,785 Rhode Island 38,077,863 South Carolina Tennessee Total • 11,577,801 Florida Mississippi • $102,106,344 85,715,814 103,299,294 $ 3,000,112,507 Source: Treasury, response to SIGTARP data call 4/7/2017; SIGTARP analysis of HHF Quarterly Financial Reports. • Much of SIGTARP’s audit work is at the request of Members of Congress Reports widely covered by Members of Congress and media which helps drive change Forensic audit team with the ability to deep dive to root out waste and refer potential fraud to SIGTARP special agents Cross-authority jurisdiction allows SIGTARP to audit everyone involved in TARP programs, not just Treasury, allowing for more complete findings. This includes for example, all Federal agencies, along with state agencies, city agencies, demolition contractors and subcontractors, and mortgage servicers. 23 24 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM assistance, loan modification, reinstatement, short sale, transition assistance, recast, and reverse mortgage assistance. Blight Elimination Program: 8 state agencies and their contractors, over 400 local partners (53 city/county agencies, 150 individuals, 8 for-profit companies, 138 non-profit companies, and 62 land banks), and hundreds/thousands of contractors and subcontractors (demolition contractors, asbestos removal subcontractors, waste disposal companies, dumping sites, fill dirt subcontractors, land greening, sellers of houses to be demolished, and site inspectors). Down Payment Assistance: First time homebuyers. Making Home Affordable $27.78 billion program: $6.27 billion obligated + $4.07 billion committed to be paid by September 2023. • HAMP: Lower homeowner interest rates through contracts to pay mortgage servicers to modify mortgages. Currently, there are more than 1 million people in HAMP or HAMP-related programs • RD-HAMP (Dept. of Agriculture) • HAMP-GSE (FHFA) • FHA HAMP (Federal Housing Administration) • VA-HAMP (Dept. of Veteran Affairs) • 2MP: second liens • HAFA: short sale or deed in lieu Recipients 140 mortgage servicers receive all payments, including Ocwen, Wells Fargo, JP Morgan Chase, Bank of America, Nationstar, SPS, CitiMortgage. They keep some as the servicer, send some to investors (some of which may be the servicer or other large financial institution) and apply some to the homeowner’s principal balance. SIGTARP Serves As A Watchdog To These Federal Dollars And Programs When our team of forensic auditors, in depth auditors, and evaluators find a program at risk, they get to work reviewing documents, interviewing, and analyzing. When an audit confirms a program is at risk, we look for ways to fix the problem by leveraging best practices with data analytics and trend analysis. We then issue recommendations to Treasury, which we share with Congress and the public. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 Cost Savings to the Government from SIGTARP Recommendations SIGTARP saves the Government money. SIGTARP has identified $2 billion in cost savings. Each year, Treasury spends billions of dollars on TARP housing programs, so we continue to be on watch for waste, mismanagement, inefficiency, and risk of fraud. Already this year, we identified more than $220 million in potential cost savings including up to $161 million in the more than $800 million TARPfunded blight demolition program. We recommended protections from fraudulent overcharging and non-competitive back room deals to award contracts for TARP dollars. On December 23, 2016, Treasury implemented two of SIGTARP’s 20 recommendations to limit TARP dollars to more than 400 local partners for only those demolition costs that are necessary and reasonable and to require full and open competition for these Federal dollars which will save the Government up to $161 million. On March 20, 2017, SIGTARP announced an audit into the approximately $26 million in TARP-funded blight demolition costs incurred in Flint, Michigan.i There is much more in cost savings recommended by SIGTARP that SIGTARP has not quantified, but would save costs. These recommendations have not been implemented. Key Cost-Saving Recommendations Without Specified $ Remove Nevada contractor that wasted and abused $8.2 m in HHF (Potential cost savings of millions of dollars) State agencies should determine necessary and reasonable demolition costs using independent experts, third party fair market price quotes and current and historical cost information State agencies should effectively benchmark claims against the agency’s analysis of necessary & reasonable demolition costs Prohibit state agencies from charging the Hardest Hit fund for 100% of overhead costs i This reporting period, due to resource allocation and other SIGTARP reporting, SIGTARP closed a 2015 evaluation into the outcome of certain homeowners applying for HHF. 25 26 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Key Issues and High Risks in TARP Programs SIGTARP Identified Widespread Waste and Abuse in Nevada’s Hardest Hit Fund – September 2016 Audit Report Waste and Abuse in the Hardest Hit Fund in Nevada SIGTARP SIGTARP-16-004 OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR THE TROUBLED ASSET RELIEF PROGRAM September 9, 2016 • $8.2 million in waste identified-including holiday parties, luxury office rent, employee gifts, and other wasteful expenses, even a $500 car allowance for a Mercedes Benz • At the same time, Nevada’s already low number of homeowners admitted to the Hardest Hit Fund plummeted by 94% • SIGTARP recommends firing of contractor used in HHF program and repayment of $8.2 million • The money has not been repaid and the contractor is still being paid by Treasury ONGOING AUDIT WORK Based on concerns raised by Senator Chuck Grassley, in October 2016, SIGTARP initiated an audit into the spending of $678 million of TARP funds to state agencies in HHF for administrative expenses. ONGOING AUDIT WORK Based on concerns raised by Representative Dina Titus, in October 2016, SIGTARP initiated a second audit into spending at HHF Nevada. Our exposure of waste in Nevada, and our publicly announced audits, serve to deter waste and fraud for the approximately $30 million each quarter that Treasury pays to state agencies for their expenses in administering the Hardest Hit Fund. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 SIGTARP Identified Abuse: Indiana Hardest Hit Fund Used TARP Funds to Demolish Occupied Homes – December 2015 SIGTARP identified abuse of the blight demolition program to evict people in Indiana so their homes would qualify as vacant to be eligible for TARP funds for demolition, clearing the area for a car dealership to move there. This picture is one of the homes demolished, despite the fact that Treasury’s contract with the Indiana state agency limited HHF Occupied house in Evansville, Indiana, demolished using TARP funds, photo provided to SIGTARP. to vacant and abandoned houses. Concerns over SIGTARP’s findings prompted the House Oversight Committee to schedule a hearing, which did not go forward. However, Treasury issued guidance to all state agencies that a house must be abandoned to qualify for TARP dollars, as SIGTARP recommended. SIGTARP also recommended that the Indiana state agency repay $246,490 spent on demolishing these homes. That money has not been repaid. SIGTARP Identified TARP Demolition Program at Significant Risk of Overcharging, Fraud, and Unfair Competitive Practices That Could Drive Up Costs – June 2016 SIGTARP reported that the more than $800 million demolition program is significantly vulnerable to fraud, bid rigging, other closed door contract awards, and overcharging. The report found there are no federal competition requirements or limitations that federal funds only pay for costs that are necessary and Blighted house used in PowerPoint for Evansville, Indiana, public meeting about HHF demolitions, photo provided to SIGTARP. reasonable. SIGTARP reported that most state agencies also have no competition requirements and no state agency has requirements that demolition costs be limited to necessary and reasonable costs. There are more than 400 local partners and their subcontractors receiving these Federal dollars without those protections. SIGTARP recommended that these vulnerabilities be reduced by requiring full and open competition and specific requirements to ensure full and open competition. Members of the House Committee on Oversight and Government Reform including Chairman Jason Chaffetz, Subcommittee Chairman Jim Jordan, Representative Mick Mulvaney, and Representative John J. Duncan, Jr., sent a letter to the Treasury 27 28 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Secretary expressing concerns over SIGTARP’s findings, and asking for a timeline to implement SIGTARP’s recommendations. In December 2016, Treasury implemented two of SIGTARP’s 20 recommendations to require full and open competition and limit TARP reimbursement to necessary and reasonable costs. Other SIGTARP recommendations in that audit that were not implemented are designed to 1) arm state agencies with knowledge of what demolition costs are necessary and reasonable, use that as a benchmark for claims for TARP funds; 2) implement standard federal contracting rules to ensure full and open competition, through specific competition requirements. SIGTARP Identified Inefficiencies and Poor Record Keeping in the Hardest Hit Fund – January 2017 State agencies paid by Treasury to distribute Hardest Hit Fund unemployment assistance turned down 84,965 people who earned less than $30,000, including 64,979 people who made less than $20,000. SIGTARP found that, in 12 of the 19 states—mostly in the Rust Belt and south—nearly three out of four people turned down for these Federal funds earned less than $30,000 per year, as shown in Figure 2.1. In cities where General Motors—which received $50 billion in TARP funds—or its suppliers closed plants or laid off workers, denial rates are even higher for those who made less than $30,000 per year as shown in Figure 2.2. There may be eligibility criteria that are too stringent. There may be valid reasons why these people were turned down, but it is impossible to know because SIGTARP found that state agencies’ records were non-existent, missing, or incomplete. State agencies should improve record keeping and eliminate unnecessary criteria that do not exist in other states or that do not reflect the reality of the working class in that state. Representative Michael Turner wrote a letter to the Treasury Secretary asking about implementation of SIGTARP’s recommendations saying they were practical and make sense. ONGOING AUDIT WORK Based on concerns raised by Representative John Lewis, in September 2016, SIGTARP initiated an audit to determine whether HHF has adequately served those most in need of assistance in selected Georgia counties, and to identify areas for improvement. Priority Recommendations SIGTARP’s recommendations have the power to drive improvements in program effectiveness and efficiency, and prevent fraud, waste, abuse, and mismanagement of TARP dollars and programs. Priority recommendations that remain unimplemented are as follows: SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 PRIORITY RECOMMENDATIONS Implement standard federal contract requirements that ensure full & open competition for blight demolition Establish necessary and reasonable demolition costs using independent experts, third party fair market value quotes and current/historical costs Benchmark claims against necessary and reasonable cost analysis In December 2016, Treasury implemented two SIGTARP recommendations to require full and open competition and limit TARP reimbursement to necessary and reasonable demolition costs. These changes have the potential to save up to $161 million for the federal government. However, SIGTARP has 18 other recommendations in the same audit that remain unimplemented. Without implementation of these related priority SIGTARP recommendations, this program is at risk. Treasury still can take action to mitigate these vulnerabilities to fraud and waste. SIGTARP recommended the state agency develop their own analysis of necessary and reasonable costs using independent experts, third party fair market value quotes, and current and historical costs. SIGTARP also recommended that state agencies benchmark claims against this analysis and require substantial justification for any claim that exceeds the benchmark. SIGTARP also made additional recommendations to implement standard federal requirements – requirements that ensure full and open competition. For example, prohibit requests for bids written such that only a certain small number of contractors could qualify. PRIORITY RECOMMENDATIONS Seek repayment of $8.2 million in waste from Nevada contractor Remove contractor from TARP In April 2017, Treasury recently told SIGTARP that it will seek repayment of 1% of the $8.2 million in waste identified by SIGTARP. By Treasury not seeking repayment of millions of dollars of waste SIGTARP identified, the contractor chosen by the Nevada state agency is keeping TARP dollars that it wasted and abused. Any entity that was willing to abuse Federal dollars for lavish spending on their employees exposes the program to further waste and abuse. Protecting TARP from waste and abuse requires the removal of the contractor. 29 30 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM PRIORITY RECOMMENDATIONS Eliminate unnecessary criteria that may preclude lower-income homeowners from HHF Unemployment Bridge Maintain detailed records of why each person was denied HHF Unemployment Bridge Allow homeowners facing upcoming layoffs to be eligible for HHF before becoming past-due on their mortgage These three criteria are SIGTARP’s latest recommendations from its January 2017 audit, as discussed in more detail above. PRIORITY RECOMMENDATIONS Take action to curb people canceling out of HAMP Determine extent of servicer misconduct in canceled homeowners (violation of Treasury contract) Ensure servicers properly transfer HAMP contract with transferred mortgage (violation of Treasury contract) Suspend and/or claw back Federal dollars when servicers violate Treasury’s contract With $6.27 billion obligated to be paid under Treasury contracts to pay to servicers, and another $4.07 billion committed, HAMP requires SIGTARP’s oversight. Limiting the number of homeowners canceling out of HAMP represents a cost savings to the Government. SIGTARP made a series of recommendations to curb people canceling out of HAMP, some of which Treasury implemented, and some not. For example, SIGTARP recommended that Treasury analyze to what extent servicer misconduct contributes to homeowners canceling out of HAMP. Upon a SIGTARP recommendation, Treasury now looks for servicer misconduct in its compliance reviews of larger servicers but only on a small sample size. Despite finding over and over again that several of the largest servicers have wrongfully canceled people out of HAMP in violation of Treasury’s contract, Treasury has taken limited action to only require servicers to put back into HAMP those specific wronged homeowners. Requiring servicers to conduct independent reviews and report to Treasury on all homeowners wrongly canceled out of HAMP would SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 help those homeowners, stop wasted taxpayer dollars, and lead to stronger servicer controls to prevent future contract violations. SIGTARP recommended that Treasury ensure that all servicers comply with HAMP rules by vigorously enforcing the terms of Treasury contracts including by withholding permanently TARP dollars. 31 32 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SECT IO N 3 IN THE HARDEST HIT FUND, TREASURY RECENTLY GAVE UP NEARLY 10 MILLION DOLLARS TO STATE AGENCIES AND INCREASED THE RISK OF FRAUD, WASTE AND ABUSE, RISKS THAT SHOULD BE MITIGATED QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 IN THE HARDEST HIT FUND, TREASURY RECENTLY GAVE UP NEARLY 10 MILLION DOLLARS TO STATE AGENCIES AND INCREASED THE RISK OF FRAUD, WASTE AND ABUSE, RISKS THAT SHOULD BE MITIGATED Treasury took two recent actions in the Hardest Hit Fund (HHF) that impact taxpayers who fund TARP and increase the risk of fraud, waste, and abuse in HHF’s blight demolition subprogram. First, on April 1, 2016, Treasury made the decision to give up its future right to recover nearly $10 million dollars that Treasury estimated to be returned to the Hardest Hit Fund.1 These dollars are likely to be much higher given recent trends and new HHF programs that haven’t yet gotten off the ground.2 Second, Treasury recently increased TARP dollars paid per demolished house, and expanded the program to allow TARP dollars to pay for the demolition of larger apartment buildings with five or more apartments.3 These changes increase the risk of fraud, waste, and abuse. These risks can, and should be, mitigated. SIGTARP is willing to work with Treasury to mitigate these risks. With $3 billion in TARP dollars remaining to be spent by state agencies in the Hardest Hit Fund, it is imperative that taxpayers and the program are protected from fraud, waste and abuse.4 Finally, these changes were buried in contract amendments on Treasury’s website.5i Treasury should bring greater transparency when making significant changes to programs. In April 2016, Treasury amended its contracts with state agencies to give up nearly $10 million, and possibly far more, that under the contract were to be returned to Treasury The Hardest Hit Fund is a program where the majority of TARP dollars expended to assist a homeowner are recovered if the house is sold prior to either a three, five, or 10-year period (depending on the state).ii When a homeowner receives either HHF foreclosure assistance or when HHF funds are used to demolish a blighted house, there is a forgivable loan secured by a lien placed on the property. The homeowner does not have to repay the assistance back if they stay as the owner of their home for the applicable number of years.i6 The lien is an important protection against fraud, waste, and abuse. For example, the lien protects against a homeowner, buyer, or developer profiting off of the TARP assistance in a house flip. In the past five years, state agencies have recovered $188 million from homeowners who received HHF assistance before selling their home or refinancing i In some states, the lien is forgiven each year by a percentage. For example, in a state with a five-year lien, the amount of the lien would decrease by 20% of the TARP dollars received each year. In other states, the lien stays at the full value of TARP dollars received until the end of the period. ii T hree small HHF Programs modify homeowners' mortgages with a 30-year lien forgiveness period. 35 36 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM their mortgage with a new loan, a figure that is increasing each year.7 Given its design of the program to include a lien, Treasury anticipated that dollars would be recovered from homeowners who sold their property or refinance their mortgage. In its contracts, Treasury provided that during the program these dollars would be recycled back into the program, and after the program closed, the money would be paid back to Treasury, reducing the burden on taxpayers for the cost of TARP.iii In April, 2016, Treasury amended its contracts to delete the requirement that at the close of the program, state agencies remit homeowner recoveries to Treasury, meaning that state agencies can keep these recovered dollars. In a one-page internal Treasury memorandum, using data prior to April 2016, Treasury estimated recoveries of $347.2 million. Treasury estimated $337.6 million in recoveries prior to December 2021 (the program close) that would be recycled into the program. Treasury estimated $9.6 million in recovered dollars after the program closed. Treasury decided that allowing states to retain the $9.6 million in recoveries would alleviate an administrative burden on Treasury for administrative costs after the program closed.8 Treasury’s decision to give up recoveries after the program closes did not protect taxpayers. First, the data Treasury analyzed to predict recovered dollars was dated, and has since significantly increased, and Treasury did not take into account how changes in the new round of $2 billion in funding could change recoveries. Second, Treasury did not account for the fact that certain states could have greater percentage of recoveries than others or that certain states would increase recoveries. Third, Treasury made no estimate of what post-program administrative costs would be, or took any action to mitigate post-program costs. iii Treasury’s 2010 contracts with state agencies provided that when a homeowner who had received TARP dollars in the Hardest Hit Fund sold their house prior to the expiration of the lien, the state agencies would recycle those dollars back into the program before the state agency submitted requests to Treasury for additional TARP dollars. QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 First, the data Treasury analyzed to predict recovered dollars was dated, and has since significantly increased as seen in Figure 3.1 below FIGURE 3.1 TARP DOLLARS RECOVERED AND PUT BACK INTO THE HARDEST HIT FUND (AS OF MARCH 31, 2017) $70,000,000 $63,741,512 $60,000,000 $50,000,000 $44,391,877 $39,464,760 $40,000,000 $30,000,000 $20,427,834 $20,000,000 $16,772,124 $10,000,000 $- $2,831,992 2012 2013 2014 2015 2016 Q1 2017 Soiurce:SIGTARP analysis of Treasury provided Hardest Hit Fund Quarterly Financial Reports – obtained via data call from Treasury 7/7/2017 Whereas in 2014 recoveries were $39 million, increasing only slightly to $44 million in 2015, there were even greater recoveries of $63.7 million in 2016.9 Recoveries in future years are likely to continue to increase. This is particularly true given the fact that HHF expanded with an additional $2 billion in 2016. Treasury did not take into account how changes in the new round of funding would increase post-program recoveries Under Treasury’s estimation, 54% of all recoveries have already come back.10 However, this was based on data before state agencies recently reopened programs or created new programs with the new 2016 funding of $2 billion. Estimating recoveries based on past programs does not take into account what could be greater recoveries in these new programs. For example, Treasury now allows TARP to pay up to $75,000 for the demolition of larger apartment buildings in Ohio, and could extend that to other states.11 An investor in apartment buildings might be more willing to sell the property in future years after the program closed than a homeowner trying to stay in their neighborhood. In addition, some of the newly reopened or created programs have not yet begun providing assistance, or have provided only minimal assistance, which pushes back the timeline on recoveries. 37 38 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Second, Treasury did not account for the fact that certain states could have greater percentage of recoveries than others or for recent increases in recoveries in certain states Based on trends, recoveries vary by state. Overall, HHF recoveries in California, Oregon, Illinois, North Carolina, and Florida, account for about three quarters of the full $188 million recoveries as seen in Table 3.1. TABLE 3.1 TARP DOLLARS RECOVERED AND PUT BACK INTO THE HARDEST HIT FUND (AS OF MARCH 31, 2017) TARP Dollars Recovered Program to Date TARP Dollars Recovered Past Year California $59,438,958 $19,626,683 33% Oregon $35,409,033 $6,948,054 20% State Agency Percentage of TARP Dollars Recovered in Past Year Illinois $23,711,931 $6,221,268 49% North Carolina $14,989,622 $5,594,072 42% Florida $12,087,133 $2,962,052 46% $7,280529 $2,024,509 41% Michigan Ohio $4,970,781 $1,930,148 34% New Jersey $5,639,392 $1,426,203 34% Kentucky $3,369,158 $1,426,203 42% Georgia Tennessee $3,31,991 $1,866,987 56% $3,108,847 $1,425,347 46% Arizona $2,889,427 $1,273,759 44% South Carolina $2,767,338 $2,025,005 37% Indiana $2,085,519 $1,083,288 52% Rhode Island $1,619,582 $370,940 23% Nevada $1,442,335 $199,848 14% Alabama $986,279 $248,449 25% Washington, D.C $908,809 $175,107 19% Mississippi Total $582,413 $352,318 60% $187,629,098 $66,358,290 35% Sources: SIGTARP analysis of Treasury DHardest Hit Fund Quarterly Financial Repors – obtained via data call from Treasury 7/7/2017. Recoveries are increasing; with nearly 40% of all recoveries happening within the past year – even though HHF has existed since 2010. In some states, recoveries in the past year have significantly increased. This includes Mississippi, where 60% of the recoveries were in the last year, Georgia where 56% of recoveries were in the last year, and Indiana where 52% of recoveries would have been in the last year. These increases in recoveries would have been after Treasury conducted its QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 estimate.12 In the past quarter, there has already been more than $16 million in recoveries. See Table 3.2. The increases in recoveries based off the older HHF programs, couple with new programs that have not yet started or only recently started, evidences that Treasury very likely gave up far more than $10 million. TABLE 3.2 Third, Treasury made no estimate of what post-program administrative costs would be, or took any action to mitigate those costs California Before giving up nearly $10 million in post-program recoveries for the sole purpose of offsetting administrative costs, Treasury conducted no estimate of postprogram administrative costs. Treasury also took no action to mitigate these costs. Treasury stated that there would be administrative costs because “each of the 19 participating HFAs will need to maintain staff and other infrastructure to monitor and remit such recoveries to Treasury.”13 When the owner sells or refinances the property, the lienholder is contacted by the title company or seller, limiting the monitoring required. The state agency would then receive wired funds or a check, which they could use their existing staff to provide to Treasury. The only other step would be to release the lien, which generally uses a form template filed with the county. This would not seem to be a full time job for even one state employee post-program. Treasury could further mitigate administrative costs by working to understand each state agency’s current process, and make sure that process is streamlined to minimize costs to TARP now and in the future. In addition, Treasury stated that its own Office of Financial Stability (OFS) would need to maintain staff and infrastructure to receive and process recoveries and monitor compliance. However, other Treasury staff such as in the Office of Domestic Finance (which is where OFS is housed), could receive the dollars and monitor compliance. As some weeks may not see any recoveries post-program, the amount of Treasury employee hours may not be onerous. However, the dollars recovered to Treasury sent back into the U.S. Treasury to reduce the cost of TARP to Federal taxpayers could be many more millions than what Treasury estimated, far exceeding administrative expenses. Part of Treasury’s analysis was a concern about asking state agencies to continue remitting recoveries to Treasury, while no longer paying for expenses with TARP dollars.14 Treasury could mitigate this concern by allowing states to receive a portion of recoveries, such as 10%, to be put towards administrative expenses, rather than giving up 100% of recoveries. TARP DOLLARS RECOVERED IN QUARTER ENDED MARCH 31, 2017 State Agency Oregon Administrative Expenses $4,508,073 $979,969 Illinois $4,858,434 North Carolina $1,385,279 Florida $1,437,437 Michigan $715,756 Ohio $411,072 New Jersey $258,610 Kentucky $233,676 Georgia $454,217 Tennessee $392,500 Arizona $323,284 South Carolina $309,028 Indiana $278,751 Rhode Island $67,623 Nevada $33,272 Alabama $32,935 Washington, DC $34,594 Mississippi Total $56,616 $16,771,124 Source: SIGTARP analysis of Treasury Hardest Hit Fund Quarterly Financial Reports – obtained via data call from Treasury 7/7/2017. 39 40 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 3.3 TARP DOLLARS TO BE PAID PER DEMOLITION Up to $15,000 in TARP $ Per House Mississippi Up to $25,000 in TARP $ Per House Alabama Indiana Michigan* Ohio (Single Family House) Tennessee Up to $35,000 in TARP $ Per House Illinois South Carolina* Up to $75,000 in TARP $ Per Building Ohio (Multi-Family Building) Source: Treasury, Website, “Hardest Hit Fund - Current Program Documents”, https://www.treasury.gov/initiatives/financialstability/TARP-Programs/housing/Pages/Program-Documents. aspx, accessed 7/17/2017. * Michigan and South Carolina dollars paid per demolition include single family properties with 1–4 units and multi-family properties with 4+ units but with the same cap as a single family home. RECENT TREASURY CHANGES TO THE BLIGHT DEMOLITION PROGRAM IN THE HARDEST HIT FUND THAT INCREASE THE RISK OF FRAUD, WASTE, AND ABUSE In April 2017, Treasury changed the blight demolition subprogram of the Hardest Hit Fund to permit TARP to pay for the demolition of larger apartment buildings with five or more units, and tripled the amount of TARP dollars per property from $15,000 to $75,000.15 Treasury had been increasingly allowing TARP dollars to pay for the demolition of multifamily homes, but continued to limit TARP dollars to the same cap as a single family home as seen in Table 3.3 to the left. Treasury expanded use of TARP to larger apartment buildings despite not implementing 18 of SIGTARP’s recommendations to implement standard federal contracting rules to protect against fraud, overcharging, bid rigging, and other closed-door practices Treasury’s change increases the risk of fraud, waste, and abuse, risk that should be mitigated. SIGTARP has already recommended that Treasury mitigate risk in its June 2016 audit. In that audit, SIGTARP warned that the blight demolition program is significantly vulnerable to fraud, bid rigging, other closed door contract awards, and overcharging. SIGTARP found there are no federal competition requirements or limitations that federal funds only pay for costs that are necessary and reasonable. SIGTARP reported that most state agencies also have no competition requirements and no state agency has requirements that demolition costs be limited to necessary and reasonable costs.16 There are more than 400 local partners and their subcontractors receiving these Federal dollars without those protections.17 SIGTARP recommended that these vulnerabilities be reduced by requiring full and open competition and specific requirements to ensure full and open competition.18 In December 2016, Treasury implemented only two of SIGTARP’s 20 recommendations, by requiring state agencies to implement controls for only the very basic requirements to require full and open competition and limit TARP reimbursement to necessary and reasonable costs. SIGTARP recently reported in April 2017, that SIGTARP reviewed new changes by the state agencies after SIGTARP’s audit report, and found significant inconsistencies, and that other than one state agency in South Carolina, the state agencies have not implemented the type of rigorous analysis or strong controls that SIGTARP recommended, leaving taxpayers exposed to the risk of overcharging and fraud.19 SIGTARP’s other 18 recommendations in that audit that have not been implemented are to put in place standard federal competition and antifraud rules that apply to federal grants, such as for demolition in HUD programs. These standard federal rules are designed to 1) arm state agencies with knowledge of what demolition costs are necessary and reasonable, use that as a benchmark for claims for TARP funds; 2) ensure full and QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 open competition, through specific competition requirements; and 3) prevent bidrigging, contract steering and other closed door contracting processes. Without the implementation of these recommendations, taxpayers are at risk. However, without fully implementing SIGTARP’s recommendations to protect taxpayers, Treasury has allowed for the expansion of the blight demolition program to use HHF dollars to demolish large apartment buildings rather than single family homes, and tripling the amount of TARP dollars per property. This increases the risk to taxpayers. Treasury did not identify and mitigate risk in this expanded use of TARP dollars, but should do so now The use of TARP dollars to demolish larger apartment building poses new risks of fraud, waste, and abuse that Treasury should have analyzed and taken steps to mitigate. In April 2015, SIGTARP issued an audit report finding, “Treasury has not taken a risk-based approach to identify and mitigate risks that could form barriers to the most effective use of TARP funds for demolition activity or could lead to fraud, waste, and abuse.” Treasury continued that same pattern.iv SIGTARP asked Treasury for any analysis performed by Treasury that would support the changes approved to blight demolition programs. Treasury only provided a 2013 analysis that was used to create the blight demolition program.20 Treasury has provided SIGTARP with no analysis of the risks associated with using TARP to pay for demolishing larger apartment buildings.v SIGTARP can provide Treasury recommendations to mitigate risk. Using TARP to demolish larger apartment buildings poses increased risk of fraud and other crime that can, and should be, mitigated by Treasury The demolition of larger apartment buildings poses different and increased risk of fraud, waste, and abuse than demolishing a single family home. For example, Risk of Developer Fraud: A large vacant lot in an area with large apartment buildings would often be considered attractive by a developer. However, the use of federal dollars to make that lot vacant through federally-funded demolition brings risk of developer fraud in the acquisition of the lot. There is a risk of collusion with a developer and existing property owner. There is also the risk of corruption with city or county officials in the award of contracts or rezoning for commercial use, in kickback schemes or quid-pro quo arrangements. Risk of Unfair Competition such as Bid-Rigging or Collusion: There will be a limited pool of demolition companies with capacity to demolish larger apartments or housing complexes. Local contractors may not have the capacity to bid, opening it up iv S ee SIGTARP, “Treasury Should Do Much More to Increase the Effectiveness of the TARP Hardest Hit Fund Blight Elimination Program,” April 21, 2015. v Even Treasury’s 2013 analysis only focuses on how the demolition of residential houses will increase home values within a 200-foot radius. Treasury apparently has no analysis of the increase in home values or stabilizing neighborhoods around large apartment buildings, which is required to use TARP dollars. 41 42 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM to out-of-state contractors. Larger contracts, more Federal money and a smaller competitive pool, increase the risk of criminal unfair competition. Risk of Fraud: The risk of overcharging and contract fraud grows exponentially as the amount of TARP dollars grows. Larger monetary contracts bring greater opportunity for fraud. This type of fraud involving larger properties has already taken place in other blight demolition programs, like the Department of Housing and Urban Development’s (“HUD”) Neighborhood Stabilization Program (“NSP”), a pattern that could be repeated in HHF. For example, HUD was the victim of fraud involving contract steering with respect to the demolition of a larger commercial property. In 2012, the supervisor of a town in the Detroit suburbs was sentenced to three years in prison for accepting bribes from a company seeking to receive NSP funds for demolition and asbestos abatement of an abandoned theater. The township supervisor attempted to steer the contract to the company providing the bribe. After unsuccessfully attempting to steer the contract, the township supervisor asked the winning bidder to provide him with cash payments in exchange for the supervisor’s approval of a change order that fraudulently inflated the cost for the asbestos abatement.21 In another example, in 2017, an Indiana building commissioner was indicted for corruption. He is charged with using sham bidding practices and submitting fraudulent invoices to steer work to his companies and then bill the city for work that was either performed at inflated prices or for work that was never performed.22 While these types of fraud can exist in any contract award, the stakes increase as the dollar amount of the contract increases. These cases are just some basic examples of the type of fraud, waste, and abuse associated with expending blight demolition programs to larger demolition projects. These are the types of risk that Treasury should analyze. The extent of this increased risk grows each time Treasury expands the program. Although right now, Treasury has only approved the demolition of large apartment buildings for one state, Treasury has historically expanded the blight demolition program, as shown in Figure 3.2. QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 FIGURE 3.2 INCREASE OF TARP DOLLARS June 2013 August 2013 December 2013 Michigan Ohio Michigan Indiana Ohio Michigan Illinois Indiana Ohio Michigan $160 Million $235 Million $237 Million $100 Million April 2014 July 2014 September 2014 September 2015 Sep. 2015 – Dec. 2015 Alabama South Carolina Illinois Ohio Indiana Michigan Alabama South Carolina Illinois Ohio Indiana Michigan Tennessee South Carolina Alabama Illinois Indiana Funding Increases Michigan Ohio Tennessee Alabama Illinois South Carolina Indiana Funding Increases Michigan Ohio $272 Million $297 Million $384 Million January 2016–June 2016 Indiana South Carolina Funding Increases Alabama Michigan Ohio Tennessee August 2013 Mississippi Tennessee Alabama South Carolina Illinois Indiana Michigan Ohio December 2013 Mississippi Tennessee Alabama Illinois Indiana Michigan Ohio Funding Increases South Carolina $791 Million $811 Million $806 Million $430 Million Sources: Treasury, Website, “Hardest Hit Fund - Current Program Documents”, https://www.treasury.gov/initiatives/financial-stability/ TARP-Programs/housing/Pages/Program-Documents.aspx, accessed 7/17/2017; Treasury, Website, “Hardest Hit Fund - Additional Program Information”, https://www.treasury.gov/initiatives/financial-stability/TARP-Programs/housing/hhf/Pages/Archival-information. aspx?Program=Hardest+Hit+Fund, accessed 7/17/2017 Treasury should take steps to mitigate the increased risk of fraud, waste and abuse with demolition of the larger apartment buildings and/or housing complexes. At a minimum, Treasury should implement the remaining 18 SIGTARP recommendations in the June 2016 audit designed to prevent fraud, waste, abuse, and overcharging, and follow up on ensuring that state agencies implement rigorous analysis and controls. However, those recommendations were the basic recommendations related to smaller residential houses, not large apartment complexes. Treasury will need to conduct an analysis of risks and take steps to mitigate those risks. SIGTARP is willing to work with Treasury to develop a series of recommendations for controls and processes that mitigate risk to taxpayers. Treasury Should Engage in Greater Transparency When Making Significant Program Changes Finally, each of these program changes were buried in contract amendments posted on Treasury’s website, despite the fact that they have real and significant consequences for taxpayers.23 Whenever Treasury made changes to the HAMP program, they issued a release, but not so in HHF. This limits oversight and transparency, and should be remedied. Significant program changes require transparency to protect taxpayers. 43 44 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SECT IO N 4 SIGTARP’S OVERSIGHT BY TARP PROGRAM 46 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 SIGTARP’S OVERSIGHT OVER THE BANK BAILOUT SIGTARP conducts oversight over the bank bailout through investigations. Through the Capital Purchase Program Treasury invested $204.9 billion in 707 banks (or other financial institutions) and invested in 84 banks or credit unions through the Community Development Capital Initiative.24 SIGTARP INVESTIGATIONS RELATED TO TARP BANKS SIGTARP’s investigations prioritize bankers in banks where Treasury still holds TARP securities or banks where taxpayers (through Treasury) suffered a loss in TARP, or banks where SIGTARP found egregious crime. Treasury suffered a loss on the TARP investments in more than a third banks that received TARP funds. For example, in June 2017, two bank officers from Gulfsouth Bank, who SIGTARP arrested, were indicted by the Department of Justice in December 2016, and were sentenced to prison. When Gulfsouth Bank failed, taxpayers (through Treasury) lost the entire $7.5 million TARP investment. President Anthony Atkins was sentenced to five years and three months in prison, and Vice President Samuel Cobb was sentenced to three months in prison. Five co-conspirators have been convicted in the case. In April, 2017, Lamar Cox, the former Chief Operating Officer and director of Tennessee Commerce Bank was convicted for causing the bank to make a false statement to the FDIC concealing the true condition of the bank.i When TCB failed, taxpayers (through Treasury) lost the entire $30 million TARP investment. iC riminal charges contain allegations that a defendant has committed a crime. Every defendant is presumed innocent unless and until proven guilty. 47 48 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM RESULTS OF SIGTARP’S BANK INVESTIGATIONS BANKERS 97 INDICTED 78 CONVICTED* 51 SENTENCED** TO PRISON As of June 30, 2017. *Includes one reversed on appeal and one vacated due to cooperation. **Includes one reversed on appeal. BANKER’S CO-CONSPIRATORS 90 INDICTED 60 CONVICTED 43 SENTENCED TO PRISON BORROWERS DEFRAUDING BANKS 52 INDICTED 40 CONVICTED 27 SENTENCED TO PRISON SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 SIGTARP Investigations of Banks or Credit Unions Where Treasury Holds TARP Securities As of June 30, 2017, Treasury holds securities in 43 banks. This includes $158 million in outstanding TARP principal as well as warrants that even if valued at $1 a share (the face value) is $6.5 million. As shown in Table 4.1. SIGTARP’s investigations have resulted in criminal prosecutions in 7 of these banks. TABLE 4.1 TREASURY HOLDINGS OF TARP SECURITIES IN BANKS, AS OF 6/29/2017 Program Capital Purchase Program (CPP) Bank Outstanding Principal Investment One Financial Corporation $17,300,000 $10,478,262 One United Bank $12,063,000 $6,544,178 Cecil Bancorp, Inc. $11,560,000 $523,076 SIGTARP Missed Investigation Dividends $5,837,800 Harbor Bankshares Corporation $6,800,000 Broadway Financial Corporation $5,338,628 Pinnacle Bank Holding Company, Inc. $4,389,000 $2,200,800 Grand Mountain Bancshares, Inc. $3,076,000 $1,673,120 St. Johns Bancshares, Inc. $3,000,000 First Bancorp (PR) $3,128,000 ✓ ✓ ✓ $1,285,900 $75,763 Pacific International Bancorp / BBCN Bancorp, Inc. $20,087 $4,017,350 Porter Bancorp, Inc.(PBI) Louisville, Ky $330,561 $6,737,500 Royal Bancshares Of Pennsylvania, Inc. $1,368,041 $7,601,750 $556,976 $1,754,475 Severn Bancorp, Inc. ✓ $2,215,820 Village Bank And Trust Financial Corp. $31,189 Wilmington Trust Corporation / M&T Bank Corporation $95,440 CPP Total ✓ ✓ Hampton Roads Bankshares, Inc. Synovus Financial Corp. Community Development Capital Initiative (CDCI) Warrants Remaining $63,526,628 Carver Bancorp, Inc $18,980,000 First American International Corp. $17,000,000 Mission Valley Bancorp $10,336,000 IBC Bancorp, Inc. $8,086,000 Fairfax County Federal Credit Union $8,044,000 Citizens Bancshares Corporation $7,462,000 Hope Federal Credit Union $4,520,000 Community Bank of the Bay $4,060,000 Carter Federal Credit Union $3,800,000 Cooperative Center Federal Credit Union $2,799,000 $6,502,853 $2,026,475 ✓ $51,999,709 7 $20,300 Continued on next page 49 50 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TREASURY HOLDINGS OF TARP SECURITIES IN BANKS, AS OF 6/29/2017 ($ MILLIONS) Institution Community Development Capital Initiative (CDCI) TARP Investment Outstanding Investment Tri-State Bank of Memphis $2,795,000 Community First Guam Federal Credit Union $2,650,000 Opportunities Credit Union $1,091,000 D.C. Federal Credit Union $500,000 Tulane-Loyola Federal Credit Union $424,000 Northeast Community Federal Credit Union $350,000 North Side Community Federal Credit Union $325,000 Neighborhood Trust Federal Credit Union $283,000 Buffalo Cooperative Federal Credit Union $145,000 Vigo County Federal Credit Union $102,450 Episcopal Community Federal Credit Union $100,000 Hill District Federal Credit Union $100,000 Liberty County Teachers Federal Credit Union $87,000 Renaissance Community Development Credit Union $31,000 Union Baptist Church Federal Credit Union $10,000 East End Baptist Tabernacle Federal Credit Union $7,000 CDCI Total TOTAL BANKS Warrants Remaining (CONTINUED) Missed SIGTARP Dividends Investigation $167,700 $94,087,450 — $188,000 0 $157,614,078 $6,502,853 $52,187,709 7 Sources: Treasury, Transactions Report, 6/29/2017; Treasury, Dividends and Interest Report, June 2017. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 For exampleii: Wilmington Trust: Following a SIGTARP investigation, on January 6, 2016, TARP recipient Wilmington Trust Corporation was indicted, charged with concealing from the Federal Reserve, the Securities and Exchange Commission (SEC) and the investing public the total quantity of past due loans on its books from October 2009 through November 2010. Four senior bank officers were indicted in 2015, President Robert V.A. Harra, CFO David Gibson, CCO William North, and Controller Kevyn Rakowski. According to the indictment, Wilmington Trust, through the actions of defendants Harra, Gibson, North, and Rakowski, concealed the truth about the health of its loan portfolio from the SEC, the investing public and from Wilmington Trust’s regulators. During the course of the alleged conspiracy, in February 2010, Wilmington Trust raised approximately $273.9 million through a public stock offering. In November 2010, Wilmington Trust announced an agreement to be acquired by M&T Bank at a price of $3.84 per share, a discount of approximately 46% from the bank’s share price the prior trading day, and approximately $9.41 per share less than at the time of Wilmington Trust’s capital raise in February 2010. The decline in price from February represented a loss of $204 million in total market value of the shares bought during the capital raise.25 Three Wilmington Trust bank officers have already been convicted of crimes including Vice President Joseph Terranova, Delaware Market Officer Brian Bailey, and Loan Officer Pete Hayes. Co-conspirator Dover real estate developer Michael Zimmerman was also indicted.26 Two co-conspirators were sentenced to prison. James Ladio, the former CEO of MidCoast Community Bank was sentenced to two years in prison and ordered to pay $700,000 restitution. Salvatore Leone was sentenced to one year and one day in prison and ordered to pay $784,568. Saigon National Bank: Saigon National Bank exited TARP, this quarter. In December 2015, SIGTARP agents, with other Federal law enforcement authorities, arrested 15 defendants (and charged 20 defendants across three indictments) in Operation “Phantom Bank,” a series of alleged money laundering schemes that involved international narcotics trafficking and money laundering; some through Saigon National Bank.iii A total of 25 defendants have been indicted. One of the indictments—a 16 defendant, 109 page racketeering indictment—charged six individuals with violating the Federal Racketeer-Influenced and Corrupt Organizations Act by playing key roles in a series of schemes to launder drug proceeds, allegedly orchestrated by former bank CEO and President Tu Chau “Bill” Lu while the bank the was in TARP. iiAn indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty. iii A n indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty. 51 52 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM The RICO count alleges that Lu and 5 other defendants were members of a criminal organization that was involved in narcotics trafficking and international money laundering in countries that included the United States, China, Cambodia, Liechtenstein, Mexico, and Switzerland. The indictment alleges that Lu used his “insider knowledge, position as an official at Saigon National Bank, and network of connections to promote and facilitate money laundering transactions involving members and associates of the enterprise.” According to the indictment, several members of the organization engaged in separate money laundering schemes, but “all working with, through, or at the instigation of defendant Lu.” In one scheme, in the indictment it is alleged that an undercover informant delivered cash represented to be drug proceeds to defendants, who arranged for the cash to be converted to cashier’s checks made out to a company the informant allegedly owned. The indictment also alleges the delivery of cash from the informant, and that money was allegedly converted into cashier’s checks. As part of the racketeering enterprise, Lu and others named in the RICO count allegedly floated a plan in which the informant and his boss (an undercover law enforcement officer) would purchase a controlling interest in Saigon National Bank so they could have a financial institution which could easily facilitate money laundering operations. In another aspect of the RICO conspiracy, Lu allegedly played a critical role in introducing to the informant, and other RICO defendants, operatives from a drug cartel who wanted to launder millions of dollars every month. According to the indictment, Lu also had conversations with cartel operatives about purchasing Saigon National Bank, and one of the operatives said the cartel had already invested $1 million in the bank. The indictment details money laundering transactions involving a total of $3.75 million. Since the arrests in December 2015, three additional defendants were charged with money laundering. Saigon National Bank was one of 12 TARP banks to reject Treasury’s request to send an observer to the bank’s board meetings. One Financial Corp: Following a SIGTARP investigation, DOJ filed a False Claims Act suit and a forfeiture action, alleging that the late Layton P. Stuart, former CEO and President of One Financial Corp., in Little Rock, Arkansas, obtained $17.3 million in TARP funds under false pretenses and diverted some of those funds for personal use including the purchase of luxury vehicles for his wife and children. Within two weeks of receiving TARP funds, Stuart diverted $2.185 million into his personal accounts. On September 30, 2015, CEO Stuart’s estate paid the Government $4 million and $6.9 million to One Financial’s subsidiary One Bank. In January 2016, the Government won a $47 million default judgment against One Financial. The luxury vehicles have been seized and are pictured in Section 1 of this report. In an unrelated scheme regarding a bank loan to borrower Alberto Solaroli, following a SIGTARP investigation, Senior Executive Vice President Gary Rickenbach was convicted, and sentenced to probation in December 2016 and on March 2, 2016, Solaroli was sentenced to one year in prison and required to pay $120,000 in restitution. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 Broadway Bank: Following a SIGTARP investigation, on October 26, 2016, Broadway Bank Loan Officer Paul Ryan was sentenced to 18 months in prison. The bank, according to a L.A. Times story, “had long provided loans to local houses of worship, but in 2007, with Ryan’s help, it started lending to churches across the country.” Many of those loans defaulted, causing at least $5 million in loses. Ryan abused his position of trust and caused bank losses by using inflated financial information for borrowers in loan applications. In this mortgage scheme aimed at predominately African-American churches, he demanded more than $350,000 in bribes from brokers. One of the brokers who paid kickbacks—Chester Peggese— was sentenced in February 2016 to one year and one day in prison and was ordered to pay $4.2 million to the bank. When investigators closed in, Ryan tried to cover up his crimes by telling a co-conspirator to lie on his behalf. Bank CEO WayneKent Bradshaw reportedly told the L.A. Times about the church loans, “It was by far the major basis for problems at the institution. It was a big and bad operation. Broadway had a large church portfolio, and it fell apart. We found out it was the making of a rogue lender.” With the bank unable to repay TARP, in 2013, Treasury agreed to swap its debt for Broadway stock and remains a large shareholder in the bank. Porter Bancorp (PBI): Following a SIGTARP investigation, on May 5, 2016, Joseph Tobin loan officer at TARP bank Porter Bancorp was charged along with bank borrowers Daniel Sexton, Jonathan Williams, and Sheila Flynn for a scheme to defraud PBI and other banks. The scheme allegedly resulted in PBI Bank funding millions in loans based on false information. After pleading guilty, on June 19, 2017, Daniel Sexton was sentenced to nine years and one month in prison. Treasury took a loss of $31.5 million on the TARP investment along with 13 missed dividend payments totaling $6,737,500. Treasury continues to hold warrants in the bank. Harbor Bank: Following a SIGTARP investigation, Harbor Bank employee Rodney Dunn and co-conspirator Darryl Clements and David Odom were convicted in 2016 and 2017 for defrauding the bank to secure $13 million in financing for a movie. In April 2017, Darryl Clements was sentenced to one year and six months in prison. SIGTARP Investigations Related to Failed or Bankrupt TARP Banks-Full or Near Full TARP Loss SIGTARP investigations have resulted in criminal prosecutions related to 15 of 34 failed TARP banks. For the 34 TARP banks that failed, as shown in Table 4.2, Treasury suffered a full loss of the whole TARP investment or Treasury received a small amount in the liquidation of the failed bank. Treasury also suffered losses of unpaid TARP dividends owed by banks that failed. 53 54 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.2 BANKRUPT OR WITH FAILED SUBSIDIARY TARP BANKS, AS OF 6/30/2017 ($ MILLIONS) Company CIT Group Inc., New York, NY TARP Loss SIGTARP Investigation 2,330.0 UCBH Holdings Inc., San Francisco, CA 298.7 ✓ Anchor BanCorp Wisconsin Inc. 110.0 ✓ Midwest Banc Holdings, Inc., Melrose Park, IL 89.4 Integra Bank Corporation, Evansville, IN 83.6 First Place Financial Corporation 72.9 Superior Bancorp, Inc., Birmingham, AL 69.0 ✓ Tennessee Commerce Bancorp, Inc., Franklin, TN 30.0 ✓ Princeton National Bancorp 25.1 ✓ Rogers Bancshares, Inc. 25.0 TCB Holding Company 11.7 Citizens Bancorp, Nevada City, CA Cecil Bancorp, Inc. ✓ 10.4 ✓ 11.6* ✓ Premier Bank Holding Company 9.5 Sonoma Valley Bancorp, Sonoma, CA 8.7 Syringa Bancorp 8.0 GulfSouth Private Bank 7.5 Western Community Bancshares, Inc., Palm Desert, CA 7.3 Idaho Bancorp, Boise, ID 6.9 Pierce County Bancorp, Tacoma, WA 6.8 ✓ Premier Bancorp, Inc.,Wilmette, IL 6.8 ✓ Rising Sun Bancorp, Rising Sun, MD 6.0 FPB Bancorp, Port Saint Lucie, FL 5.8 Legacy Bancorp, Inc., Milwaukee, WI 5.5 One Georgia Bank, Atlanta, GA 5.5 Blue River Bancshares, Inc., Shelbyville, IN 5.0 Pacific Coast National Bancorp, San Clemente, CA 4.1 CB Holding Corp., Aledo, IL 4.1 ✓ Investors Financial Corporation of Pettis County, Inc. 4.0 ✓ Tifton Banking Company, Tifton, GA 3.8 ✓ ✓ ✓ Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 BANKRUPT OR WITH FAILED SUBSIDIARY TARP BANKS, AS OF 6/30/2017 ($ MILLIONS) (CONTINUED) Company Gold Canyon Bank Fort Lee Federal Savings Bank Indiana Bank Corp. Gregg Bancshares, Inc. Total TARP Loss SIGTARP Investigation 1.6 $1.3 1.3 0.9 $3,271.0 15 Notes: Numbers may not total due to rounding. *Cecil Bancorp, Inc. filed for bankruptcy on June 30, 2017. Sources: Treasury, Transactions Report, 6/29/2017. SIGTARP investigations led to criminal charges against bank officials in 12 failed/bankrupt TARP banks (11 CPP banks and 1 CDCI bank) and against borrowers who defrauded 8 TARP banks that later failed. Also as a result of SIGTARP investigations, the SEC has brought civil securities fraud charges related to failed TARP banks. Key investigations include: UCBH Holdings Inc./United Commercial Bank, San Francisco, California: Following a SIGTARP investigation, United Commercial Bank Holdings, Inc. (“UCBH”) COO and Chief Credit Officer Ebrahim Shabudin was sentenced to 8 years and 1 month in prison. Former Senior Vice President, Thomas Yu was convicted, and sentenced to probation on DOJ’s recommendation in August 2016. He testified at trial against Shabudin. CFO Craig On was convicted and awaits sentencing. DOJ deferred prosecution of two other bank officers. Both testified at trial. UCBH was the 9th largest bank to fail since 2008 and Treasury took a nearly $300 million loss on its TARP investment in UCBH. From 2004 to 2007, United Commercial Bank began aggressively expanding, nearly doubling its loans, with a goal to be a $10 billion bank so that it could become a bank in China. During the crisis, in an attempt to have the bank appear to “break even,” COO Shabudin and co-conspirators manipulated the bank’s books and records, and issued false press releases, filings with examiners, and false financial statements. He fraudulently delayed downgrading the risk ratings of loans. He hid that the inventory of electronics that served as collateral for a major loan turned out to be fake even though bank officials found a warehouse of empty boxes. He hid that other loans had real property as collateral that had significantly declined in value. Then U.S. Attorney Melinda Haag, the prosecutor on the case at the time, said, “UCB is one of the largest criminal prosecutions brought by the U.S. Department of Justice of wrongdoing by bank officers arising out of the 2008 financial crisis.” Sonoma Valley Bancorp, Sonoma, California: As a result of a SIGTARP investigation, on March 31, 2014, Sean Cutting, the former bank President and CEO; Brian Melland, bank Senior Vice President; bank borrower Bijan Madjlessi (now deceased) and David Lonich (attorney for Madjlessi), and in a recent 55 56 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM indictment in March 2017, were charged for their roles in an alleged bank fraud scheme. From approximately 2009 to 2012, Cutting and Melland are alleged to have defrauded the bank by loaning $9.5 million to a straw purchaser, concealing that Madjlessi and his attorney Lonich were the beneficiaries. The defendants allegedly used the proceeds of the loan to purchase from the FDIC the rights to a $30 million IndyMac Bank condominium construction loan which Madjlessi had defaulted. Premier Bank, Wilmette, Illinois: On July 10, 2013, SIGTARP federal agents participated in the arrest of all four defendants, who were charged with a massive hidden six-year bank fraud conspiracy and criminal enterprise that led to the collapse of the bank. The indictment alleges that the defendants hid the poor financial condition of Premier Bank from regulators. It is alleged that Zulfikar Esmail engaged in a criminal shakedown scheme. It is also alleged that Esmail ordered construction and improvements to his home and rental properties, including construction of an underground tunnel at his home, and directed the contractor to prepare invoices that fraudulently showed the work was done at the bank in order to bill the bank for the work. By late 2008, when the bank was near failure, the bank applied for and received the first of two payments from TARP in order to further the criminal scheme.27 On November 1, 2016, Zulfikar Esmail, the bank’s Chairman of the Board, was sentenced to five years in prison. His wife, Shamim Esmail, who was the bank’s general counsel and director, was sentenced to probation.28 The scheme defrauded Treasury out of $6.784 million in TARP funds lost when the bank failed, in addition to $64.1 million estimated cost to the FDIC due to the bank’s failure.29,30 Board members Robert McCarty and William Brannin were indicted and face trial. SIGTARP’s investigation also resulted in the indictment of Angelica Demetropolis, the former bank President of Premier Bank in October 2013 for allegedly filing or causing to be filed false and misleading financial information with the FDIC to make past due loans appear current. Demetropolis allegedly instructed the destruction of documents two weeks before the bank closed. The indictment alleges that in order to obtain $6.784 million in TARP funds, Demetropolis and others caused the bank to submit documents that materially misrepresented the financial condition of the bank to Treasury to exchange TARP securities. Demetropolis fled the county and currently awaits extradition. Conviction after jury trial of Premier Bank Chairman Zufikar Esmail for Defrauding TARP Recipient First Midwest Bank: On December 15, 2015, after a six-day trial, a jury found Zulifikar Esmail and Shamim Esmail guilty of defrauding another TARP bank, First Midwest Bank in an $8 million loan. On March 30, 2016, the court entered a judgment notwithstanding the jury’s guilty verdict for Shamim Esmail. Zulfikar Esmail was sentenced to two years of probation. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 Pierce County Bancorp, Tacoma, Washington: Following a SIGTARP investigation, on January 28, 2013, Shawn Portmann, former Senior Vice President and Loan Officer at Pierce Commercial Bank was sentenced to 10 years in prison for a mortgage fraud scheme that resulted in the collapse of the bank. Loan underwriter Jeanette Salsi was sentenced to 7 months in prison, personal assistant Lorraine Barney was sentenced to two months in prison, and Pierce Commercial Vice President and Residential Lending Manager Sonja Lightfoot was sentenced to one month in prison. On January 26, 2017, five additional employees at the mortgage subsidiary were indicted. Since then, four have pled guilty. Portmann falsified information about the borrowers’ qualifications as well as their intention to reside in the homes being financed. For more than 300 loans, more than half the loans defaulted or caused bank losses. Portman was compensated for each loan’s total value. Pierce Commercial Bank received $6.8 million in TARP funds in January 2009, all of which was lost when the bank failed. Tifton Banking Co., Tifton, Georgia: Following a SIGTARP investigation, bank CEO Pat Hall was sentenced to 7 years in prison for concealing past-due loans. Hall obtained $3.8 million in TARP to fill holes in the bank’s books caused by his fraud, all of which was lost when the bank failed. Superior Bancorp, Inc., Birmingham, Alabama: On January 13, 2016, 11 former high-ranking executives and board members at TARP recipient, Superior Bancorp, Inc., were charged by the SEC with defrauding shareholders in connection with various schemes to conceal the extent of loan losses. In an unrelated scheme, as a result of a SIGTARP investigation, Superior Bank branch manager Phillip Owen was sentenced to six months in prison for conspiring to commit bank fraud. Jason Maurice Robinson, Phillip Owen’s co-conspirator, was sentenced to six months in prison. Superior Bank failed resulting in the loss of the $69 million in TARP. Anchor BanCorp Wisconsin, Inc., Madison, Wisconsin: Following a SIGTARP investigation, on June 16, 2015, bank officer David Weimert, was sentenced to 18 months in prison after a jury trial for a fraud scheme. The Seventh Circuit reversed his conviction on appeal. SIGTARP Investigations Related to TARP Banks Where Treasury Suffered a Partial Loss on TARP Only about half of TARP banks repaid TARP in full. For the remaining banks, Treasury wrote off some amount of loss on the TARP investment from sale (236 banks) or a loss in a restructuring, exchange or other write-off (31 banks).31 SIGTARP also investigates crime and civil fraud in banks where Treasury took a partial loss. Recent examples include: 57 58 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Wilshire Bank: On January 13, 2016, Ataollah “John” Aminpour, former Chief Marketing Officer of Mirae Bank, was indicted for a $150 million loan fraud scheme that contributed to the failure of Mirae Bank and caused $33 million in losses to TARP recipient, Wilshire Bank, which acquired Mirae. SIGTARP’s investigation, revealed that, from 2005 through 2009, Aminpour allegedly created $150 million in inflated loans to gas stations and car washes, skimmed money off the top, and generated over a million dollars in commissions. Aminpour allegedly concealed the true loan amounts from the bank, arranged for fake down payments and encouraged some borrowers to stop making payments so he could purchase those distressed loans at a discount. Prior to its acquisition of Mirae in 2009, Wilshire received $62 million in TARP funds. Treasury suffered a loss of more than $3.5 million. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 SIGTARP’S OVERSIGHT OVER TRADING IN MORTGAGE-BACKED SECURITIES Treasury’s original TARP proposal presented to Congress was that the Government purchase toxic assets (mortgage backed securities) held by banks. SIGTARP conducts oversight over mortgage backed securities related to TARP in two ways: (1) SIGTARP investigations over the Public Private Investment Program, a TARP program known as “PPIP”, that purchased and sold mortgage backed securities using TARP funds through nine investment firms to unlock frozen credit markets; and (2) SIGTARP investigations of the largest TARP institutions in the business of packaging and selling residential mortgage backed securities (RMBS) where taxpayers suffered losses when those securities traded through PPIP. SIGTARP Investigations into TARP Institutions for Misrepresentations to RMBS Investors SIGTARP investigated the largest TARP-recipient institutions for misrepresentations in the packaging, securitization, marketing, sale, and issuance of RMBS. The RMBS at issue also traded through the PPIP program. As a result of these investigations, DOJ brought actions under the Financial Institutions Reform, Recovery and Enforcement Act (“FIRREA”), which authorizes the Federal government to impose civil remedies against financial institutions that commit mail and wire fraud. Taxpayers suffered losses when the securities traded through PPIP.33 Most recent cases include: In April 2016, DOJ brought an enforcement action against Goldman Sachs (“Goldman”) for fraudulent representations to investors that mortgage loans that went into RMBS met the loan originator’s underwriting guidelines. However, Goldman admits that from its sampling, it knew that significant percentages of the loans reviewed in due diligence did not conform to those investor representations. Some of the securities traded at a loss through TARP’s PPIP. Goldman admitted to the misconduct, paid a $2.385 billion civil penalty, $1.8 billion relief in homeowner relief, and $1.75 billion to National Credit Union Administration, various states and Federal Home Loan Banks.32 59 60 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM In February 2016, DOJ brought an enforcement action against Morgan Stanley for misleading investors about the subprime mortgage loans underlying the RMBS it sold. Some of the securities traded at a loss through TARP’s PPIP. Morgan Stanley admitted to the misconduct, paid $2.6 billion penalty, $225 million for credit union purchasers of RMBS, $1.25 billion for RMBS purchases by Fannie Mae and Freddie Mac, and $86.95 million to the FDIC for purchases of RMBS by failed banks.34 Ally Financial (formerly GMAC): In November 2016, DOJ brought an enforcement action against Ally resulting from SIGTARP’s investigation into Ally’s packaging, securitizing, marketing, selling, and issuing subprime RMBS. Ally paid $52 million and discontinued operations of its broker-dealer Ally Securities, LLC, which was the lead underwriter on the subprime RMBS that we investigated. Ally received $17.2 billion in TARP funds. Treasury wrote-off a $2.47 billion loss on the principal TARP investment. These investors included taxpayers when some of the securities traded at a loss through TARP’s PPIP. SIGTARP Investigation of Wall Street Traders Buying and Selling to PPIP Managers SIGTARP investigates Wall Street traders that traded through PPIP or were TARP recipients. SIGTARP was the first to bring these type of securities cases. Recent cases include: • Jefferies trader Jesse Litvak: Following a SIGTARP investigation after a three week trial in 2014, Jefferies trader Jesse Litvak was convicted of securities fraud, TARP fraud and making false statements to the Federal government, for defrauding customers trading in RMBS, including through the PPIP program. The court sentenced him to two years in prison.35 On appeal, the Second Circuit upheld the securities fraud conviction, reversed on the TARP fraud conviction, and remanded to the lower court to hold a new trial. After a second trial in January 2017, the jury convicted Litvak of securities fraud. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 • RBS Securities trader Matthew Katke: Following a SIGTARP investigation, in March 2015, Matthew Katke, managing director at RBS Securities, Inc. (“RBS”) pled guilty to a multimillion dollar securities fraud scheme. Between 2008 and 2013, Katke admitted that he and others conspiring to increase RBS’s profits on collateral loan obligations bond trades at the expense of customers. In certain transactions, Katke misrepresented the seller’s asking price to the buyer (or vice versa), keeping the difference. In other transactions, Katke misrepresented to the buyer that bonds held in RBS’s inventory were being sold by a fictitious third-party, which allowed Katke to charge an extra commission. The multi-million dollar securities fraud had at least 20 customers who were victims—including TARP recipients.36 • RBS Securities supervisor Adam Siegel: Following a SIGTARP investigation, in December 2015, Adam Siegel, Matthew Katke’s boss and head mortgage backed securities trader, pled guilty to a multimillion dollar securities fraud scheme. Between 2008 and 2014, Siegel admitted that he and others conspired to increase RBS’s profits on trades at the expense of customers. In certain transactions, Sigel misrepresent the seller’s asking price to the buyer (or vice versa), keeping the difference. In other transactions, Siegel misrepresented to the buyer that bonds held in RBS’s inventory were being offered for sale by a fictitious third-party seller, which allowed RBS to charge the buyer an extra, unearned commission. The multi-million dollar securities fraud had at least 35 customers who were victims, including TARP recipients.37 • Nomura Securities traders Ross Shapiro, Michael Gramins, and Tyler Peters: Following a SIGTARP investigation, in September 2015, three Nomura Securities International (“Nomura”) RMBS traders, Ross Shapiro, Michael Gramins, and Tyler Peters, who formerly worked at Lehman Brothers, were indicted for fraud. The traders allegedly conspired to overcharge their customers, which included an investment firm that was managing a PPIP fund. As alleged in the indictment, Shapiro, Gramins, and Peters fraudulently inflated the purchase price at which Nomura could buy a RMBS bond to induce their victim-customers to pay a higher price for the bond, and fraudulently deflated the price at which Nomura could sell a RMBS bond to induce their victim-customers to sell bonds at cheaper prices, each causing Nomura and the three defendants to profit illegally. The defendants are also alleged to have created fictitious third parties in an effort to increase their profits.38 In may, 2017, a federal jury found Michael Gramins guilty of one count of conspiracy to commit security and wire fraud. • Cantor Fitzgerald Trader David Demos: Following a SIGTARP investigation, on December 7, 2016, Cantor Fitzgerald Managing Director David Demos was charged in an alleged scheme to overcharge customers trading in RMBS, including through the PPIP program. Demos allegedly fraudulently inflated the purchase price at which Cantor Fitzgerald could buy a RMBS bond to induce their victimcustomers to pay a higher price for the bond, and fraudulently deflated the price 61 62 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM at which Cantor Fitzgerald could sell a RMBS bond to induce their victimcustomers to sell bonds at cheaper prices, causing losses to victims. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 SIGTARP’S OVERSIGHT OF THE MAKING HOME AFFORDABLE PROGRAM SIGTARP conducts audits and investigations of the Making Home Affordable program (“MHA”), which pays mortgage servicers and investors to take certain action for homeowners, including lowering high mortgage interest rates (permanently) for participating homeowners in the signature MHA program, the Home Affordable Modification Program (“HAMP”) and related HAMP programs through the GSEs, the Department of Agriculture and the Department of Veterans Affairs. Treasury is spending approximately $600 million a quarter on MHA.39 MHA, including HAMP, is terminated for homeowner applications. However, under contracts between Treasury and 140 mortgage servicers, Treasury has TARP obligations related to more than one million homeowners in HAMP and related programs.40 Under the 140 Treasury contracts, Treasury is obligated to pay $6.3 billion in TARP dollars over the next 7 years for existing homeowners in MHA. In addition, Treasury is committed to pay up to an additional $4.07 billion based on homeowners who applied for the program by December 31, 2016.41 TARP payments do not go out all at once because they are not yet earned under the Treasury contracts. TARP payments are based on continuous reporting to Treasury and compliance with Treasury MHA and HAMP rules.42 63 64 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.3 TREASURY CONTRACTS FOR TARP DOLLARS TO BE PAID TO MHA MORTGAGE SERVICERS UNTIL 2023, AS OF 6/30/2017 $4.4 Billion + Obligated to be paid $2.9 Billion + Obligated to be paid $2.8 Billion + Obligated to be paid $2.1 Billion + Obligated to be paid $1.2 Billion + Obligated to be paid $1.2 Billion + Obligated to be paid TARP dollars paid TARP dollars paid TARP dollars paid TARP dollars paid TARP dollars paid TARP dollars paid $692 Million TARP dollars paid Other Servicers TOTAL $2.2 Billion TARP dollars paid $17.44 Billion TARP dollars paid + + $1.7 Billion + $903 Million + $682 Million $570 Million + $561 Million $367 Million + $478 Million $740 Million + $265 Million $668 Million + $220 Million $123 Million Obligated to be paid $1.2 Billion Obligated to be paid $6.27 Billion TARP Obligated to be paid Sources: Treasury, Aggregate Cap Monitoring Report - June 2017; SIGTARP analysis of Treasury MHA data. + + $1.0 Billion Available for use Available for use Available for use Available for use Available for use Available for use $123 Million Available for use $717 Million Available for use $4.07 Billion TARP Committed SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 Significant oversight is required because of the risk of waste, fraud, and abuse due to the poor track record of these large banks and non-bank servicers. Some servicers have been the subject of law enforcement action, including investigations by SIGTARP. SIGTARP has also reported that some servciers have repeatedly broken Treasury’s rules in HAMP. SIGTARP Audit Oversight Over HAMP SIGTARP’s audit priorities in HAMP are to: • Identify vulnerabilities to fraud by servicers • Identify waste and abuse by servicers • Identify inefficiencies and mismanagement that could lead to cost savings In addition to identifying servicer mismanagement and abuse to homeowners applying to HAMP, SIGTARP has identified the following servicer mismanagement and abuse by servicers of homeowners already in HAMP: • Wrongfully terminating people out of HAMP • Lost paperwork • Misapplying mortgage payments made in HAMP which causes delinquency that incur late fees • Transferring the mortgage without transferring the HAMP paperwork. The new servicer does not know the person is in HAMP so only sees underpayment, or fails to honor the HAMP lowered interest rate • Failing to notify homeowners, as Treasury requires, when their interest rate and monthly payment is going to rise after 5 years • Failing to notify homeowners, as Treasury requires, that after 6 years in HAMP they can lower their mortgage payment by re-amortizing the mortgage • Overcharging Treasury for extinguishing second liens when those liens were not extinguished • Failing to reduce principal on mortgages despite being paid by Treasury to do so • Charging Treasury for mortgages that are not eligible for HAMP SIGTARP has made cost saving recommendations related to MHA. SIGTARP recommended that Treasury hold servicers in HAMP accountable by developing performance metrics and publicly reporting against them, which Treasury implemented in 2011. SIGTARP made a recommendation that Treasury permanently withhold TARP dollars related to the time period that servicers failed to perform at an acceptable level, which Treasury did not implement. SIGTARP has made several recommendations to assess and stop servicer mismanagement and abuse that leads to wrongfully canceling people out of HAMP. Taxpayers paid $2.7 billion mostly to servicers and investors for 604,193 homeowners cancelled out of HAMP.43 At least 159,113 of these homeowners were foreclosed or otherwise lost their home.44 Others were put into less advantageous private mortgage modifications. Treasury has partially implemented SIGTARP’s 65 66 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM recommendation to determine how servicer mismanagement leads to canceling people out of the program by finding that 6 of the largest 7 servicers in HAMP have wrongfully cancelled homeowners out of the program. However, Treasury’s compliance group only looks on a small sample basis of 150 homeowner files per quarter, and does not know the full extent of the problem. Treasury requires the servicer to put any wronged-homeowner found in Treasury’s sample back into HAMP. This mismanagement and abuse leads to inefficiency in government payments. In order to determine the full scope of mismanagement, Treasury could start with requiring servicers found in violation to conduct an independent review and self-report to Treasury on other homeowners wrongfully cancelled out of the program. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 Servicer Track Records Evidence High Risk Areas 68% Homeowners denied for HAMP 331,223 People in HAMP now or before 134,569 Homeowners fell out of HAMP (40%) costing taxpayers $907 million Source: Treasury, 1MP Program Volumes - June 2017, accessed 7/20/2017; Treasury, response to SIGTARP data call 7/6/2017; SIGTARP analysis of Treasury HAMP data. Ocwen is the largest recipient of federal TARP dollars, but also has one of the worst track records in foreclosure mitigation, including HAMP. Ocwen had an enforcement action in December 2013 for significant and systemic “deception and shortcuts in mortgage servicing”, which included improperly denying homeowner’s a mortgage modification and failing to properly apply a homeowner’s payment, both of which are extremely relevant to conducting oversight over Ocwen in HAMP.45 Ocwen had another major enforcement action in April of 2017 for “Failing Borrowers Throughout the Mortgage Servicing Process” which included (among other issues): servicing loans using error riddled information; illegally foreclosing on homeowners; failing to credit borrower payments; mishandling escrow information and payments; and mishandling servicing transfers – all of which can have dire implications for homeowners in HAMP whose modifications are handled by Ocwen.46 During the last two years, Treasury has found that Ocwen wrongfully denied homeowners help from HAMP and wrongfully cancelled homeowners out of HAMP.47 • Wrongfully canceling homeowners out of HAMP: Treasury continued to find in recent years that Ocwen has wrongfully cancelled homeowners out of HAMP. More than 134,569 homeowners who were in HAMP with Ocwen have fallen out of the program. Treasury paid Ocwen in excess of $907 million in TARP dollars for these cancelled homeowners. More than 31,700 of these homeowners went into foreclosure or otherwise lost their home.48 Ocwen’s wrongfully cancelation of people out of HAMP is similar to the conduct in Ocwen’s enforcement action. Ocwen cancelled homeowners out of HAMP on the basis that they had missed three payments, when in reality homeowners made the payments. Ocwen held mortgage payments in suspense, 67 68 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM improperly reversed and later reapplied mortgage payments, and did not timely post payments made to an Ocwen lockbox. Treasury does not know how many homeowners Ocwen has wrongfully cancelled out of HAMP. Treasury’s findings on a sample basis should be viewed in light of the December 2013 enforcement action that found, in part that Ocwen failed “to timely and accurately apply payments made by borrowers and failing to maintain accurate account statements.”49 In order to determine the full extent of mismanagement, Treasury could require Ocwen to conduct an independent review (paid for by Ocwen) and report on all people wrongfully cancelled out of HAMP, while also requiring additional controls to ensure that Ocwen timely and accurately posts homeowner payments. • Wrongfully denying homeowners admission in HAMP: Ocwen has until September 2017 to determine which homeowners who applied by December 30, 2016 are admitted into HAMP. Ocwen’s denied of 68% of homeowners who applied for HAMP. The enforcement action found that Ocwen “improperly denied mortgage modifications.”50 This included: Failing to provide accurate information about mortgage modifications and other loss mitigation services; Failing to properly process borrowers’ applications and calculate their eligibility for mortgage modifications; Providing false or misleading reasons for denying mortgage modifications; Failing to honor previously agreed upon trial modifications with prior servicers; and Deceptively seeking to collect payments under the mortgage’s original unmodified terms after the consumer had already begun a mortgage modification with the prior servicer. In recent years, Treasury found that Ocwen denied homeowners for HAMP that should have been admitted and/or failed to offer homeowners a HAMP modification.51 • Risk of Waste — Overcharging Treasury: Recently, Treasury found Ocwen misrepresentations to and overcharging of Treasury for payments to investors. • Failure to notify homeowners in their 6th year of HAMP that they can lower their monthly payment: Ocwen recently failed to provide timely and accurate notices to homeowners who had successfully made their mortgage payments in HAMP for six years that the homeowners could lower their mortgage payment by re-amortizing (recasting) their unpaid principal balance. As a result, homeowners who has successfully performed their obligation in HAMP paid a higher payment than was necessary. In the most recent quarter, 80% of the loans reviewed by Treasury at Ocwen had erroneous information that could affect the homeowner’s decision to recast their loan. With Treasury obligated to pay $1.7 billion and committed to pay up to an additional $924 million to Ocwen, continued oversight remains critical.52 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 61% Homeowners denied for HAMP 212,237 People in HAMP now or before 66,649 Homeowners fell out of HAMP (31%) costing taxpayers $318 million Source: Treasury, 1MP Program Volumes - June 2017, accessed 7/20/2017; Treasury, response to SIGTARP data call 7/6/2017; SIGTARP analysis of Treasury HAMP data. Wells Fargo is the second largest receiver of TARP funds. Wells Fargo has broken HAMP’s rules by canceling people out of HAMP who made their payments on time, and by failing to notify homeowners in HAMP, as Treasury requires, on a timely basis that their mortgage payment was going to increase.53 • Wrongfully canceling homeowners out of HAMP: Recently, Treasury found that Wells Fargo wrongfully canceled people out of HAMP by not timely and accurately applying homeowner’s payments. More than 66,649 homeowners in HAMP with Wells Fargo have canceled out of HAMP costing taxpayers $318 million. Almost 22,407 homeowners went into foreclosure or otherwise lost their home. Treasury does not know how many total homeowners Wells Fargo wrongfully canceled out of the program. In order to determine the full extent of mismanagement, Treasury could start with requiring Wells Fargo to conduct an independent review (paid for by Wells Fargo) and report on other people wrongfully canceled out of HAMP, to ensure that Wells Fargo timely and accurately posts homeowner payments.54 • Failure to consider homeowners for other programs: Treasury found that Wells Fargo failed to follow HAMP rules to help homeowners falling out of HAMP avoid foreclosure by considering them for other MHA programs. • Failing to notify homeowners timely that their mortgage was increasing: Wells Fargo failed to notify homeowners of upcoming increases to their mortgage payments in accordance with HAMP rules. Treasury requires that the servicer give a 120 day notice and a 60 day notice before the payment increase giving homeowners an opportunity to find means to pay their mortgage. • Failure to notify homeowners in their sixth year of HAMP that they can lower their mortgage payment: Wells Fargo failed to notify on a timely basis homeowners that had successfully made their HAMP mortgage payment for six years that the homeowner could lower their mortgage payment by re-amortizing 69 70 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM (recasting) their unpaid principal balance. As a result, homeowner’s who had successfully performed their obligations in HAMP may have paid a higher payment than was necessary. Given that Treasury does not know how many other homeowners did not receive timely notice given Treasury’s small sample size of 25, Treasury could start with requiring Wells Fargo to self-report these violations. With Treasury obligated to pay $903 million and committed to pay up to an additional $682 million to Wells Fargo, continued oversight remains critical.55 84% Homeowners denied for HAMP 166,381 People in HAMP now or before 44,886 Homeowners fell out of HAMP (27%) costing taxpayers $200 million Source: Treasury, 1MP Program Volumes - June 2017, accessed 7/20/2017; Treasury, response to SIGTARP data call 7/6/2017; SIGTARP analysis of Treasury HAMP data. JPMorgan denied nearly 1 million people for HAMP—84% of all who applied.56 According to Treasury, JPMorgan went from a history of one of the worst offenders of breaking Federal rules governing HAMP, to recently improving. If this is the case, it shows that it is possible for a large bank or non-bank servicer to follow Federal rules governing HAMP. For example, Treasury did not find that JPMorgan miscalculated homeowner income over the past year, showing that it is possible for a large bank to put controls in place to calculate income correctly.57 However, JPMorgan’s extremely high rate of denying people for HAMP will require oversight while it continues to assess homeowner applications.58 Treasury has recently found on several occasions that JPMorgan failed to notify homeowners that successfully made their mortgage payments in HAMP for six years that they were eligible to re-amortize their mortgage and lower their payment, or made errors in notices sent. As a result, homeowners who successfully performed obligations in HAMP may have paid a higher payment than was necessary. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 79% Homeowners denied for HAMP 108,273 People in HAMP now or before 37,135 Homeowners fell out of HAMP (34%) costing taxpayers $137 million Source: Treasury, 1MP Program Volumes - June 2017, accessed 7/20/2017; Treasury, response to SIGTARP data call 7/6/2017; SIGTARP analysis of Treasury HAMP data. Bank of America has one of the worst track records in HAMP. SIGTARP’s investigation of Bank of America defrauding HAMP led to a 2012 Department of Justice enforcement action against Bank of America.59 Treasury found that Bank of America needed substantial improvement in complying with HAMP’s rules, repeatedly, even in recent years.60 • Risk of Waste — Overcharging Treasury: In 2016, Treasury found that Bank of America overcharged Treasury by hundreds of thousands of dollars found in Treasury’s sample. Bank of America reported incorrect information about the delinquency status of several second liens that were extinguished, resulting in more than $400,000 in wasted tax dollars, including almost $150,000 on a single loan. Treasury requested that Bank of America perform a lookback analysis to determine whether there were other instances of misreporting. • Wrongfully denying homeowners admission into HAMP: Bank of America denied 79% of all who applied for HAMP. Bank of America has repeatedly wrongfully denied homeowners for HAMP. Bank of America’s extremely high rate of denying people for HAMP requires oversight while it continues to assess homeowners applications. • Miscalculation of income: Bank of America repeatedly miscalcualted homeowner income. Miscalculation can lead to Bank of America denying a qualified homeowner for HAMP or setting a higher mortgage payment for people than is sustainable. • Risk of waste—Failing to reduce principal despite being paid by Treasury to do so: In the HAMP principal reduction program, Treasury pays servicers typically several thousand tax dollars per mortgage to reduce the outstanding balance of underwater mortgages. Bank of America failed to reduce the principal despite being paid by Treasury about $4,500 on average to do so. Bank of America did not reduce these homeowners’ underwater balances until Treasury later inquired about the status of these homeowners. 71 72 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM • Failure to notify homeowners in their 6th year of HAMP that they can lower their monthly payment: Bank of America failed to notify homeowners on a timely basis and provided inaccurate information to homeowners who had successfully made their mortgage payments in HAMP for six years that the homeowners could lower their mortgage payment by re-amortizing (recasting) their unpaid principal balance. As a result, homeowners who successfully performed their obligation in HAMP may have paid a higher payment than was necessary. 53% Homeowners denied for HAMP 213,538 People in HAMP now or before 62,032 Homeowners fell out of HAMP (29%) costing taxpayers $200 million Source: Treasury, 1MP Program Volumes - June 2017, accessed 7/20/2017; Treasury, response to SIGTARP data call 7/6/2017; SIGTARP analysis of Treasury HAMP data. Nationstar has one of the worst track record in HAMP. Nationstar’s violations of Treasury rules have been widespread spanning multiple quarters. Nationstar has shown little improvement and, even appears to be getting worse. Treasury recently found that Nationstar needed substantial improvement in complying with HAMP’s rules. • Wrongful denying or failing to offer homeowners HAMP admission: Nationstar has repeatedly wrongfully denied or failed to offer homeowners admission into HAMP. • Wrongful cancellation of homeowners out of HAMP: Nationstar has wrongfully canceled homeowners out of HAMP. More than 62,032 homeowners who were in HAMP with Nationstar have fallen out of HAMP. Nationstar was paid $200 million in TARP dollars for these canceled homeowners. More than 25,674 of these homeowners went into foreclosure or otherwise lost their home. Treasury does not know how many homeowners Nationstar has wrongfully terminated out of HAMP given their small sample size. In order to determine the full extent of mismanagement, Treasury could require Nationstar to conduct an independent review (paid for by Nationstar) and report on all people wrongfully canceled out of HAMP, while also requiring SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 • • • • • additional controls to ensure that Nationstar timely and accurately posts homeowner payments. Misreporting of homeowner payments: Nationstar has repeatedly misreported homeowner payment information to Treasury that resulted in homeowner harm of lost TARP payments or wasted tax dollars. In some cases, Nationstar reported homeowners as delinquent when they had not missed payments. In the most recent quarter Nationstar misreported information about borrower payments, resulting in homeowners being shortchanged or Treasury being overcharged. Risk of Waste — Overcharging Treasury: Treasury found, even recently, that it overpaid Nationstar due to Nationstar’s faulty reporting. Nationstar modified ineligible mortgages, overcharging Treasury. Nationstar also misreported to Tresaury leading to the overpayment of homeowner relocation incentives to homeowners who did not even not live in the properties. In the most recent quarter, Treasury found that in almost one-fifth of the transactions it reviewed at Nationstar, Nationstar failed to verify that the homeowners were not convicted of disqualifying felonies (such as mortgage fraud), which would have disqualified them. Treasury also recently found reporting errors on almost half of the Nationstar HAMP modifications it reviewed, resulting in overcharging to Treasury. Failure to notify homeowners on timely basis about increase in mortgage payment: Nationstar has repeatedly failed to timely notify homeowners in HAMP, as Treasury requires, that their interest rate was rising and therefore their mortgage payment was also rising. Last quarter 20% of Nationstar’s notices that Treasury reviewed were either not sent timely or had in erroneous information. Failure to notify homeowners in their 6th year of HAMP that they can lower their monthly payment: Nationstar has not followed Treasury rules to provide timely notification to homeowners of their ability to re-amortize their mortgage, and lower their payment. Miscalculation of income: Nationstar has repeatedly miscalculated homeowner income. Miscalculation can lead to Nationstar denying a qualified homeowner for HAMP or setting a higher mortgage payment than is sustainable. 73 74 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 43% Homeowners denied for HAMP 150,327 People in HAMP now or before 59,528 Homeowners fell out of HAMP (40%) costing taxpayers $443 million Source: Treasury, 1MP Program Volumes - June 2017, accessed 7/20/2017; Treasury, response to SIGTARP data call 7/6/2017; SIGTARP analysis of Treasury HAMP data. Select Portfolio is the only servicer out of the largest 7 servicers in HAMP that Treasury has not found to have wrongfully terminated homeowners out of HAMP. It also is the only one of the 7 servicers who denied admission to less than half of all homeowners that applied to HAMP.61 Previously, Treasury has found that some instances where SPS misreported information that impacts the TARP funds that investors receive for current homeowners. Fixing that could represent a cost savings. However, that would require Treasury to determine the full extent of misreporting and TARP dollars. 89% Homeowners denied for HAMP 35,536 People in HAMP now or before 13,041 Homeowners fell out of HAMP (37%) costing taxpayers $49 million Source: Treasury, 1MP Program Volumes - June 2017, accessed 7/20/2017; Treasury, response to SIGTARP data call 7/6/2017; SIGTARP analysis of Treasury HAMP data. CitiMortgage has had a track record of not following the Federal rules governing HAMP. • Risk of Waste — Late reporting homeowners who fell out of HAMP/ overcharging TARP: CitiMortgage has wrongfully terminated homeowners out of HAMP. However, Treasury is not aware of the full extent of the problem, given its small sample size. Treasury found that in some instances CitiMortgage SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 delayed reporting the termination to Treasury, delaying sometimes more than 100 days, in one case delaying reporting to Treasury for more than 2 years and in another case more than 5 years. During this time, CitiMortgage would have received “pay for success” TARP payments, including $1,000 each year to put towards principal, servicer payments (if the HAMP modification was in its first three years), and investor payments. These payments represent waste. Treasury also found other instances where CitiMortgage received TARP funds based on inaccurate reporting. Treasury is requiring CitiMortgage to identify the total population of mortgages that were part of misreporting related to termination of HAMP modifications. • Misapplication of investor payments: CitiMortgage repeatedly misapplied payments causing homeowners to be reported as delinquent when they were not. • Denied 89% of homeowners seeking help in HAMP: CitiMortgage has the highest rate of denying homeowners for admission to HAMP – 89%, which are 341,628 homeowners, of which 21,186 lost their home to foreclosure or distressed sale. • Failure to notify homeowners in their 6th year of HAMP that they can lower their monthly payment: CitiMortgage has repeatedly failed to provide homeowners who had successfully made their mortgage payments in HAMP for six years that they could re-amortize and reduce their mortgage payment. SIGTARP Investigations Related to HAMP SIGTARP’s investigations related to HAMP have: (1) shut down scams, bringing justice to 110 convicted scammers stealing homeowners’ money on a false promise that they can get a homeowner into HAMP, and then do little or nothing; and (2) led to DOJ actions against HAMP servicers related to misconduct and false representations to Treasury and/or homeowners. With the application period expired, SIGTARP will focus on investigations of mortgage servicers being paid with TARP dollars. Investigations of HAMP Mortgage Servicers SIGTARP’s investigations resulted into three DOJ actions against mortgage servicers, SunTrust Bank, JP Morgan and Bank of America. Criminal conduct by SunTrust Bank: SIGTARP’s investigation of HAMP mortgage servicer SunTrust Mortgage, Inc., a subsidiary of TARP recipient SunTrust Bank, uncovered criminal conduct by SunTrust including that SunTrust made misrepresentations to homeowners seeking help from HAMP. SunTrust failed to process HAMP applications timely, instead piling so many unopened 75 76 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FedEx packages of HAMP applications and homeowner documents in a room that the floor eventually buckled. SunTrust mass denied homeowners for HAMP, and then lied to Treasury about the reason why those homeowners were denied. The U.S. Attorney for the Western District of Virginia entered into a non-prosecution agreement of charges of mail fraud, wire fraud, and false statements to Treasury, with SunTrust Bank who paid $225 million in restitution to victims and made significant corporate changes to prevent fraud. Investigation into JP Morgan Chase’s Misconduct in HAMP: DOJ brought an enforcement action against JP Morgan Chase for its failure to engage in adequate loss mitigation efforts (HAMP) for past due homeowners. Of this $6,187,500 was attributed to SIGTARP’s investigation. Investigation into Bank of America’s Misconduct in HAMP: DOJ brought an enforcement action against Bank of America for defrauding HAMP. Of this amount, $6.5 million was attributed to SIGTARP’s investigation. SIGTARP will continue to investigate mortgage servicers participating in HAMP. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 SIGTARP’S OVERSIGHT OVER THE HARDEST HIT FUND SIGTARP conducts oversight through audits and investigations of the Hardest Hit Fund (“HHF”), a $9.6 billion program that is in a ramp-up stage. Treasury’s spending in the second quarter 2017 tripled from the first quarter to $880 million. SIGTARP Investigations Related to HHF SIGTARP is actively conducting criminal investigations related to the Hardest Hit Fund. In fiscal year 2017, two homeowners who received HHF dollars were indicted for false statements. One allegedly falsified his HHF application saying he was single when his wife worked at the state agency in charge of HHF. Another allegedly under reported cash savings to qualify for HHF. SIGTARP Prioritizes Investigations in the More Than $800 Million TARP-Funded Demolition Program.62 Right now, we are analyzing data and conducting trend analysis to find crime proactively in the more than $800 million blight demolition program. SIGTARP’s audits identified vulnerabilities to criminal behavior, including unfair competitive practices and fraud. SIGTARP’s investigations root out these crimes. SIGTARP Audit Oversight of HHF The majority of SIGTARP’s audit work is in response to concerns raised by members of Congress after SIGTARP identified waste, abuse or risks of fraud. SIGTARP works to identify cost saving recommendations. SIGTARP also identified previously spent federal funds that were wasted or abused, so that Treasury can seek repayment of those dollars. SIGTARP forensic auditors also refer potential fraud to SIGTARP agents. SIGTARP’s audit priorities in the Hardest Hit Fund are to: • Identify vulnerabilities to fraud in the HHF demolition programs • Identify possible fraud by contractors, city or state agencies, or other local partners • Identify waste by demolition contractors, city or state agencies, or other local partners • Identify wasteful spending by state agencies paid with HHF dollars or their contractors • Identify abuse by city or state agencies, or other local partners • Identify mismanagement or inefficiency by state agencies paid with TARP dollars • Identify potential cost savings and make recommendations 77 78 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP Identified Abuse in HHF Demolition Program $246,490 COST SAVINGS FROM SIGTARP RECOMMENDATIONS SIGTARP alert: As reported in Section 2, in December 2015, SIGTARP identified abuse by a city and state agency using TARP dollars to demolish occupied homes, rather than abandoned homes. SIGTARP uncovered that in Evansville, Indiana; people in 18 houses were evicted or asked to move to have the house qualify for TARP funding Occupied house in Evansville, Indiana, demolished using TARP so that a car dealership could move funds, photo provided to SIGTARP. to the site. The Indiana agency administering HHF was aware that people lived in the homes. City inspection reports presented to the Indiana agency listed the homes as occupied. Despite Treasury’s contract with the Indiana agency limiting HHF funds to vacant and abandoned houses, the Indiana agency approved the use of TARP. SIGTARP recommended that Treasury direct state agencies to limit HHF to demolish abandoned properties only in line with their contract, and claw back $246,490 used to demolish the lived-in residences.63 After SIGTARP’s report: After notifying Treasury of this abuse, Chairman January 8, 2016 – Hearing to Jason Chaffetz of the House Oversight examine Treasury’s oversight of the Committee scheduled a hearing on Hardest Hit Fund, Treasury’s policies January 8, 2016.i to ensure accountability and measure On January 15, 2016, Treasury the effectiveness of the HHF issued state agencies a directive that the house must have been abandoned prior program, and Treasury’s policies to to initiating a demolition, the hearing prevent misuse of program funds. did not go forward.64 Treasury has not Chairman Jason Chaffetz clawed back the $246,490. i United States House of Representatives, Hearing: Treasury Oversight of TARP’s Hardest Hit Fund, www.house.gov/legislative/ date/2016-01-08, accessed 4/10/2017. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 SIGTARP Identified Vulnerabilities in HHF Demolition Program to Unfair Competitive Practices and Overcharging, Potentially Leading to Fraud and Waste $161 Million COST SAVINGS FROM SIGTARP RECOMMENDATIONS SIGTARP’s June 2016 Report: SIGTARP identified that the HHF subprogram for blight demolition is significantly vulnerable to the substantial risks of unfair competitive practices and overcharging. There is no requirement that limits reimbursement to only necessary and reasonable costs, or requirement for competition, which risks criminal Blighted house used in PowerPoint for Evansville, Indiana, public meeting about HHF demolitions, photo provided to SIGTARP. behavior, fraud, and waste.65 Treasury does not limit federal payments to costs that are necessary and reasonable—the normal standard in demolition contracts. Instead, Treasury set a worst-case-scenario maximum allowable cost of $15,000 to $35,000 per house, depending on the state. Federal requirements for competition are critically important to keep programs fair, drive down costs, motivate better contractor performance, and help curb fraud, waste, abuse, favoritism, undue influence, contract steering, “Approximately $458 million remains bid rigging, and other closed-door contract processes. SIGTARP identified to be spent in the Blight Elimination that TARP’s demolition program is Program. Treasury can still take vulnerable to the risk of these backroom action to implement SIGTARP’s unfair competitive practices. The TARP recommendations and create program had no federal requirements for competition in the awarding of federal requirements to protect contracts, and 5 of 7 state agencies against waste, fraud, and abuse, did not have their own competition while allowing for locally-tailored requirements. solutions and flexibility.” After SIGTARP’s report: In July 2016, members of the House Committee on Chairman Jason Chaffetz, Chairman Jim Oversight and Government Reform Jordan, Representative John J. Duncan, Jr., including Chairman Jason Chaffetz, Representative Mick Mulvaney - July 2016 Chairman of Subcommittee Jim Jordan, 79 80 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Representative John J. Duncan, Jr., and Representative Mick Mulvaney, sent a letter to Treasury Secretary Lew citing to SIGTARP’s audit findings, and their concerns. These members of Congress requested documents and information, including Treasury’s timeline for fully responding to SIGTARP’s recommendations. After SIGTARP’s report, Treasury implemented 2 out of 20 SIGTARP recommendations in the audit (1) limit TARP reimbursement to necessary and reasonable costs, and (2) require full and open competition. Implementation of these two recommendations will save the government up to $161 million. SIGTARP has 18 unimplemented recommendations in its audit, including those described in Section 2 of this report, that state agencies use best practices to determine necessary and reasonable costs and apply federal contracting rules to ensure full and open competition. SIGTARP Identified $8.2 Million in Wasteful Spending of HHF Dollars in Nevada $8.2 MILLION COST SAVINGS FROM SIGTARP RECOMMENDATIONS SIGTARP’s September 2016 Report: SIGTARP identified $8.2 million in wasted TARP dollars and abuse by the Nevada Affordable Housing Assistance Corporation (NAHAC), the contractor selected by the Nevada Housing Division to administer HHF. SIGTARP found a deliberate attempt to use the TARP program as a cash cow for every expense imaginable, while NAHAC all but stopped admitting new homeowners. SIGTARP recommended Treasury seek repayment of the following waste: • $11,000 for the CEO’s car allowance for a Mercedes Benz • $20,000 for severance to the terminated CEO • $10,963.68 spent on employee bonuses, employee gifts, employee outings, staff lunches and other employee perks. ◦◦ SIGTARP found that NAHAC used TARP funds to treat their employees to extravagant gifts and perks, all of which was charged to the HHF. NAHAC spent these funds at restaurants, a casino, a country club, on catering and employee gifts, and on an executive’s bonus. Establishments where funds were spent include Herbs & Rye, named the nation’s best “high volume cocktail bar,” and the Dragon Ridge Country Club and Golf Course, which provides “championship golf, luxurious amenities and elegant service.” • $5,811.27 spent for holiday parties and gifts • $100,385.20 wasted on excessive rent, relocation and related costs SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 • $184,319.21 spent on legal expenses to defend violations and alleged violations of the law ◦◦ HHF funds were used to pay lawyers to settle a federal investigation by the Department of Labor who found that NAHAC violated Federal law: employee discrimination lawsuits (block‐billed at $123,217), and for an ethics investigation (block‐billed at $18,160). • $26,395.70 to pay for forensic auditors to reconcile its books • $10,812.00 for the independent auditor to reconcile non-HHF bank accounts • $19,874.75 paid for the terminated CEO’s severance package • $10,840.18 spent on non-HHF expenses identified by Treasury • $23,838.25 identified by Treasury for unsupported and non-HHF expenses • $2,241,396 in wasted excessive administrative expenses during 2015, which exceeded the per-homeowner-cost in 2013, and • $7,459,626.22 in overhead as NAHAC charged 100% of its overhead to HHF. Taxpayers should not pay for non-performance under a government contract or pay for wasteful spending. In 2015, NAHAC kept one TARP dollar for every TARP dollar it gave to a homeowner. It kept for itself more than $1.4 million of the $2.4 million in TARP dollars spent. SIGTARP found that NAHAC dropped homeowner admissions to HHF to only 6% of admissions at its peak year, but still sought 100% of their overhead from TARP, while the number of homeowners admitted to the program plummeted 94 percent.66 See Figure 4.1. FIGURE 4.23 SPENDING BY HARDEST HIT FUND NEVADA COMPARED TO HOMEOWNERS APPROVED FOR HHF $, Homeowners 3,000 HHF Dollars Spent on Gifts, Pizza, Cakes, Picnic & Office Refreshments 2,500 2,000 1,500 1,000 Homeowners Admitted to HHF 500 - 2013 2014 2015 Source: SIGTARP, Audit Report: “Waste and Abuse in the Hardest Hit Fund in Nevada”, 9/9/2016, https://www.sigtarp.gov/ Audit%20Reports/HHF%20Nevada_090916.pdf, accessed 1/13/2017. SIGTARP recommended that Treasury prohibit this contractor from HHF. The Nevada Housing Division outsourced this work to this contractor, which is rare in HHF. 81 82 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM After SIGTARP’s Report: Treasury has Only Sought Repayment of 1% of Waste and NAHAC Continues to Adminster HHF After the report, Senator Chuck Grassley sent a letter to Treasury expressing concerns about Treasury’s oversight to prevent waste.68 After receiving Treasury’s response, Senator Grassley issued the following comment on Treasury’s response: “The Treasury Department tiptoes around its responsibility to ensure that $9.6 billion in taxpayer funding is used effectively to help vulnerable homeowners stay in their homes. Treasury writes the checks and relies on states to spend the money. If states don’t pay attention to whether the money is spent properly, abuse can and does occur, as we saw in Nevada. This is unacceptable for both homeowners who were supposed to be helped by this program and the taxpayers. SIGTARP and the Government Accountability Office are right to conduct oversight and fill the void left by the Treasury Department.”69 Senator Chuck Grassley The Nevada Housing Division released to the press an October 2015 letter sent to Treasury one year before SIGTARP’s report where it suggested removing NAHAC from HHF based on a “List of State of Nevada Concerns” about NAHAC including: • Lack of transparency, including private board decisions that led to the contraction of the program and the inability to disburse Treasury funding • Poor customer service, including that NAHAC had an unpublished phone number, does not publish their office location, and does not encourage face-toface communication with borrowers • Complicated intake process compared to other states in HHF • NAHAC has alienated prior working relationships with counseling agencies • NAHAC’s leadership is more concerned with funding than its customers and programs • Key staff turnover • The Nevada Housing Division is frustrated with the lack of communication with NAHAC • NAHAC has not demonstrated it can meet its mission, goals, and timelines67 The Nevada Housing Division’s representative told the press after SIGTARP’s audit that he warned Treasury about NAHAC and “from that point forward [two years ago] the money stopped flowing and the housing division’s attempts to try to intervene were blocked. We’ve been working with Treasury for two years to get NAHAC to change its ways.” The Nevada Housing Division admits that NAHAC stopped flowing the TARP money out to homeowners, but still claims that NAHAC should be entitled to expenses, despite the fact that Treasury’s contract only allows those expenses that are necessary for the purpose of the program.70 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 If Treasury had taken action to remove NAHAC after being warned by the state agency in October 2015, taxpayers could have saved one year of abused and wasted TARP dollars. In that year, Treasury paid NAHAC $1.66 million while NAHAC only admitted a very small number of homeowners.71 NAHAC issued a statement to the press saying, “[T]he new leadership team have been shifting the organization’s culture into one of accountability and transparency like never before to prevent such abuse and bad judgment from ever occurring again.”72 NAHAC admits abuse (abuse that happened over a large timeframe with multiple CEOs), but refuses to pay back the money. And even with NAHAC’s admitted abuse, it continues administering HHF in Nevada, putting this program and these dollars at significant risk of waste and abuse. Any entity that has shown itself willing to waste Federal dollars should be removed from receiving more Federal dollars. In April 2017, Treasury requested that NAHAC repay $82,000 only 1% of $8.2 million in TARP funds for expenses identified in SIGTARP’s audit. Ongoing Priority Audit/Evaluations In March and May 2017, SIGTARP opened an audit and an evaluation of the HHF Blight Elimination Program in the state of Michigan. In March, 2017, SIGTARP opened an audit of demolition costs for demolition and other related costs in Flint for the HHF Blight Program in Flint. On May 3, 2017, SIGTARP announced an evaluation on the use of TARP funds to green and maintain land after demolition, reviewing the costs and reimbursments paid to local partners and contractors. In October 2016, at the request of Senator Grassley, SIGTARP opened an audit into expenses of 19 state agencies that were reimbursed with TARP funds. Having already found substantial waste in HHF Nevada, SIGTARP has honed its expertise to find any additional wasteful spending or spending by state agencies that is not “necessary to carry out the purpose” of HHF, which is the requirement in the contract with Treasury. Treasury has paid state agencies $704 million as shown in Table 4.4. Efficiency Controls Identified by SIGTARP $79.4 MILLION COST SAVINGS FROM SIGTARP RECOMMENDATIONS In April 2012, SIGTARP issued an audit that after two years, state agencies had only spent 3% of TARP dollars for the Hardest Hit Fund. In that audit, SIGTARP made five recommendations for Treasury to set performance goals for state agencies, measure state agencies against those goals, and develop an action plan to increase performance. Treasury implemented some of these recommendations by TABLE 4.4 TARP DOLLARS FOR STATE AGENCY EXPENSES, AS OF 3/31/2017 State Agency Administrative Expenses Alabama $11,142,804.40 Arizona $24,388,816.63 California $168,568,106.77 Florida $73,345,685.40 Georgia $32,043,626.07 Illinois $40,249,228.00 Indiana $31,964,939.83 Kentucky $16,323,252.23 Michigan $41,472,053.59 Mississippi $13,307,728.23 Nevada $18,593,034.05 New Jersey $27,911,294.75 North Carolina $70,392,568.70 Ohio $53,556,919.27 Oregon $39,815,531.12 Rhode Island $10,559,964.19 South Carolina $35,449,954.65 Tennessee $19,715,557.70 Washington, DC Total $3,783,498.34 $732,584,563.92 Note: Administrative expenses are as reported on the states Quarterly Financial Reports. Source: Treasury, response to SIGTARP data call, 7/6/2017. 83 84 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM issuing action plans for certain underperforming state agencies, but did not always hold these state agencies accountable for meeting those goals. Taxpayers have paid greater costs for state agencies that have not been efficient in administering the program. By January 2015, seven of the 19 state agencies had either exhausted their allocated TARP dollars or stopped taking new homeowner applications, which reduced their expenses by an average of 59%, expenses paid with TARP dollars. The remaining 12 state agencies were not as efficient in administering the program. This inefficiency resulted in $79.4 million in excess administrative expenses through calendar years 2015 and 2016; expenses that were paid with TARP dollars and could have been saved if SIGTARP’s recommendations had been fully implemented. SIGTARP Identified Disporportionate Spending by State Agencies $54 MILLION COST SAVINGS FROM SIGTARP RECOMMENDATIONS After finding that the Nevada state agency contractor kept $1 for its expenses for every $1 it distributed to homeowners in 2015; SIGTARP recommended that Treasury disallow any administrative expenses claimed by state agencies that are disproportionate to the dollars provided to homeowners. On average, state agencies had spent approximately $1 on their own administrative expenses for every $10 in HHF assistance (10%), some spent more, and some less. If Treasury limits state state agency administrative expenses reimbursed by TARP to only 10%, the Government would save up to $54 million until 2020, based on current spending patterns. $222 MILLION agency administrative expenses reimbursed by TARP to only 10%, the Government would save up to $54 million until 2020, based on current spending patterns. COST SAVINGS FROM SIGTARP RECOMMENDATIONS In April 2012 and again in October 2015, SIGTARP issued reports finding that homeowners suffered from significant delays in getting help from the Hardest Hit Fund (“HHF”) because the program lacked measurable performance goals and metrics. SIGTARP recommended that Treasury require the 19 state housing finance agencies administering the HHF program to establish meaningful and measurable performance goals including metrics for how many homeowners they intend to assist with each HHF program, regularly review individual state HHF programs’ performance against those metrics, and put funds from under- and non- SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 performing state programs to better use by reallocating them to programs that more effectively reach homeowners in need. By 2015, seven of the HHF state agencies-Alabama, California, Florida, Georgia, Indiana, Nevada, and South Carolina- had $222,213,577 in unused TARP dollars in non-performing or significantly underperforming programs. Two of the nine programs were pilot programs, one in California and the other in Florida, assisting only 418 of the nearly 2000 (4.5%) homeowners projected to be aided. One of the nine programs (an Alabama short sale program) helped no homeowners while another in that state helped only 4% of the target number of homeowners expected. These $222 million in Federal dollars were available and should have been reallocated to more effective programs as SIGTARP recommended. Only half ($110 million) of the $222 million has since been reallocated within HHF and that half only after lengthy delays. Treasury should have required states to act sooner to put the full $222 million to better use by reallocating to more effective HHF programs. October 2015 report on HHF Florida: At the request of Senator Bill Nelson, SIGTARP audited the Florida agency in HHF. Despite being paid more than $53 million to distribute Federal dollars; SIGTARP reported in October 2015, that only 20% of the people who applied in Florida received assistance, the lowest of any state, and took nearly 6 months to provide assistance to applying homeowners. The state agency has since increased its admission rate to 29%.73 While the admission rate in Florida still remains the lowest of all the HHF states, it shows that increased oversight over inefficient or mismanaged state agencies can lead to change.74 State Agencies Inefficiency and/or Mismanagement in Providing HHF Assistance to American Homeowners SIGTARP Quarterly Reports to Congress October 2015 through Present: HHF dollars have been slow to flow in many states and more than 170,000 people were denied HHF assistance. Starting October 2015, SIGTARP reported on low performing state agencies in homeowner admission rates, homeowner denial rates, and withdrawn homeowner application rates. Fewer than half (285,132) of all 669,232 homeowners who sought HHF assistance were admitted to the program. Table 4.5 shows those state agencies who admitted less than 43% of applying homeowners. 85 86 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.5 INEFFICIENT HHF STATE AGENCIES – LOW PERCENTAGE OF APPROVED APPLICATIONS, AS OF 3/31/2017 Homeowners That Applied Homeowners That Received Assistance Homeowner Admission Rate 131,484 28,593 21.7% Alabama 23,805 5,632 23.7% Arizona 19,767 4,804 24.3% Georgia 29,750 9,061 30.5% Nevada 15,623 5,491 35.1% New Jersey 15,609 6,443 41.3% 29,785 12,374 41.5% 162,373 67,543 41.6% State Agency Florida Oregon California Sources: Treasury, response to SIGTARP data call 7/6/2017; Treasury, “HFA Aggregate Quarterly Report,” https://www.treasury.gov/ initiatives/financial-stability/reports/Pages/Housing-Finance-Agency-Aggregate-Report.aspx, accessed 7/17/2017. On a cumulative basis, HHF Alabama, HHF Arizona, and HHF Florida, were the most inefficient. State agencies that continue to help the fewest homeowners, include HHF in Alabama at 23.7%, HHF Arizona helped 24.3% of unemployed and underemployed homeowners who applied, and HHF Florida assisted just 21.7% of homeowners seeking help in that state. HHF Georgia admitted more unemployed and underemployed homeowners this year after a letter from their Congressman John Lewis, but is still very low at helping less than a third (30.5%) of Georgia homeowners who apply.75 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 State Agencies Inefficiency and/or Mismanagement – Denying High Numbers of Homeowners for HHF Throughout the nation, state agencies denied 174,636 people – 26% of all who applied. Some state agencies denied higher rates of people, as listed in Table 4.6. TABLE 4.6 INEFFICIENT STATE AGENCIES – HIGH PERCENTAGE OF DENIED HOMEOWNERS, AS OF 3/31/2017 Homeowners That Applied Homeowners Denied Assistance Homeowner Denial Rate Arizona 19,767 13,509 68.3% New Jersey 15,609 8,223 52.7% Georgia 29,750 11,922 40.1% South Carolina 27,400 9,165 33.4% 5,142 1,581 30.7% Michigan 69,384 21,047 30.3% California 162,373 45,524 28.0% State Agency Rhode Island Sources: Treasury, response to SIGTARP data call 7/6/2017; Treasury, “HFA Aggregate Quarterly Report,” https://www.treasury.gov/ initiatives/financial-stability/reports/Pages/Housing-Finance-Agency-Aggregate-Report.aspx, accessed 7/17/2017. HHF Arizona, HHF New Jersey and HHF Georgia denied homeowners at the highest rates. Some state agencies continue to turn down more American homeowners than in the past, including HHF Arizona at 68.3%, far higher than 56% in 2014, and HHF New Jersey at 52.7%, higher than 47% in 2013.76 87 88 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM State Agencies Seeing High Numbers of Withdrawn Applications There were 186,334 people saw their application withdrawn – 27% of all who applied to HHF. Some state agencies had an even higher amount of withdrawn applications, as shown in Table 4.7. TABLE 4.7 INEFFICIENT STATE AGENCIES – HIGH PERCENTAGE OF WITHDRAWN APPLICATIONS, AS OF 3/31/2017 Homeowners That Applied Homeowner Applications Withdrawn Homeowner Withdrawal Rate Alabama 23,805 15,608 65.6% Oregon 29,785 14,442 48.5% Florida 131,484 57,266 43.6% Nevada 15,623 6,120 39.2% 162,373 45,854 28.2% State Agency California Sources: Treasury, response to SIGTARP data call 7/6/2017; Treasury, “HFA Aggregate Quarterly Report,” https://www.treasury.gov/ initiatives/financial-stability/reports/Pages/Housing-Finance-Agency-Aggregate-Report.aspx, accessed 7/17/2017. The percentage of homeowners “Resources are unused and who withdrew their applications or had their applications withdrawn, were the SIGTARP’s negative audits highest in Alabama, Oregon, Florida and and recommendations for Nevada – 65.6% in Alabama, 48.5% in Oregon, 43.6% in Florida, and 39.2% HHF improvement have been in Nevada. The withdrawal rates have disregarded.” increased slightly in Nevada, and had Representatives John Lewis, John Conyers, small declines in Alabama, Oregon, and David Scott, Marcy Kaptur, Dina Titus, Florida. This could signal inefficiency or Brenda Lawrence, Henry C. Johnson, Jr., Alan mismanagement, lengthy wait times, or Grayson, Mike Thompson, Corrine Brown, and program criteria that do not match the Terri Sewell 77 reality of homeowners in that state. After SIGTARP’s reports: In March 2016, 11 Congressmen led by Representative John Lewis, sent a letter to President Obama saying that the results presented by SIGTARP were “very troubling.” These Members of Congress expressed concern that that: (1) fewer than half of homeowners who applied received help, and far fewer than that in certain states; (2) there were long waiting periods to receive assistance, and (3) that more than half of homeowners were ultimately denied help or had their applications withdrawn. Those Congressmen included Representatives John Lewis, John Conyers, David Scott, Marcy Kaptur, Dina Titus, Brenda Lawrence, Henry C. Johnson, Jr., Alan Grayson, Mike Thompson, Corrine Brown, and Terri Sewell.78 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 The 11 Congressmen asked for executive action for Treasury to amend their HHF contracts with state agencies to implement SIGTARP’s recommendations. However, SIGTARP’s recommendations can be implemented without amending contracts, as long as Treasury issues guidance to the state agencies, just as it did related to houses being abandoned or related to blight. Ongoing Priority Audit At the request of Congressman John Lewis, SIGTARP opened an audit of HHF in three counties in Georgia: In September 2016, SIGTARP opened an audit of HHF in DeKalb, Fulton, and Clayton Counties in Georgia, at the request of Congressman John Lewis. Preventing Fraud, Waste, and Abuse in HHF Homebuyer Assistance Programs $61.2 Million COST SAVINGS FROM SIGTARP RECOMMENDATIONS HHF also provides $612.8 million in down payment assistance, ranging from $7,500 to $20,000 to homebuyers, and in 2015, SIGTARP made recommendations to Treasury to prevent fraud, waste, and abuse in homebuyer programs. Among these were recommendations to prevent fraud, such as requiring detailed reporting on who was receiving these dollars, whether they were buying the house in a non-arms-length transaction, whether there was commingling with state down payment assistance dollars, and the buyer certifying that they met the eligibility requirements. We also recommended that the state agency conduct background checks to determine if an applicant was convicted of a crime of dishonesty.79 These unimplemented recommendations can save the Government $61.2 million based on the average 10% fraud found in Government programs. 89 90 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HHF in Alabama SIGTARP has identified significant inefficiencies at the Alabama state agency, despite being paid $11.1 million in TARP. For example:80 • In 6 years, HHF has helped only 5,632 Alabama homeowners and 62% of TARP dollars have not been spent. • Homeowners estimated being helped with HHF were cut nearly by half. • Only 1,035 new Alabama homeowners were admitted last year. • Alabama’s HHF program has an application withdrawal rate of 66%, among the highest of all 19 HHF states. • Only 24% of all people who applied received help—among the lowest of any state agency in HHF. • No one was admitted to an HHF program to help unemployed homeowners with a short sale, despite 214 people applying and only admitted 4% (151 of 4,089) of homeowners applying to an HHF program to modify mortgages. • After more than two years, only 3 houses have been demolished. FIGURE 4.2 FIGURE 4.3 HARDEST HIT FUND – USE OF FUNDS IN ALABAMA, STATUS OF ALABAMA HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 7% 0% 1% 24% 31% 62% 9% 66% TARP Dollars to State Agency ($11,142,804) Demolition ($38,714) Unemployment Bridge and Related Assistance ($50,219,762) Unspent ($102,106,344) Demolition ($34,961,286) Unemployment and Related ($51,058,417 ) Admin Expenses ($16,086,642) Homeowners Helped (5,632) Homeowners Denied (2,271) Homeowners with Withdrawn Applications (15,608) Homeowners In Process (294) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. Source: Treasury, response to SIGTARP data call, 7/6/2017. TARP-Funded Demolition After more than two years, the Alabama state agency has only demolished 3 houses using $38,713, out of $35 million. 91 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 TABLE 4.8 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN ALABAMA, AS OF 3/31/2017** Most Recent Quarter Cumulative 0 3 Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative Properties Demolished/Removed City/County Partnera Alabama (Statewide) Alabama Association of Habitat for Humanity $— 0 0 Autauga County Habitat for Humanity of Autauga and Chilton County $— 0 0 Greater Birmingham Habitat for Humanity $— Birmingham Land Bank $— 0 0 Chilton County Habitat for Humanity of Autauga and Chilton County $— 0 0 Hale County Habitat for Humanity of Hale County $— 0 0 Jefferson Greater Birmingham Habitat for Humanity $38,714 3 3 Birmingham Alabama Housing Finance Authority. b Alabama HFA response to SIGTARP data call. Due to reporting date differences, disbursement amounts may be more recent than demolition data. a ** Alabama Housing Finance Authority, Treasury Reports, Quarterly Performance Report, Q1 2017, no date. 92 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HHF in Arizona SIGTARP has identified significant inefficiencies at the Arizona state agency, despite being paid $24.4 million in TARP. For example:80 • In 6 years, HHF has helped only 4,804 Arizona homeowners, 18% of TARP dollars has not been spent. • The Arizona state agency has not helped 14,844 or 75% of all homeowners who applied for help. In contrast, every home buyer who applied for assistance from the Arizona state agency to purchase a home received assistance (4,148 homebuyers). • Only 24% of all people who applied received help—among the lowest of any HHF state. • Homeowners estimated being helped with HHF was cut by nearly half. • SIGTARP reported in January 2017 that it takes 51 to 131 days to process an application and many cannot withstand such a lengthy delay. HHF Arizona stopped reporting wait times. • During the past year, Arizona’s HHF approved 454 homeowners for assistance. During same time, 8,081 Arizona homeowners lost their homes to foreclosure. FIGURE 4.4 FIGURE 4.5 HARDEST HIT FUND – USE OF FUNDS IN ARIZONA, STATUS OF ARIZONA HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 8% 1% 18% 22% 52% 7% 24% 68% TARP Dollars to State Agency ($24,388,817) Homebuyer Assistance ($65,972,389) Unemployment Bridge and Related Assistance ($155,594,490) Unspent ($52,982,256) Homebuyer Assistance ($5,395,339) Unemployment and Related ($32,195,989) Admin Expenses ($15,390,928) Source: Treasury, response to SIGTARP data call, 7/6/2017. Homeowners Helped (4,804) Homeowners Denied (13,509) Homeowners with Withdrawn Applications (1,335) Homeowners In Process (119) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 HHF in California SIGTARP has identified inefficiencies at the California state agency, despite being paid $169 million by Treasury to distribute $2.358 billion in TARP funds. For example:80 • 45,854 of the 162,373 homeowners who applied for HHF either withdrew or were withdrawn by the state agency – one of the highest rates for HHF states. • Over the past year, 5,662 of the 19,701 homeowners who applied for HHF in California withdrew their applications or had them withdrawn. • Only 67,543 of the 162, 373 (42%) homeowners who applied for HHF received assistance. • Over the past year only 6,258 California homeowners received HHF unemployed homeowner assistance, while over 800,000 are currently unemployed in the state. FIGURE 4.6 FIGURE 4.7 HARDEST HIT FUND – USE OF FUNDS IN CALIFORNIA, STATUS OF CALIFORNIA HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 7% 2% 25% 68% 42% 28% 28% TARP Dollars to State Agency ($168,568,107) Unemployment Bridge and Related Homeowners Helped (67,543) Assistance ($1,656,063,313) Homeowners Denied (45,524) Unspent ($593,400,858) Unemployment and Related ($520,150,355) Admin Expenses ($73,250,503) Source: Treasury, response to SIGTARP data call, 7/6/2017. Homeowners with Withdrawn Applications (45,854) Homeowners In Process (3,452) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. 93 94 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HHF in Florida SIGTARP has found significant inefficiencies in the Florida state agency, despite being paid $73.3 million by Treasury to distribute TARP funds. In October, 2015, SIGTARP issued an audit report making findings about severe underperformance in HHF by at the state agency. Some of the problems with HHF in Florida include:80 • Only 22% of homeowners seeking unemployment help from the Florida state agency actually received that help (28,593 of 131,484), while 97% (8,400 of 8,626) of homebuyers received help. • The Florida state agency had the third highest rate of homeowners with withdrawn applications (44%) of all the HHF states. • Over the last year 58% of homeowners withdrew their HHF application or had their application withdrawn, among the highest in the country during that period. • As of March 31, 2017, Florida’s HHF program had an 14 month backlog of homeowner applications, based on processing of 2,662 applications last quarter, while 12,738 homeowners were still waiting for a decision when the quarter ended. • Only 1,584 homeowners received help from Florida’s HHF unemployment bridge program last year, while Florida currently has 404,500 unemployed workers. • Only 35% of the estimated number of homeowners received HHF help. FIGURE 4.8 FIGURE 4.9 HARDEST HIT FUND – USE OF FUNDS IN FLORIDA, STATUS OF FLORIDA HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 6% 11% 10% 26% 57% 22% 25% 43% TARP Dollars to State Agency ($73,345,685) Homebuyer Assistance ($125,471,931) Unemployment Bridge and Related Assistance ($650,649,506) Unspent ($298,355,685) Homebuyer Assistance ($63,180,653) Unemployment and Related ($183,629,313) Admin Expenses ($51,545,719) Source: Treasury, response to SIGTARP data call, 7/6/2017. Homeowners Helped (28,593) Homeowners Denied (32,887) Homeowners with Withdrawn Applications (57,266) Homeowners In Process (12,738) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 HHF in Georgia SIGTARP has identified significant inefficiencies at the Georgia state agency, despite being paid $32.0 million by Treasury to distribute Federal HHF dollars. For example:80 • More than two-thirds (67%) (20,051) of homeowners who applied did not receive HHF help. • In 6 years, only 30% (9,061 of 29,790) homeowners received help from HHF among the lowest rate of any HHF state. • 40% of homeowners who sought HHF help were denied by the state agency among the highest in of all the HHF states. • Over the last year only 1,247 homeowners were approved for the unemployment bridge and related programs, 237,421 remain unemployed in Georgia. • Almost half of the TARP funds allocated to Georgia have not been spent. • Over the past year, the number of people denied for HHF (43%) has been among the highest in the country during that period. FIGURE 4.10 FIGURE 4.11 HARDEST HIT FUND – USE OF FUNDS IN GEORGIA, STATUS OF GEORGIA HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 2% 9% 45% 30% 27% 28% 31% 46% 40% 40% TARP Dollars to State Agency ($32,043,622) Unemployment Bridge and Related Homeowners Helped (9,061) Assistance ($173,813,365) Homeowners Denied (11,922) Unspent ($167,621,393) Unemployment and Related ($151,812,903) Homeowners with Withdrawn Applications (8,129) Admin Expenses ($15,808,490) Source: Treasury, response to SIGTARP data call, 7/6/2017. Homeowners In Process (638) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. 95 96 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HHF in Illinois SIGTARP has identified inefficiencies at the Illinois state agency, despite being paid $37 million by Treasury. For example:80 • In 6 years, HHF has helped only 15,172 Illinois homeowners. • Illinois homeowners who received HHF assistance had to wait as long as 165 days (depending on the program they applied for) to receive assistance. • Over the last year, the Illinois state agency only approved 1,138 homeowners for HHF assistance, while 275,090 people are unemployed in Illinois. • Only 91 properties were demolished after more than 2 years. FIGURE 4.12 FIGURE 4.13 HARDEST HIT FUND – USE OF FUNDS IN ILLINOIS, AS OF 3/31/2017 STATUS OF ILLINOIS HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 6% 6% 5% 0% 12% 40% 48% 64% 19% TARP Dollars to State Agency ($40,249,228) Homebuyer Assistance ($47,325,000) Homeowners Helped (15,172) Demolition ($2,373,469) Homeowners Denied (4,589) Unemployment Bridge and Related Assistance ($354, 576,350) Homeowners with Withdrawn Applications (2,780) Unspent ($294,265,501) Homeowners In Process (1,190) Homebuyer Assistance ($25,675,000 ) Unemployment and Related ($225,933,982) Demolition ($14,626,531 ) Admin Expenses ($28,029,988 ) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. Source: Treasury, response to SIGTARP data call, 7/6/2017. TARP-Funded Demolition After more than two years, the $17 million TARP-funded demolition program in Illinois has just barely gotten off the ground. The Illinois state agency has only demolished 91 abandoned houses using $2.4 million. 97 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 TABLE 4.9 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN ILLINOIS, AS OF 3/31/2017** Most Recent Quarter Cumulative 18 91 Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative Joseph Corporation $— 0 0 Northern Lights Development $— BCMW Community $— Services, Inc. $— 0 0 0 5 Properties Demolished/Removed City/County Partnera Fox Valley Habitat for Humanity Aurora Centralia Chicago Greater Englewood CDC Sunshine Gospel Ministries $— $120,275 Chicago Heights Cook County Land Bank Authority $— 0 0 Danville Habitat for Humanity Danville $— 0 0 Community Partners for Affordable Housing $— 0 0 Northwestern Illinois Community Action Agency $— 0 11 8 Evanston Freeport NW Homestart, Inc. $278,853 $209,163 0 $— 0 0 0 4 Joliet South Suburban Land Bank and Devt. Authority Macomb Western Illinois Regional Council Community Action Agency Moline Moline Community Development Corporation $117,550 $131,548 0 4 $65,022 0 2 $— 0 0 $144,700 0 8 Rock Island Economic Growth Corp. $286,560 0 9 Comprehensive Community Solutions, Inc $496,796 11 23 0 0 4 4 Ottawa Starved Rock Homes Development Corp Park Forest South Suburban Land Bank and Devt. Authority Peoria Peoria Citizens Community for Economic Opportunity Riverdale Cook County Land Bank Authority Rock Island Rockford Round Lake Beach Rockford Corridor Improvement, Inc. The Fuller Center for Housing–Hero Project Lake County Enos Park Neighborhood Improvement Association Springfield $46,015 $— $132,296 Nehemiah Expansion $— The Springfield Project $— Sterling Rock Island Economic Growth Corp. $196,563 1 8 Urbana Habitat for Humanity of Champaign County $149,168 2 5 a b Illinois Housing Development Authority. Illinois HFA response to SIGTARP data call. Due to reporting date differences, disbursement amounts may be more recent than demolition data. **Illinois Housing Development Authority, Illinois Hardest Hit Program, Reporting, Quarterly Performance Report, Q1 2017, no date. 98 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HHF in Indiana SIGTARP has identified inefficiencies at the Indiana state agency, despite being paid $32 million in TARP. For example:80 • After 6 years, HHF has helped only 9,127 Indiana homeowners and 33% of TARP dollars have not been spent. • The Indiana state agency lowered the number of homeowners it estimated helping with HHF from 16,257 homeowners to 11,335 homeowners, as it shifted more TARP funds to demolition. FIGURE 4.14 FIGURE 4.15 HARDEST HIT FUND – USE OF FUNDS IN INDIANA, STATUS OF INDIANA HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 3% 8% 11% 9% 33% 48% 6% 82% TARP Dollars to State Agency ($31,964,940) Demolition (22,886,161) Unemployment Bridge and Related Assistance ($137,981,952) Unspent ($92,966,903) Demolition ($52,113,839) Unemployment and Related ($34,516,555) Admin Expenses ($6,336,509) Homeowners Helped (9,127) Homeowners Denied (662) Homeowners with Withdrawn Applications (1,029) Homeowners In Process (280) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. Source: Treasury, response to SIGTARP data call, 7/6/2017. TARP-Funded Demolition The $75 million TARP-funded demolition program in Indiana has demolished 1,621 properties, spending almost $23 million in TARP. 99 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 TABLE 4.10 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN INDIANA, AS OF 3/31/2017** Properties Demolished/Removed Locality City of Alexandria Partnera Contractors/Subcontractors Alexandria Redevelopment Commission Cumulative 218 1,621 Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative 0 19 4 37 0 1 14 14 $237,626 Madison County Council of Governments $— Miller’s Excavating & Demolition Anderson Community Development Corporation $299,833 Anderson Redevelopment Commission $240,242 Bethesda Missionary Baptist Church City of Anderson Most Recent Quarter $22,994 Habitat for Humanity of Madison County $— Operation MOVE-In, LLC $— South Meridian Church of God $— Shepherd Homes General Contractor Gerry's Construction Services Apfel, Inc. Davis Excavating, Inc. City of Auburn Redevelopment Commission City of Auburn $— Habitat for Humanity of Northeast Indiana $21,341 Knott Drainage & Excavating Inc. City of Austin Austin Redevelopment Commission (ARC) $149,625 Southern Indiana Housing & Community Development Corp. $— City of Bicknell Bicknell Bulldog Development Corporation $223,720 14 14 City of Brazil Clay County Economic Redevelopment Commission $169,720 0 9 0 0 0 0 3 3 0 8 City of Brookville City of Cambridge City Brookville Redevelopment Commission $— Kara Knapp $— Tammy Davis, III $— Carla Boyles $— Jonathan Winchester $— Robert Fortman $— Administrative Resources Association (ARA) City of Columbus $ 50,633 Southern Indiana Housing & Community Development Corporation $— Thrive Alliance, Inc. $— Connersville Urban Enterprise Association $99,499 City of Connersville Whole Family Community Initiative, Inc./House of Ruth of Connersville $69,531 City of Daleville Daleville Parks, Inc. $— 0 0 City of Delphi Habitat for Humanity of Lafayette, Inc. $— 0 0 City of Dunkirk Dunkirk Industrial Development Corporation $96,709 0 9 7 50 $— 0 0 $269,662 0 20 Frank Construction & Excavating, Inc. Kesler Excavating, LLC Unknown City of East Chicago $9,242 East Chicago Department of Redevelopment $573,719 East Chicago Redevelopment Commission $74,615 JM Industrial Services, Inc. Actin Contracting, LLC City of Edwardsport Keith Martin Elwood Redevelopment Commission City of Elwood Miller's Excavating & Demolition Renascent, Inc. Continued on next page 100 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN INDIANA AS OF 3/31/2017** Locality Partner a Contractors/Subcontractors Amanda Hanna Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative 59 123 28 207 19 336 3 24 0 19 $8,523 Comfort Homes $— Community One, Inc. $54,505 David Clark $45,076 ECHO Housing Corporation $197,834 Evansville Brownfields Corporation $719,506 Evansville Housing Authority City of Evansville (CONTINUED) $— Full Gospel Mission $20,572 Gethsemane Church $28,941 Gloria Peek $7,361 Habitat for Humanity of Evansville $210,422 Hope of Evansville $— James Bradley $9,606 JBELL Properties, LLC $10,838 Jonathan Page $7,595 Memorial Community Development Corporation $26,725 New Odyssey Investments, LLC $360,008 Ozaman Family Shelter Corp. $18,238 Pleasant Chapel General Baptist Church $33,394 Hazex Construction Co. Unknown $13,341 Housing and Neighborhood Devt. Svcs, Inc. $4,021,452 Diamond Green Group Inc. Martin Enterprises Inc. City of Fort Wayne Patriot Engineering Paul Davis Restoration Protechs, Inc. Rothberg Logan & Warsco LLP Broadway Area Community Development Corp. $117,114 City of Gary Redevelopment Commission $184,928 Fuller Center for Housing of Gary $3,193,126 Sojourner Truth House $14,351 The Sojourner Truth House City of Gary $113,691 C. Lee Construction Services Gary Material Supply Aavatar Enterprises Actin Contracting, LLC JM Industrial Services, Inc. Spirit Wrecking & Excavation, Inc. Unknown City of Hammond $13,884 Hammond Redevelopment Commission $69,727 United Neighborhoods, Inc. $320,526 JM Industrial Services, Inc. RSR Demolition, LLC Blackford Development Corporation City of Hartford City $176,337 Community & Family Services $— Jay Dawson $— Rosalie Adkins $— Shroyer Bros Inc. Continued on next page 101 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN INDIANA AS OF 3/31/2017** Locality Partner a Contractors/Subcontractors Community Alliance of Far Eastside Demolished in Most Recent Quarter Demolished, Cumulative 11 106 $— 0 0 Disbursements to Partners, Program to Dateb $— Mapleton-Fall Creek Development Corporation $58,167 Near East Area Renewal, Inc. $95,704 Near North Development Corporation City of Indianapolis (CONTINUED) $110,330 Renew Indianapolis $1,247,132 Riley Area Development Corporation $17,481 C&M Wrecking Inc. Ray's Demolition LLC Nel Main Interiors, Inc. Construction Waste Renascent, Inc. City of Kendellville Campbell and Fetter Bank City of Knox Starke County Economic Devt. Foundation, Inc. $145,753 6 10 Kokomo Community Development Corporation $887,575 2 77 0 0 $57,351 0 5 Freedom First Excavation and Demo LLC Vincent Concrete Merritt's Truck & Auto Repair City of Kokomo Donathon's Inspections City of Firsts Excavating and Demo LLC Yardberry Landscape Excavating LA Excavating City of Lagro David Pefley $— Kevin Campbell $— City of Lawrence Lawrence Community Development Corporation City of Lebanon Lebanon Community Development Corporation City of Logansport Logansport Municipal Building Corporation Ray’s Demolition LLC $38,550 0 3 $582,318 1 34 $1,070,751 0 63 0 3 0 0 0 30 Allback Construction LLC B&G Construction Marion Redevelopment Commission Keith Sullivan Excavating, Inc. Dave's Excavating Afford able Housing Corporation City of Marion Republic Services Grant County Lawn Care Randal Miller & Associates Quality Environmental Solutions Inc. City of Montpelier City of Muncie City of New Castle Blackford Development Corporation $30,578 Community and Family Services $— Shroyer Bros Inc. Faith Builders $— Muncie Redevelopment Commission $— Healthy Communities of Henry County $66,829 Henry County Redevelopment Commission $20,012 Interlocal Community Action Program, Inc. $72,074 New Castle Housing Authority $— Westminster Community Center $69,744 Neal Scrap Metals LLC Continued on next page 102 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN INDIANA AS OF 3/31/2017** Locality Demolished in Most Recent Quarter Demolished, Cumulative 5 6 1 4 0 103 0 5 $151,916 0 9 Habitat for Humanity of Shelby County $ 85,027 0 5 Near Northwest Neighborhood, Inc. $153,522 South Bend Heritage Foundation $174,675 0 61 Urban Enterprise Association $699,216 0 0 0 10 0 16 0 0 0 0 Partner a Contractors/Subcontractors Habitat for Humanity of Miami County, Inc. City of Peru Disbursements to Partners, Program to Dateb $— Miami County Economic Development Authority 105,112 Miami County Master Gardener Association $— Scratching Post Cat Rescue City of Portland (CONTINUED) $— Community and Family Services $56,300 Unknown $19,384 Good News Habitat for Humanity, Inc. (Formerly Habitat for Humanity of Greater Richmond) $175,000 Neighborhood Services Clearinghouse City of Richmond $1,394,454 Culy Contracting, Inc. Mikesell Excavating Inc Cox Excavating Plus Complete Demolition Services LLC Pro Lawn Care & Landscaping City of Rising Sun City of Rushville City of Shelbyville City of South Bend Redevelopment Commission of the City of Rising Sun, IN $116,536 RSOC Senior Citizen Housing Inc. $— Total Property Care, LLC Southern Indiana Housing & Community Development Corp Holman Excvating LLC Indiana Earth, Inc City of St. Joe City of Sullivan Habitat for Humanity of Northeast Indiana $— Larry Griffin $— Michael Mills $— Sullivan City Redevelopment Commission $138,410 Freedom First Excavating and Demo LLC Terre Haute Department of Redevelopment City of Terre Haute $192,693 West Terre Haute Redevelopment Commission $— Bell & Bell Demolition Inc. Hoggatt Excavating & Demolition City of Vincennes City of Walton Carol Anderson $— Chris Case $— Dan Vories $— Forest and Charity Davis $— Jack Stilwell $— Karen Evans $— Larry Stuckman $— Leonard Stevenson $— Mark Loveman $— Matt McCoy $— Priscilla Wissell $— Randall E. Madison $— Rick Szudy $— Spiritwoman Greywolfe $— Steven Kramer $— Thursday Church $— United Pentecostal Tabernacle $— William Ridge $— Cass County Redevelopment Commission $— Continued on next page 103 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN INDIANA AS OF 3/31/2017** Locality City of Washington Partner a Contractors/Subcontractors Davies County Economic Development Foundation, Inc. Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative 10 10 3 11 5 18 $92,720 Habitat for Humanity of Daviess County, Inc. $— Washington Housing Authority $— Aurora Development Corporation $19,403 Aurora Redevelopment Commission $46,197 Casey Kaiser $11,109 John & Darlene Albright $— John Albright County of Dearborn (CONTINUED) $8,672 Joseph Fette $— Laura Williams $11,666 Linda & Wayne Ketterman, Co-Trustees of the Linda Ketterman Revocable Trust $23,525 Moores Hill Redevelopment Commission $30,662 Robert & Janice Fehrman $8,963 Victor C. Fay, III $14,328 Probst Excavating Inc. County of Elkhart La Casa Real Estate Holding, LLC $358,417 Pelley Excavating Continued on next page 104 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN INDIANA AS OF 3/31/2017** Locality Partner a Contractors/Subcontractors Disbursements to Partners, Program to Dateb Anna Keil $11,092 Barnaby Knoll $58,808 Billy Ray Walden $22,723 Brandon & Jane Taylor $11,025 Brenda Boyer $— Brenda Farber $18,000 Brian C. Dawson $16,638 Chris Schmidt $14,720 Daniel & Sherry Engler $19,006 David Hill $13,700 Donald Keith & Wilma Newcome Demolished in Most Recent Quarter Demolished, Cumulative 1 42 8 9 0 1 8 24 $9,811 Elizabeth Schlacks $— Gloria & Jose Garcia $14,495 Jason Spindler County of Gibson (CONTINUED) $— Nancy Carsey, Jay and Richard Stevens $14,831 John D. Young $18,540 Lillie E. Gardner Wheelhouse, Joseph H. Gardner and Judith L. Gardner $17,312 Keith Perkins $— Kenneth Wolf $12,575 Leslie Marshall $17,119 Mark A. Tooley $— Nicholas Burns $29,906 Princeton Redevelopment Commission $160,826 Ralph Debord $11,200 Randall A. Scales $15,425 Richard Ellis $16,899 Richard Kolb $— Rick and Elaine Sides $— Scott & Kathryn St. Clair $9,942 Shela Besing $19,793 Sheryl & Allen Isakson $12,204 Steven & Brian Dyson $17,887 Thomas Johnstone $52,137 Tim Thompson $31,675 Timothy A. Beadles $— Naas & Son, LLC County of Greene Greene Redevelopment Commission County of Howard Howard Redevelopment Commission $131,659 Carr-Thomas Construction Inc. $— Jessee Trine 19,569 Allen and Erma Roedel $— Beverly Stone & Katrina Wagner $13,645 Brett Newman $— Bruce and Kathy Martin $— Dale Reuter County of Posey $22,382 James C. Welch, Jr $— Karen Baker $— Mt. Vernon Redevelopment Commission $261,052 Randall Yeida and Susan Marshall $6,922 Sherriell Thompson $23,712 Naas & Son, LLC Earth Services Continued on next page 105 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN INDIANA AS OF 3/31/2017** Locality Partner County of Pulaski White’s General Contracting County of Shelby Habitat for Humanity For Shelby Co. a Contractors/Subcontractors (CONTINUED) Disbursements to Partners, Program to Dateb County of Sullivan Sullivan City Redevelopment Commission $— Sullivan County Redevelopment Commission $— County of Vigo West Terre Haute Redevelopment Commission Andy & Donna VanWinkle Demolished, Cumulative 0 15,012 Bettye Lee 15,216 Boonville Now 278,858 Brian Hendrickson 12,070 Charles L. Allen County of Warrick Demolished in Most Recent Quarter $— Chris Lunn 25,000 Clifford Hayden 12,108 Daryl K. Saltzman, Alan E. Saltzman, and Elizabeth C. Saltzman-Griggs 17,277 Habitat For Humanity of Warrick County 20,282 James B. Decker, II 13,579 Josh Barnett 22,166 Larry & Karen Willis 15,487 Larry D. Speicher & Scott R. Speicher 14,336 Lori Lamar 15,618 Ronald & Annis M. Marshall 10,057 Ronald Evans 3 36 $— Roy and Linda Paxton 23,425 Scott Speicher Terry D. Cline and Kathy J. Cline 11,966 Thomas Key $— Tim A McKinney 11,364 Wesle & Maureen Hack 13,916 Zachary Lee Bailey $— Jerry Aigner Construction, Inc. Town of Arcadia Curtis and Mary Parr $21,015 0 1 Town of Coatesville National Road Heritage Trail $15,536 0 1 2 3 0 3 1 1 0 0 0 4 Cathy Griffith Darrell & Robin Lindsay Town of Decker $— $18,151 David & Bonnie Wehmeirer $6,442 Decker Community Center $— Doug Deyoe $— Kathy Hartigan $— William Beamon David and Dianna Mosier and Danielle Virgil $— $7,265 Town of Greens Fork Mendy Rose Town of Hagerstown Joe Smith, Jefferson Township Trustee $— Randy Moles $— Town of Oaktown Knox County Housing Authority $— Town of Richland City The Friends of Richland Monty and Mary York Edward Nugent $8,265 $14,765 $8,765 $61,670 Continued on next page 106 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN INDIANA AS OF 3/31/2017** Locality Partnera Town of Silver Lake Silver Lake Education Foundation Town of Sweetser Contractors/Subcontractors Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative $29,252 0 3 $24,898 0 2 0 9 Greene Excavating Sweetser Redevelopment Commission Habitat for Humanity of Northeast Indiana Town of Waterloo (CONTINUED) 50,428 RP Wakefield Co. 15,699 Waterloo Redevelopment Commission 106,317 Knott Drainage & Excavating Inc. Indiana Housing and Community Development Authority. b Indiana HFA response to SIGTARP data call. Due to reporting date differences, disbursement amounts may be more recent than demolition data. **Indiana Housing and Community Development Authority, Indiana’s Hardest Hit Fund, Quarterly Reports to the U.S. Treasury, Quarterly Performance Report, Q1 2017, no date a SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 HHF in Kentucky The Kentucky state agency has been paid $16.3 million by Treasury to distribute these Federal dollars. For example:80 • Last year, only 889 Kentucky homeowners received HHF help through Kentucky’s unemployment program, despite there being approximately 97,409 unemployed people in Kentucky. • 69% of homeowners received help, while 17% of homeowners were denied and 12% of homeowners had their applications withdrawn. • As of March 31, 2017, Kentucky Kentucky’s HHF program has a 58 day backlog of homeowner applications waiting to be processed. FIGURE 4.16 FIGURE 4.17 HARDEST HIT FUND – USE OF FUNDS IN KENTUCKY, STATUS OF KENTUCKY HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 8% 1% 7% 12% 26% 17% 59% 70% TARP Dollars to State Agency ($16,323,252) Homebuyer Assistance ($14,825,940) Unemployment Bridge and Related Assistance ($124,443,098) Unspent ($54,782,702) Homebuyer Assistance ($9,424,060) Unemployment and Related ($41,706,509) Admin Expenses ($3,652,133) Source: Treasury, response to SIGTARP data call, 7/6/2017. Homeowners Helped (8,931) Homeowners Denied (2,206) Homeowners with Withdrawn Applications (1,559) Homeowners In Process (158) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. 107 108 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HHF in Michigan The Michigan state agency, paid $41.5 million in TARP, appears to have shifted their entire focus to demolition and away from helping homeowners in HHF. For example:80 • During the first quarter of 2017, only 1 homeowner received unemployment assistance. There were 247,800 people in Michigan unemployed as of that date. • Fewer than half of all homeowners seeking help from the state agency received HHF assistance (69,384 homeowners sought help and 33,981 received that help). FIGURE 4.18 FIGURE 4.19 HARDEST HIT FUND – USE OF FUNDS IN MICHIGAN, STATUS OF MICHIGAN HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 6% 22% 1% 20% 37% 49% 35% 30% TARP Dollars to State Agency ($41,472,054) Demolition ($172,089,806) Homeowners Helped (33,981) Unemployment Bridge and Related Assistance ($268,569,324) Homeowners Denied (21,047) Unspent ($286,353,391) Demolition ($209,196,528) Unemployment and Related ($48,647,064) Admin Expenses ($28,509,799) Homeowners with Withdrawn Applications (13,992) Homeowners In Process (434) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. Source: Treasury, response to SIGTARP data call, 7/6/2017. TARP-Funded Demolition The $381.2 million TARP-funded demolition program has demolished 11,249 homes in Michigan, after more than three years, spending $172.1 million on demolition. 109 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 TABLE 4.11 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN MICHIGAN, AS OF 3/31/2017** Properties Demolished/Removed City Partner Primary Demolition Contractor Adrian Lenawee County Land Bank Authority Slusarski Excavating & Paving Inc. a 763 7,119 $997,695 1 73 $26,894,393 95 2,075 $7,417,511 2,135 $35,374,067 210 $2,984,425 Farrow Group Jenkins MCM Mangement Corp Rademacher 24 $350,079 783 $11,958,822 26 $399,227 108 $1,683,443 170 $2,901,916 1,769 $29,413,923 46 $494,084 334 $5,069,942 1 $16,522 Rickman Enterprise Group, LLC 449 $7,907,422 Salenbien Trucking and Excavating, INC 168 $2,350,103 19 $193,828 Time Savers 7 $118,632 Unknown 2 $32,030 International Construction Inc 43 $574,553 Lyle Demolition LLC 20 $263,443 Salenbien Trucking and Excavating, INC 10 $159,699 Smalley Construction Efficient Demolition, Inc. Fick Excavating, Inc. Jack Fick Excavating Inc. Genesee County Land Bank Authority $114,387,757 $5,230,030 475 Homich Flint 8 361 Esso Wrecking Wayne Metro – Ecorse 0 Able Demolition ESSO Ecorse $160,257 ABC DEMOLITION COMPANY, INC. DMC Group Detroit Land Bank Authority Demolished, Cumulative $491,752 Direct Construction Services, LLC Detroit Demolitions Demolished in Most Recent Quarter $160,257 BLUE STAR Kristine Sue Stanley 9 $104,113 377 $4,474,152 14 $183,532 57 $724,054 L Zellar and Sons Excavating, Inc. 350 $4,363,327 L.A. Construction Corp 231 $3,048,420 North American DIstmantling Corp. 716 $9,580,009 S.C. Environmental Services, LLC 68 $892,337 193 $2,956,927 60 $567,521 Salenbien Trucking and Excavating, INC W. T. Stevens Construction, Inc. 11,249 Disbursements to Partners, Program to Dateb 8 Adamo Cumulative 996 TARP Dollars Used* 32 313 Construction, LLC Most Recent Quarter Continued on next page 110 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN MICHIGAN, AS OF 3/31/2017** City Grand Rapids Partner a Habitat for Humanity of Kent County Primary Demolition Contractor Pitsch Companies, Inc. 11 $253,934 Specialized Demolition, Inc. 15 $364,890 Unknown 1 $12,920 ECO Demolition 5 $119,284 F Lax Construction Pitsch Companies, Inc. River City Excavating Specialized Demolition, Inc. Highland Park Michigan Land Bank (Highland Park) Inkster Michigan Land Bank (Inkster) Ironwood Gogebic County Land Bank Authority John George Home, Inc. Ingham County Land Bank Fast Track Authority - HHF Muskegon Heights Muskegon County Land Bank Authority $21,682 $72,410 100 $2,187,715 Salenbien Trucking and Excavating, INC Adamo 9 $149,182 21 $449,302 Angelo Luppino, Inc. 8 $172,856 Associated Constructors, LLC 4 $59,899 Snow Country Contracting, Inc. 15 $289,248 Dunigan Brothers 32 $717,129 Salenbien Trucking and Excavating, INC R A Baker Saginaw County Land Bank Authority $39,186 $999,452 $1,189,065 151 $2,226,898 S.C. Environmental Services, LLC JMB Melching 34 $327,715 126 $1,400,883 9 $94,866 74 $1,024,528 3 $46,994 38 $555,583 Homich 3 $71,984 Merlo Construction 1 $10,276 O'Brien Construction c/o ADR Consultants, LLC 4 $44,788 14 $319,626 Hammar's Contracting 5 $100,218 L&J Construction 7 $138,004 29 $660,268 E Gilbert & Sons Saginaw 2 79 S.A. Torello Wayne Metro - River Roughe HHF $330,514 43 Salenbien Trucking and Excavating, INC River Rouge $82,642 16 Bolle Contracting, Inc BLUE STAR Port Huron Neighborhood Housing Corporation 4 Salenbien Trucking and Excavating, INC Adamo Port Huron $59,625 $586,609 1 Able Demolition Michigan Land Bank (Pontiac) 3 29 4 313 Construction, LLC Pontiac $25,000 $908,183 Unknown Rickman Enterprise Group, LLC Lansing 1 51 Adamo Lester Brothers Jackson Demolitions TARP Dollars Used* 9 $106,020 Salenbien Trucking and Excavating, INC 30 $502,050 Superior Wrecking Inc. 12 $156,694 Braddock Demolition 34 $523,871 Mead & Sons Contracting, Inc 99 $1,317,713 Rodney Woods Builder 578 $7,784,722 Rohde Brothers Excavation 131 $1,569,697 (CONTINUED) Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative $2,352,127 0 117 $2,260,125 18 104 $598,483 17 30 $522, 003 0 27 $5,025,002 31 226 $3,415,962 37 230 $1,728,598 16 160 $2,168,645 9 146 $898,490 6 41 $764,674 3 51 $11,196,003 0 842 Continued on next page SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN MICHIGAN, AS OF 3/31/2017** City TOTAL Partner a Primary Demolition Contractor Demolitions TARP Dollars Used* 11,249 $173,370,305 111 (CONTINUED) Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative Notes: a Michigan Homeowner Assistance Nonprofit Housing Corporation (MHA). b Michigan HFA response to SIGTARP data call. Due to reporting date differences, disbursement amounts may be more recent than demolition data. * “TARP Dollars Used” includes demolition, acquisition, greening, maintenance and other costs associated with the demolition of the respective properties. Not all of the TARP dollars used were paid to and/or retained by the Primary Demolition Contractor. ** Michigan Homeowner Assistance Nonprofit Housing Corporation, Hardest Hit U.S. Treasury Reports, Quarterly Performance Report Q1 2017, no date. 112 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 114 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HHF in Mississippi SIGTARP has identified inefficiencies at the Mississippi state agency, despite being paid $13.3 million in TARP. For example:80 • In 6 years, HHF has helped only 4,258 Mississippi homeowners and 37% of TARP dollars have not been spent. • SIGTARP reported in January 2017 that Mississippi homeowners typically had to wait about 100 days to get HHF assistance. The Mississippi state agency stopped reporting wait times. • Only 573 new Mississippi homeowners were admitted to HHF last year. • 32% of 6,501 Mississippi homeowners who applied for HHF help did not receive it. FIGURE 4.20 FIGURE 4.21 HARDEST HIT FUND – USE OF FUNDS IN MISSISSIPPI, STATUS OF MISSISSIPPI HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 2% 9% 9% 39% 66% 23% 52% TARP Dollars to State Agency ($13,307,728) Unemployment Bridge and Related Assistance ($78,809,223) Unspent ($52,757,163) Demolition ($20,000,000) Unemployment and Related ($24,538,564) Admin Expenses ($8,218,599) Homeowners Helped (4,258) Homeowners Denied (1,523) Homeowners with Withdrawn Applications (589) Homeowners In Process (131) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. Source: Treasury, response to SIGTARP data call, 7/6/2017. TARP-Funded Demolition The Mississippi state agency’s $20 million TARP-funded demolition program was launched on December 19, 2016, and the Mississppi State agency has not reported any demolition. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 HHF in Nevada SIGTARP has identified the Nevada state agency contractor NAHAC as one of the worst participants in HHF, despite being paid $18.6 million in TARP. For example:80 • Nevada had a 95% drop in number of homeowners helped each quarter from the first quarter of 2013 to 47 in the first quarter of 2017, see Figure 4.22. • Only 47 Nevada homeowners received help from HHF last quarter, even though 67,000 people in Nevada are unemployed and the program has $91 million available to help them. • Almost half of the TARP dollars have not been spent. FIGURE 4.22 NEVADA HOMEOWNERS APPROVED FOR HHF, BY QUARTER 1200 1000 964 1,015 800 600 556 400 372 333 300 234 200 550 246 209 212 119 122 114 0 88 1 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 Q4 2012 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 2014 Q4 55 Q1 24 14 24 38 15 Q2 Q3 Q4 Q1 Q2 2015 20 27 Q3 Q4 2016 Homeowners Approved for HHF Source: SIGTARP Audit Report, “Waste and Abuse in the Hardest Hit Fund in Nevada”, 9/9/2016, https://www.sigtarp. gov/Audit%20Reports/HHF%20Nevada_090916.pdf, accessed 1/25/2017. • The number of homeowners estimated being helped by HHF was lowered by 54%. • Since 2013 spending by the Nevada state agency has increased while the number of homeowners helped has decreased, see Figure 4.23. 47 Q1 2017 115 116 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM FIGURE 4.23 SPENDING BY HARDEST HIT FUND NEVADA COMPARED TO HOMEOWNERS APPROVED FOR HHF $, Homeowners 3,000 HHF Dollars Spent on Gifts, Pizza, Cakes, Picnic & Office Refreshments 2,500 2,000 1,500 1,000 Homeowners Admitted to HHF 500 - 2013 2014 2015 Source: SIGTARP, Audit Report: “Waste and Abuse in the Hardest Hit Fund in Nevada”, 9/9/2016, https://www.sigtarp.gov/ Audit%20Reports/HHF%20Nevada_090916.pdf, accessed 1/13/2017. • Only 35% of all people who applied got HHF help, despite the state’s persistently high mortgage delinquencies, foreclosures and unemployment. • In the last year, 89% of those who applied for help did not receive it. • Nevada’s HHF program has seen 39% of homeowners withdraw their application or have their application withdrawn for them. This is among the highest in the country, as 6,120 of the 15,623 homeowners who applied for HHF assistance in Nevada have withdrawn or been withdrawn by the program. FIGURE 4.24 FIGURE 4.25 HARDEST HIT FUND – USE OF FUNDS IN NEVADA, STATUS OF NEVADA HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 9% 2% 45% 46% 35% 39% 24% TARP Dollars to State Agency ($18,592,034) Unemployment Bridge and Related Assistance ($94,689,751) Unspent ($91,071,451) Unemployment and Related ($84,416,809) Admin Expenses ($6,654,642) Source: Treasury, response to SIGTARP data call, 7/6/2017. Homeowners Helped (5,491) Homeowners Denied (3,745) Homeowners with Withdrawn Applications (6,120) Homeowners Process (267) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 HHF in New Jersey SIGTARP has identified significant inefficiencies at the New Jersey state agency, despite being paid $27.9 million in TARP. For example:80 • In 6 years, HHF has helped only 6,443 New Jersey homeowners, less than half of applicants and 34% of TARP dollars has not been spent. • 53% of homeowners who sought help in New Jersey were denied HHF help – one of highest denial rates in HHF states, 8,223 of the 15,609 homeowners who applied for HHF assistance in New Jersey since the program began have been denied assistance. • Only 30% of those who applied for HHF assistance last year received it. FIGURE 4.26 FIGURE 4.27 HARDEST HIT FUND – USE OF FUNDS IN NEW JERSEY, STATUS OF NEW JERSEY HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 7% 5% 1% 34% 59% 41% 53% TARP Dollars to State Agency ($27,911,295) Unemployment Bridge and Related Assistance ($247,468,279) Unspent ($145,393,781) Unemployment and Related ($128,275,085) Admin Expenses ($17,118,695) Source: Treasury, response to SIGTARP data call, 7/6/2017. Homeowners Helped (6,443) Homeowners Denied (8,223) Homeowners with Withdrawn Applications (203) Homeowners In Process (740) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. 117 118 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HHF in North Carolina SIGTARP has identified some inefficencies at the North Carolina state agency, despite being paid more than $70.4 million in TARP. For example:80 • Two programs designed to help homeowners modify their loans and recast their monthly payments were closed without helping a single homeowner. • SIGTARP reported in January 2017 that homeowners seeking help in North Carolina had to wait from 62 to 112 days to receive assistance. The North Carolina state agency stopped reporting wait times. FIGURE 4.28 FIGURE 4.29 HARDEST HIT FUND – USE OF FUNDS IN NORTH CAROLINA, STATUS OF NORTH CAROLINA HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 3% 2% 10% 13% 29% 58% 67% 18% TARP Dollars to State Agency ($70,392,569) Homebuyer Assistance ($21,105,000) Unemployment Bridge and Related Assistance ($422,861,803) Unspent ($207,137,814) Homebuyer Assistance ($38,966,494) Unemployment and Related ($142,755,641) Admin Expenses ($25,415,679) Source: Treasury, response to SIGTARP data call, 7/6/2017. Homeowners Helped (25,454) Homeowners Denied (6,767) Homeowners with Withdrawn Applications (5,119) Homeowners In Process (1,337) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 HHF in Ohio The Ohio state agency, paid $53.6 million in TARP, appears to be heavily focused on blight demolitions and less focused on helping homeowners with HHF. For example:80 • During the past year, HHF Ohio approved 410 homeowners for HHF assistance. During the same period 19,996 homeowners lost their home to foreclosure. • While the Ohio state agency assisted 24,493 Ohio homeowners with HHF, it has not helped nearly one out of every three applicants. • An HHF program to help homeowners refinance their homes ended without helping a single person; while another program designed to help homeowners with transition assistance only helped 75 homeowners over the last five years. FIGURE 4.30 FIGURE 4.31 HARDEST HIT FUND – USE OF FUNDS IN OHIO, AS OF 3/31/2017 STATUS OF OHIO HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 7% 8% 1% 15% 29% 14% 56% 70% TARP Dollars to State Agency ($53,556,919) Demolition ($61,695,669) Unemployment Bridge and Related Assistance ($430,500,552) Unspent ($222,519,708) Unemployment and Related ($33,184,858) Demolition ($176,333,033) Admin Expenses ($13,001,816) Homeowners Helped (24,943) Homeowners Denied (5,064) Homeowners with Withdrawn Applications (5,558) Homeowners In Process (222) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. Source: Treasury, response to SIGTARP data call, 7/6/2017. TARP-Funded Demolition The $238 million TARP-funded demolition program in Ohio, has demolished 4,370 abandoned houses using $61.7 million, since August 2013. This is the second highest number of demolitions in the HHF program. 119 120 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.12 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN OHIO, AS OF 3/31/2017** Most Recent Quarter Cumulative 107 4,370 Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative $1,044,666 0 60 Properties Demolished/Removed City/County Partner a Contractors/Subcontractors Ashtabula County Land Reutilization Corporation Adams Services Inc. Ashtabula County Port Authority Ashtabula Lower Cork Co. McCall and Spero Environmental Inc. Medico Systems Inc Monit-Air Group Inc. Belmont Belmont County Land Reutilization Corporation $137,696 0 10 Butler County Land Reutilization Corporation $672,814 11 47 $631,295 4 39 $458,297 0 26 Evans Landscaping Humble Environmental Service Butler S/R Industries aka Sharon Roth Timothy W. Carlson Attorney Vickers Demolition Watson Gravel Inc Clark County Land Reutilization Corporation Bonnie's Nursery & Garden Center Clark County Auditor's Office Clark County Clerk of Courts Clark County Community Development "EHS Laboratories - Environmental Hazard Services Huffman Tree Company LLC” Clark KC Fencing Unlimited LLC Law Office Mark F. Roberts Neighborhood Housing Partnership of Greater Springfield, Inc. Perry's Lawncare & Landscaping Tony Smith Wrecking Columbiana Columbiana County Land Reutilization Corporation Yarian Brothers Construction, Inc. Continued on next page 121 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN OHIO, AS OF 3/31/2017** City/County Partner a Contractors/Subcontractors Cuyahoga County Land Reutilization Corporation (CONTINUED) Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative $21,439,746 17 1,660 23823 Ltd LLC A&D Contracting ABC Construction, LLC Aero Abatement Services, Inc AL's Home Repair Services American Metal and Wood Salvage, Inc. American Railroad Tie & Stone Co AMJ Construction AMW Salvage Arbor Pro Tree Care Arick's Services Baumann Enterprises, Inc. Behr Geo Environmental LLC Beneficial Properties Inc. Broadway D&R Contracting C & J Contractors Inc Carey Roofing and Construction Corporation CarTeCor Management LLC Chemtron Corporation Cherokee Demolition Cuyahoga CLB Services LLC Coleman Trucking Inc Danzey Landscaping, Inc. ETA Development Inc. Everest Land Title Agency Inc. Expert Reclaim Inc Foresight EHS Glenn A Smith Sr Consulting Great Lakes Contracting HEZ Enterprises LLC Hooks Landscaping & Snow Plowing, LLC Integrity Environmental Development, LLC JF Construction and Environmental LLC JJK Envinromental Cleaning Jubilee Excavation King's Sons 820, Inc. Kingsway Contracting Kurtz Brothers, Inc L & S Lab Consulting Inc. Lawrence Properties & Rehab. Inc Lee Environmental Cleaning LLC Liberty Tire Recycling Continued on next page 122 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN OHIO, AS OF 3/31/2017** City/County Partner a Contractors/Subcontractors (CONTINUED) Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative $165,847 0 10 $355,454 4 21 Lightening General Contractors Lightning Demolition M & R Industries, Inc. m.a.c. Paran Consulting Mark Brookins/Ginmark Inc. Midtown Demolition Miles Builders New Vista Enterprises O.B.O. Demolition and Construction OBON One Reliable Home Solutions Operation Clean Sweep Otis Maintenance Paran Consulting Partners Environmental Consulting Inc. Precision Environmental Co R.C.I. Services SafeAir Contractors T & T Demolition The Afcose Group The Barker Group The Opal Industrial Group, LLC Uptown Environmental Services LLC Urban Recycling 216 Vlora Construction Inc. XL Excavating Erie County Land Reutilization Corporation Great Lakes Demolition Co. Erie Holcomb Enterprises LLC Stone Environmental, LLC Fairfield Fairfield County Land Reutilization Corp Fairfield County Treasurer Fairfield County Clerk of Courts Fairfield County Port Authority Fairfield Fairhaven Lawn Care Krikbride Lawn Care LEPI Enterprises Inc Ricketts Excavating, Inc. Vinton County National Bank Continued on next page 123 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN OHIO, AS OF 3/31/2017** City/County Partner a Contractors/Subcontractors Central Ohio Community Improvement Corporation (CONTINUED) Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative $6,007,888 6 366 $3,357,259 0 158 Bronze Star Construction City of Columbus Colvin Gravel Company CTL Engineering, Inc. Demo Construction, LLC Department of Development; City of Columbus DSS Services LLC Egner Construction Franklin County, Ohio Friends of the Hilltop H & H Environmental Hina Environmental Solutions, LLC Franklin Lowendick, LLC Luper Neidenthal & Logan McCall and Spero Environmental Inc. McDaniel's Construction Corporation, Inc. Miles-McClellan Construction Company, Inc. North American Environmental Services, LLC Ohio Technical Service, Inc. Poindexter Community Renaissance LLC R3 Inc Rain Brothers, LLC Ransom Company Savaas or Savvas Ramone LLC Superior Enterprises Unlimited LLC Watson General Contracting Hamilton County Land Reutilization Corporation Allgeier and Sons Inc Battle Axe Construction LLC Building Value, LLC City of Cincinnati Code Enforcement Fiscus Trucking & Excavating, Inc. Hamilton Just Right Construction & Lawn Care Service Lawn Life Logan Creek LLC Port of Greater Cincinnati Development Authority R & J Construction Services Rainbow Environmental Services SRW Environmental Services, Inc. Continued on next page 124 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN OHIO, AS OF 3/31/2017** City/County Partner a Contractors/Subcontractors Jefferson County Land Reutilization Corporation (CONTINUED) Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative $337,732 0 23 $492,499 5 27 $2,157,537 7 116 Bruzzese & Calabria Attorneys at Law CT Consultants D&L Unlimited Construction Dave Buckmaster Plumbing & Heating Jefferson County Auditor Jefferson Jefferson County Regional Planning Commission Lawrence T. Piergallini Littlejohn Law, LLC Office of the Prosecuting Attorney Raze International, Inc Thomas Wilson X-Treme Demolition Lake County Land Reutilization Corp Blackmore's Security Inc Conway Land Title Company Crisp Analytical, LLC Lake Cuyahoga HHF Acquisitions, LLC Jim Hall Tree Service JMW Trucking Lake Erie Lawn Service Pillar Excavating Lorain County Land Reutilization Corporation Lorain Diamond Services, Inc. JP Environmental Consulting, Inc. Old Republic National Title Insurance Company Continued on next page 125 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN OHIO, AS OF 3/31/2017** City/County Partner a Contractors/Subcontractors Lucas County Land Reutilization Corporation (CONTINUED) Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative $8,050,759 0 813 $2,247,822 18 152 All Aspects DMD Environmental, Inc. E&H Taylor Construction, Inc. ESI Ecological Services, Inc Hazcorp Environmental Services, Inc. Jackson Industries Corp. LCLRC Holdings LLC Midwest Environmental Control, Inc. Paxton Demolition Lucas SL Hauling & Renovations LLC Total Environmental Services, LLC TTL Associates Inc. City of Toledo J Walker Construction Mike's Hauling and Demolition PB Fabrication & Dismantling T. Smidi Hauling TJRS-LLC Wes Boykin Trucking Mahoning County Land Reutilization Corp Adamczak LLC Battle Axe Construction LLC Canfield Fence Company Capital Title Services., Inc. Cyclone Services, Inc. Environmental Protection Systems LLC Howland Company, LLC Lien Forward Ohio Logan Creek LLC Mahoning County Prosecuting Attorney Mahoning McCall and Spero Environmental, Inc. MCM Services (Maximus Consulting LLC) Metro Land Title Agency, Inc. Ron's Tree & Lawn Service, Inc. SAFECO Environmental, Inc. Safeguard Title Agency Siegel Excavating LLC SKW Prep, LLC Sly's Landscaping Steve Biroshak Triple-Diamond Trucking & Excavating, LLC Upscale Landscaping & Lawn Maintenance Inc. Continued on next page 126 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN OHIO, AS OF 3/31/2017** City/County Partner a Contractors/Subcontractors (CONTINUED) Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative $4,206,922 11 251 $178,326 1 14 $810,269 0 67 Western Reserve Title & Escrow Inc. Mahoning (Continued) White Inc. Associates Youngstown Neighborhood Development Montgomery County Land Reutilization Corp Bladecutters Lawn Service, Inc. Central Insulation Systems Charles Jergens Construction Chicago Title Company, LLC City of Dayton Coolidge Wall Co CountyCorp Montgomery Hart Environmental Resources Montgomery County Clerk of Courts Ohio Technical Service, Inc. Rainbow Home Environmental Services Sierra Environmental Group, Inc. Tall View Palladium Inc. The Evans Group Turn-Key Environmental Consultants, Inc. Portage County Land Reutilization Corporation Butcher and Sons Excavating Portage Diamond Environmental Neighborhood Development Services, Inc. Woodford Excavating LLC Richland County Land Reutilization Corp Accurate Key & Lock Service Certified Environmental, Inc. Chem-Tech Consultants, Inc. H & T Demolition Richland Lowes Home Centers, LLC Ours Excavating Page Excavating, Inc. Rex's Landscaping & Construction, LLC. Richland County Habitat for Humanity Southern Title of Ohio, Ltd. Wallace Turf Care Continued on next page 127 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN OHIO, AS OF 3/31/2017** City/County Partner a Contractors/Subcontractors Stark County Land Reutilization Corp (CONTINUED) Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative $3,155,077 9 206 Al's General Building Contractor, LLC american title associates agency., Inc Analytical Services AWI, Inc. Bertolini Trucking Boswell Concrete, Inc. Campbell Excavating Cardinal Environmental Services, Inc. City of Canton Cottrill Wrecking CRS General Contracting Cutler Homes Danmar Services DCV Construction DDH Construction Emerald Environmental, Inc. Stark FER Title Agency, LLC HEPA Environmental Services Inc. Heritage Union Title Howland Company, LLC John D. Ferrero L & L General Contractors Moore Title Group Paramount Inc. Phillip Schandel PS Construction Quality Care Construction SAG Construction Stark County Clerk of Courts Steve Martin Construction T & L Pest Control The Dell Group, Inc. The Press News Title One Agency, Inc. Urban Green Solutions Continued on next page 128 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN OHIO, AS OF 3/31/2017** City/County Partner a Contractors/Subcontractors Summit County Land Reutilization Corp (CONTINUED) Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative $2,056,268 0 132 AC Lawncare & Landscaping Akron Legal News Assured Abatement Removal Butcher and Son, Inc. Cardinal Environmental Services, Inc. CLB Services LLC Development Finance Authority of Summit County Diamond Environmental Diamond Services, Inc. Emerald Environmental, Inc. First Security Title Corporation Foresight EHS GCS Industrial Services, Ltd Habitat for Humanity of Summit County HEPA Environmental Services Inc. Summit Howland Company, LLC HzW Environmental Consultants LLC Jim Gangle Bulldozing & Excavating Co Inc M & R Industries, Inc. Mark Hostetler Masonry Contractor Minnesota Insured Title Obsidian Environmental Corp Partners Environmental Consulting Inc. Perkins Lawn Maintenance Quality Landscape Services Ray Bertolini Trucking Co SafeAir Contractors Summit County Clerk of Courts Taylor Companies of Ohio The Dell Group, Inc. Titanium Title Agency, LLC TRW Construction LLC Zollinger Sand & Gravel Co Continued on next page 129 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN OHIO, AS OF 3/31/2017** City/County Partner a (CONTINUED) Contractors/Subcontractors Trumbull County Land Reutilization Corp ABS Environmental, Inc. Bauman Land Title Agency, Inc. Diamond Environmental Harrington House & Gardens Hoffman & Walker Co. LPA Holton Inc Howland Company, LLC HzW Environmental Consultants LLC Jireh Properties, LTD M & R Industries, Inc. Trumbull Schubert Title Agency, Inc. South Park Title Agency, Inc. The Title Company of Warren Trumbull County Legal News Valley Title & Escrow Agency, Inc. Jireh Properties, LTD M & R Industries, Inc. Schubert Title Agency, Inc. South Park Title Agency, Inc. The Title Company of Warren Trumbull County Legal News Valley Title & Escrow Agency, Inc. Ohio Homeowner Assistance LLC. b Ohio HFA response to SIGTARP data call. Due to reporting date differences, disbursement amounts may be more recent than demolition data. a ** Ohio Homeowner Assistance LLC, Save the Dream Ohio: Quarterly Reports, Quarterly Performance Report, Q1 2017, no date. Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative $1,899,041 0 172 130 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HHF in Oregon The Oregon state agency has been paid $39.8 million in TARP.There can be improvements. For example:80 • 14,442 of the homeowners seeking help from HHF in Oregon have had their application withdrawn – 48% of all applications, which raises questions about the state agency’s process. • Oregon homeowners receiving HHF assistance typically waited 159 days to receive assistance. The Oregon state agency has stopped reporting wait times. FIGURE 4.32 FIGURE 4.33 HARDEST HIT FUND – USE OF FUNDS IN OREGON, STATUS OF OREGON HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 2% 11% 29% 42% 48% 60% 8% TARP Dollars to State Agency ($39,815,531) Unemployment Bridge and Related Assistance ($210,445,068) Unspent ($99,726,785) Unemployment and Related ($81,914,099) Admin Expenses ($17,865,251) Source: Treasury, response to SIGTARP data call, 7/6/2017. Homeowners Helped (12,374) Homeowners Denied (2,490) Homeowners with Withdrawn Applications (14,442) Homeowners In Process (479) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 HHF in Rhode Island The Rhode Island state agency has been paid $10.6 million in TARP.80 • HHF Rhode Island, has helped 3,129 Rhode Island homeowners and closed its initial HHF program after only two years. • Rhode Island has denied nearly 8 in 10 people seeking help in Rhode Island, over the past year. • The state agency has provided assistance to 531 of first-time homebuyers who applied for HHF down payment assistance, paying up to $7,500 each. FIGURE 4.34 FIGURE 4.35 HARDEST HIT FUND – USE OF FUNDS IN RHODE ISLAND, STATUS OF RHODE ISLAND HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 3% 2% 9% 6% 32% 56% 61% 31% TARP Dollars to State Agency ($10,559,964) Homebuyer Assistance ($3,520,000) Unemployment Bridge and Related Assistance ($65,437,058) Unspent ($38,077,863) Homebuyer Assistance ($1,180,877) Unemployment and Related ($30,044,991) Admin Expenses ($6,851,995) Source: Treasury, response to SIGTARP data call, 7/6/2017. Homeowners Helped (3,129) Homeowners Denied (1,581) Homeowners with Withdrawn Applications (324) Homeowners In Process (108) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. 131 132 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM HHF in South Carolina The South Carolina state agency, which has been paid $35.4 million in TARP, appears heavily focused on demolition.For example:80 • HHF in South Carolina has helped 12,081 homeowners, half of the homeowners who applied. • In the past year, more than a third of homeowners seeking assistance were denied help. • 21% of homeowners seeking help withdrew their application or saw their application withdrawn. • SIGTARP reported in January 2017 that South Carolina homeowners waited 139 to 288 days from application to get assistance. The South Carolina state agency stopped reporting wait times. • Two HHF programs did not help a single homeowner, the Second Mortgage Assistance Program, and the HAMP Assistance Program, before closing in 2011 and 2013, respectively. • A transition program only helped 355 people despite a peak estimate of 6,000. FIGURE 4.36 FIGURE 4.37 HARDEST HIT FUND – USE OF FUNDS IN SOUTH CAROLINA, STATUS OF ALABAMA HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 11% 1% 1% 27% 21% 44% 61% 34% TARP Dollars to State Agency ($34,422,922) Demolition ($3,194,364) Unemployment Bridge and Related Assistance ($195,869,027) Unspent ($85,715,814) Demolition ($26,805,636) Unemployment and Related ($37,049,607) Admin Expenses ($21,860,570) Source: Treasury, response to SIGTARP data call, 7/6/2017. Homeowners Helped (12,081) Homeowners Denied (9,165) Homeowners with Withdrawn Applications (5,773) Homeowners In Process (381) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. 133 SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 TARP-Funded Demolition In more than two years, the South Carolina state agency has only demolished 136 abandoned houses, using $3.2 million out of $30 million. TABLE 4.13 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN SOUTH CAROLINA, AS OF 3/31/2017** Properties Demolished/Removed City/County Aiken County Allendale County Anderson County Bamberg County Partnera Nehemiah Community Revitalization Corp. Second Baptist CDC Charleston County $— Southeastern Housing Foundation $— Anderson Community Development Corp. $— Nehemiah Community Revitalization Corp. $— Pelzer Heritage Commission $— Southeastern Housing Foundation (Bamberg Co.) Southeastern Housing Foundation (Blackville) $ 42,726 $ 75,496 $— City of North Charleston/Metanoia $— PASTORS, Inc. $— Sea Island Habitat for Humanity $— Not Available Chesterfield County Town of Cheraw Community Development Corp. Darlington County Florence County Cumulative 46 136 Demolished in Most Recent Quarter Demolished, Cumulative 0 7 0 0 0 0 0 3 0 3 0 0 $— Southeastern Housing Foundation (Williston) Chester County $— 0 0 $390,733 1 21 Darlington County Habitat for Humanity $— 0 0 Downtown Development Corporation $— 0 0 Allen Temple Community Economic Devt. Corp. $— 2 17 Genesis Homes Greenville Revitalization Corp. Greenville County $— $ 208,730 Allendale County Alive Blackville, CDC Barnwell County Disbursements to Partners, Program to Dateb Most Recent Quarter Habitat for Humanity of Greenville County Homes of Hope, Inc. $270,246 $— $13,720 $100,442 Nehemiah Community Revitalization Corp. $91,234 Neighborhood Housing Corp. of Greenville, Inc. $33,178 United Housing Connections $34,121 Greenwood County Greenwood Area Habitat for Humanity $— 0 0 Hampton County Southeastern Housing Foundation $— 0 0 Myrtle Beach Community Land Trust $— Grand Strand Housing & CDC $— 0 0 Habitat for Humanity of Horry County $— Horry County Kershaw County Santee-Lynches Regional Development Corp. $501,989 2 26 Lancaster County Catawba Regional Development Corporation $577,567 1 21 Laurens County Genesis Homes, Inc. $— 0 0 Columbia Development Corporation $— 0 3 0 0 Richland County Saluda County Columbia Housing Development Corporation $63,764 Eau Claire Development Corporation $31,473 Christ Central $— Continued on next page 134 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN SOUTH CAROLINA, AS OF 3/31/2017** City/County Partnera Habitat for Humanity of Spartanburg, Inc Homes of Hope Spartanburg County Nehemiah Community Revitalization Corp. Disbursements to Partners, Program to Dateb (CONTINUED) Demolished in Most Recent Quarter Demolished, Cumulative 2 27 $36,055 $— $— Northside Development Group $384,865 Regenesis Community Development Corporation $117,239 Upstate Housing Partnership $— Sumter County Santee-Lynches Regional Development Corp $— 0 0 Union County Not Available $— 0 0 Catawba Regional Development Corp. $— 1 8 York County a b Housing Development Corporation of Rock Hill $192,844 SC Housing Corp. South Carolina HFA response to SIGTARP data call. Due to reporting date differences, disbursement amounts or demolition counts may differ from Treasury quarterly performance reports. **SC Housing Corp., SC HELP, Reports, Quarterly Performance Reports, Q1 2017, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 HHF in Tennessee The Tennessee state agency has been paid almost $19.7 million in TARP. For example:80 • In 6 years, HHF has helped 7,367 Tennessee homeowners. • The state agency helped only 55% of the 13,500 homeowners it originally estimated helping. • The Tennessee state agency has demolished six houses. FIGURE 4.38 FIGURE 4.39 HARDEST HIT FUND – USE OF FUNDS IN TENNESSEE, STATUS OF TENNESSEE HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 0% 6% 0% 1% 7% 14% 34% 60% 78% TARP Dollars to State Agency ($19,715,558) Homebuyer Assistance ($180,000) Demolition ($98,782) Unemployment Bridge and Related Assistance ($181,870,243) Unspent ($103,299,294) Homebuyer Assistance ($59,820,000) Demolition ($9,901,218) Unemployment and Related ($17,703,034) Admin Expenses ($15,875,041) Source: Treasury, response to SIGTARP data call, 7/6/2017. Homeowners Helped (7,367) Homeowners Denied (1,306) Homeowners with Withdrawn Applications (697) Homeowners In Process (132) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. 135 136 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM TABLE 4.14 TARP RECIPIENTS IN BLIGHT ELIMINATION PROGRAM IN TENNESSEE, AS OF 3/31/2017** Most Recent Quarter Cumulative 3 6 Disbursements to Partners, Program to Dateb Demolished in Most Recent Quarter Demolished, Cumulative Properties Demolished/Removed City/County Partnera Anderson County Oak Ridge Land Bank $— 0 0 Hamilton County Chattanooga Neighborhood Enterprise $14,975 0 1 Jacobs Ladder CDC $60,851 United Housing, Inc. $22,956 3 5 Shelby County Healthy Transitions Development Group, Inc. a b $— Tennessee Housing Development Agency. Tennessee HFA response to SIGTARP data call. Due to reporting date differences, disbursement amounts may be more recent than demolition data. ** Tennessee Housing Development Agency, Treasury Reports, Quarterly Performance Report, Q1 2017, no date. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 HHF in Washington, DC The District of Columbia state agency has been paid $3.8 million in TARP. HHF DC has helped 748 homeowners, 39% of TARP dollars ($11.6 million) have not been spent. 80 FIGURE 4.40 FIGURE 4.41 HARDEST HIT FUND – USE OF FUNDS IN WASHINGTON, DC, STATUS OF ALABAMA HOMEOWNERS THAT APPLIED TO HHF, AS OF 3/31/2017 AS OF 3/31/2017 3% 3% 13% 16% 39% 48% 78% TARP Dollars to State Agency ($3,783,498) Unemployment Bridge and Related Assistance ($14,292,641) Unspent ($11,577,801) Unemployment and Related ($9,593,313) Admin Expenses ($1,984,610) Source: Treasury, response to SIGTARP data call, 7/6/2017. Homeowners Helped (748) Homeowners Denied (153) Homeowners with Withdrawn Applications (27) Homeowners In Process (32) Source: Treasury, response to SIGTARP data call, 7/6/2017; Treasury, HFA Aggregate Report Q1 2017. 137 138 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 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. Treasury, Action Memorandum - Schedule 2, “Recovered Funds” April 1 2016, obtained via email from Treasury officials on April 6, 2016. SIGTARP analysis of Treasury Hardest Hit Fund Quarterly Financial Reports – obtained via data call from Treasury 7/7/2017. SIGTARP analysis of HHF Participation Agreements and amendments obtained from Treasury “Hardest Hit Fund – Additional Program Information” website @ https://www.treasury.gov/initiatives/financial-stability/TARP-Programs/housing/hhf/Pages/Archival-information. aspx?Program=Hardest+Hit+Fund and Treasury “Hardest Hit Fund - Current Program Documents” website @ https://www.treasury.gov/ initiatives/financial-stability/TARP-Programs/housing/Pages/Program-Documents.aspx, accessed 7/17/2017. SIGTARP analysis of Treasury Hardest Hit Fund Quarterly Financial Reports – obtained via data call from Treasury 7/7/2017. SIGTARP analysis of HHF Participation Agreements and amendments obtained from Treasury “Hardest Hit Fund – Additional Program Information” website @ https://www.treasury.gov/initiatives/financial-stability/TARP-Programs/housing/hhf/Pages/Archival-information. aspx?Program=Hardest+Hit+Fund and Treasury “Hardest Hit Fund - Current Program Documents” website @ https://www.treasury.gov/ initiatives/financial-stability/TARP-Programs/housing/Pages/Program-Documents.aspx, accessed 7/17/2017. SIGTARP analysis of HHF Participation Agreements and amendments obtained from Treasury “Hardest Hit Fund – Additional Program Information” website @ https://www.treasury.gov/initiatives/financial-stability/TARP-Programs/housing/hhf/Pages/Archival-information. aspx?Program=Hardest+Hit+Fund and Treasury “Hardest Hit Fund - Current Program Documents” website @ https://www.treasury.gov/ initiatives/financial-stability/TARP-Programs/housing/Pages/Program-Documents.aspx, accessed 7/17/2017. SIGTARP analysis of Treasury Hardest Hit Fund Quarterly Financial Reports – obtained via data call from Treasury 7/7/2017. Treasury, Action Memorandum - Schedule 2, “Recovered Funds” April 1 2016, obtained via email from Treasury officials on April 6, 2016. SIGTARP analysis of Treasury Hardest Hit Fund Quarterly Financial Reports – obtained via data call from Treasury 7/7/2017 SIGTARP analysis of Treasury Hardest Hit Fund Quarterly Financial Reports – obtained via data call from Treasury 7/7/2017; Treasury, Action Memorandum - Schedule 2, “Recovered Funds” April 1 2016, obtained via email from Treasury officials on April 6, 2016. SIGTARP analysis of HHF Participation Agreements and amendments obtained from Treasury “Hardest Hit Fund – Additional Program Information” website @ https://www.treasury.gov/initiatives/financial-stability/TARP-Programs/housing/hhf/Pages/Archival-information. aspx?Program=Hardest+Hit+Fund and Treasury “Hardest Hit Fund - Current Program Documents” website @ https://www.treasury.gov/ initiatives/financial-stability/TARP-Programs/housing/Pages/Program-Documents.aspx, accessed 7/17/2017. SIGTARP analysis of Treasury Hardest Hit Fund Quarterly Financial Reports – obtained via data call from Treasury 7/7/2017; Treasury, Action Memorandum - Schedule 2, “Recovered Funds” April 1 2016, obtained via email from Treasury officials on April 6, 2016. Treasury, Action Memorandum - Schedule 2, “Recovered Funds” April 1 2016, obtained via email from Treasury officials on April 6, 2016. Treasury, Action Memorandum - Schedule 2, “Recovered Funds” April 1 2016, obtained via email from Treasury officials on April 6, 2016. SIGTARP analysis of HHF Participation Agreements and amendments obtained from Treasury “Hardest Hit Fund – Additional Program Information” website @ https://www.treasury.gov/initiatives/financial-stability/TARP-Programs/housing/hhf/Pages/Archival-information. aspx?Program=Hardest+Hit+Fund and Treasury “Hardest Hit Fund - Current Program Documents” website @ https://www.treasury.gov/ initiatives/financial-stability/TARP-Programs/housing/Pages/Program-Documents.aspx, accessed 7/17/2017. SIGTARP Audit Report “Treasury’s HHF Blight Elimination Program Lacks Important Federal Protections Against Fraud, Waste, and Abuse”, June 16, 2016, accessible at https://www.sigtarp.gov/Audit%20Reports/Blight%20Audit%20SIGTARP-16-003.pdf, accessed 7/13/2017; Various state’s HFA responses to SIGTARP data calls. 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SIGTARP, “Treasury Should Do Much More to Increase the Effectiveness of the TARP Hardest Hit Fund Blight Elimination Program,” April 21, 2015, https://www.sigtarp.gov/Audit%20Reports/SIGTARP_Blight_Elimination_Report.pdf accessed 7/17/2017 Department of Justice (“DOJ”) press release “Supervisor of Royal Oak Township Indicted for Bribery” March 26, 2017, https://archives.fbi.gov/ archives/detroit/press-releases/2012/supervisor-of-royal-oak-township-pleads-guilty-to-conspiracy-to-accept-bribes-to-defraud-hud-and-to-filefalse-statements-with-epa, accessed 7/13/2017. Department of Justice (“DOJ”) press release” Muncie building commissioner indicted on corruption-related charges”, February 15, 2017, https://www.justice.gov/usao-sdin/pr/muncie-building-commissioner-indicted-corruption-related-charges , accessed 7/13/2017. 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SIGTARP Press Release, “DELAWARE DEVELOPER INDICTED FOR DEFRAUDING A TARP BANK AND FOR MONEY LAUNDERING”, January 30, 2013 https://www.sigtarp.gov/Press%20Releases/Zimmerman_Indictment_Press_Release.pdf, accessed 7/12/2017. SIGTARP Press Release:” CHAIRMAN AND SENIOR EXECUTIVES OF TARP RECIPIENT PREMIER BANK CHARGED IN CRIMINAL FRAUD SCHEME”, August 6, 2013, https://www.sigtarp.gov/Press%20Releases/Premier_Indictment_Press_Release.pdf, accessed 7/12/2017. SIGTARP Press Release:” BOARD MEMBERS OF TARP RECIPIENT PREMIER BANK SENTENCED IN CRIMINAL FRAUD SCHEME”, November 1, 2016, https://www.sigtarp.gov/Press%20Releases/Premier%20Bank%20Release.pdf, accessed 7/12/2017. SIGTARP Press Release:” CHAIRMAN AND SENIOR EXECUTIVES OF TARP RECIPIENT PREMIER BANK CHARGED IN CRIMINAL FRAUD SCHEME”, August 6, 2013, https://www.sigtarp.gov/Press%20Releases/Premier_Indictment_Press_Release.pdf, accessed 7/12/2017. Treasury, Dividends and Interest Report, June 2017, https://www.treasury.gov/initiatives/financial-stability/reports/Pages/Dividends-and-InterestReports.aspx, accessed 7/12/2017. 139 140 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. Treasury, Transaction Report, 6/29/2017. Public Law 101-73, August 9, 1989, https://www.gpo.gov/fdsys/pkg/STATUTE-103/pdf/STATUTE-103-Pg183.pdf, accessed 4/3/2017. Department of Justice, Press Release: “Goldman Sachs Agrees to Pay More than $5 Billion in Connection with Its Sale of Residential Mortgage Backed Securities.” April 11, 2016, https://www.justice.gov/opa/pr/goldman-sachs-agrees-pay-more-5-billion-connection-its-saleresidentialmortgage-backed, accessed 7/12/2017. Department of Justice, Press Release: “Morgan Stanley Agrees to Pay $2.6 Billion Penalty in Connection with Its Sale of Residential Mortgage Backed Securities.” February 11, 2016, https://www.justice.gov/opa/pr/morgan-stanley-agrees-pay-26-billion-penalty-connection-itssaleresidential-mortgage-backed, accessed 7/12/2017. SIGTARP, Press Release: “FORMER SENIOR RMBS TRADER SENTENCED TO FEDERAL PRISON.” July 23, 2014, https://www.sigtarp. gov/Press%20Releases/Litvak_Sentencing_Press_Release.pdf, accessed 7/12/2017. SIGTARP, Press Release: “SENIOR RBS TRADER ADMITS TO DEFRAUDING CUSTOMERS IN MULTIMILLION DOLLAR SECURITIES FRAUD SCHEME.” March 11, 2015, https://www.sigtarp.gov/Press%20Releases/Katke_Plea_Press_Release.pdf, accessed 7/12/2017. SIGTARP, Press Release: “RBS SUPERVISOR PLEADS GUILTY TO CONSPIRACY TO COMMIT MULTIMILLION DOLLAR SECURITIES FRAUD.” December 22, 2015, https://www.sigtarp.gov/Press%20Releases/Siegel_RBS_Securities_Fraud_Plea_Press_Release.pdf, accessed 7/12/2017. SIGTARP, Press Release: “FORMER NOMURA RMBS TRADERS CHARGED WITH MULTIPLE FRAUD AND CONSPIRACY OFFENSES.” September 8, 2015, https://www.sigtarp.gov/Press%20Releases/Nomura_Indictment_Press_Release.pdf, accessed 7/12/2017 Treasury, Monthly TARP Update Reports, https://www.treasury.gov/initiatives/financial-stability/reports/Pages/daily-tarp-reports.aspx, accessed 7/14/2017. Treasury, “Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages, Version 5.1,” 5/26/2016, https://www.hmpadmin. com/portal/programs/docs/hamp_servicer/mhahandbook_51.pdf, accessed 7/14/2017; Treasury, “Aggregate Cap Monitoring Report (June 2017)”, 7/14/2017, accessed 7/14/2017. Treasury, Aggregate Cap Monitoring Report – June 2017; Treasury, TARP Housing Transactions Reports, 6/27/2017, https://www.treasury.gov/ initiatives/financial-stability/reports/Pages/TARP-Housing-Transaction-Reports.aspx, accessed 7/14/2017; SIGTARP analysis of Treasury HAMP data. Treasury, “Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages, Version 5.1,” 5/26/2016, https://www.hmpadmin. com/portal/programs/docs/hamp_servicer/mhahandbook_51.pdf, accessed 7/14/2017; Treasury, “Aggregate Cap Monitoring Report (June 2017)”, 6/27/2017, accessed 7/14/2017. Treasury, response to SIGTARP data call, 7/7/2017; SIGTARP analysis of Treasury HAMP data. Treasury, “60+ Day Survey – Dispositions – February 2017”, accessed 7/14/2017. Consumer Financial Protection Bureau, CFPB, State Authorities Order Ocwen to Provide $2 Billion in Relief to Homeowners for Servicing Wrongs, 12/19/2013, http://www.consumerfinance.gov/about-us/newsroom/cfpb-state-authorities-order-ocwen-to-provide-2-billion-in-relief-tohomeowners-for-servicing-wrongs/, accessed 7/14/2017. Consumer Financial Protection Bureau, CFPB, CFPB Sues Ocwen for Failing Borrowers Throughout Mortgage Servicing Process, 4/20/2017, https://www.consumerfinance.gov/about-us/newsroom/cfpb-sues-ocwen-failing-borrowers-throughout-mortgage-servicing-process/, accessed 7/17/2017 Unless otherwise noted, all servicer misconduct and non-compliance for all servicers was identified via SIGTARP review of Treasury’s Making Home Affordable Compliance examinations. Treasury, response to SIGTARP data call, 7/7/2017; Treasury, “HAMP 1MP: Program Volumes - Combined Tier 1/Tier 2: Top 25 HAMP Servicers – June 2017,” accessed 7/14/2017; Treasury, “60+ Day Survey – Dispositions – February 2017”, accessed 7/14/2017. 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SIGTARP analysis of Treasury HAMP data. Treasury, TARP Housing Transactions Reports 6/27/2017, https://www.treasury.gov/initiatives/financial-stability/reports/Pages/TARP-HousingTransaction-Reports.aspx, accessed 7/14/2017. Treasury, response to SIGTARP data call, 7/7/2017. Treasury, “HAMP 1MP: Program Volumes - Combined Tier 1/Tier 2: Top 25 HAMP Servicers – June 2017,” accessed 7/24/2017. SIGTARP analysis of Treasury HAMP data. SIGTARP analysis of Treasury HAMP data. Treasury, Making Home Affordable Program Performance Reports, https://www.treasury.gov/initiatives/financial-stability/reports/Pages/MakingHome-Affordable-Program-Performance-Report.aspx, accessed 7/14/2017. Treasury, Application Activity by Servicer – May 2017, https://www.treasury.gov/initiatives/financial-stability/reports/Pages/HAMP-Servicer.aspx, accessed 7/14/2017. Department of Justice Press Release: “Federal Government and State Attorneys General Reach $25 Billion Agreement with Five Largest Mortgage Servicers to Address Mortgage Loan Servicing and Foreclosure Abuses”, https://www.justice.gov/opa/pr/federal-government-andstate-attorneys-general-reach-25-billion-agreement-five-largest, accessed 7/14/2017. Treasury, Making Home Affordable Program Performance Reports, www.treasury.gov/initiatives/financial-stability/reports/Pages/Making-Home-Affordable-Program-Performance-Report.aspx, accessed 7/14/2017. SIGTARP QUARTERLY REPORT TO CONGRESS I JULY 27, 2017 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. Treasury, Making Home Affordable Program Performance Reports, https://www.treasury.gov/initiatives/financial-stability/reports/Pages/MakingHome-Affordable-Program-Performance-Report.aspx, accessed 7/14/2017. 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SIGTARP, Audit Report: “Treasury’s HHF Blight Elimination Program Lacks Important Federal Protections Against Fraud, Waste, and Abuse.” 6/16/2016, https://www.sigtarp.gov/Audit%20Reports/Blight%20 Audit%20SIGTARP-16-003.pdf, accessed 7/20/2017. SIGTARP, Audit Report: “Waste and Abuse in the Hardest Hit Fund in Nevada”, 9/9/2016, https://www.sigtarp.gov/Audit%20Reports/HHF%20 Nevada_090916.pdf, accessed 7/20/2017. Correspondence between Sen. Chuck Grassley and Treasury Secretary Jacob Lew, October 12, 2016, http://www.grassley.senate.gov/sites/ default/files/constituents/2016-10-12%20CEG%20to%20Treasury%20(TARP%20Hardest%20Hit%20Fund).pdf, accessed 7/20/2017. Sen. Chuck Grassley, statement on Treasury’s response regarding his inquiry on oversight of the Hardest Hit Fund, 10/26/2016, http://www. grassley.senate.gov/news/news-releases/treasury-overlooks-responsibilities-manage-96-billion-hardest-hit-homeowners, accessed 7/20/2017. State of Nevada Department of Business and Industry, “Written Comments Regarding the Office of the Special Inspector General for the Troubled Asset Relief Program Audit Report”, 9/9/2016, http://business.nv.gov/uploadedFiles/businessnvgov/content/Home/Feature/Written%20 Statement%20SIGTARP%20Audit%20with%20exhibits.pdf, accessed, 9/9/2016. Las Vegas Review Journal, “Federal audit rips contractor that administered Nevada’s recession housing fund for ‘culture of waste and abuse”, 9/9/2016, http://www.reviewjournal.com/news/nevada/federal-audit-rips-contractor-administered-nevada-s-recession-housing-fund-culturewaste, accessed 7/20/2017. Based on SIGTARP analysis of Treasury’s HHF Quarterly Performance Reports accessed at https://www.treasury.gov/initiatives/financial-stability/ TARP-Programs/housing/Pages/Program-Documents.aspx, accessed on 7/20/2017. Treasury, response to SIGTARP data call, 7/6/2017. Housingwire, Embattled Nevada housing agencies respond to allegations of wasted millions, 9/15/2016, http://www.housingwire.com/ articles/38049-embattled-nevada-housing-agencies-respond-to-allegations-of-wasted-millions, accessed 7/20/2017. SIGTARP, Audit Report “Factors Impacting the Effectiveness of Hardest Hit Fund Florida”, 10/6/2015, https://www.sigtarp.gov/Audit%20 Reports/SIGTARP_HHF_Florida_Report.pdf, accessed 7/20/2017. Based on SIGTARP analysis of Treasury’s HHF Quarterly Performance Reports accessed at https://www.treasury.gov/initiatives/financial-stability/ TARP-Programs/housing/Pages/Program-Documents.aspx, accessed on 7/20/2017. Based on SIGTARP analysis of Treasury’s HHF Quarterly Performance Reports accessed at https://www.treasury.gov/initiatives/financial-stability/ TARP-Programs/housing/Pages/Program-Documents.aspx, accessed on 7/20/2017. Based on SIGTARP analysis of Treasury’s HHF Quarterly Performance Reports accessed at https://www.treasury.gov/initiatives/financial-stability/ TARP-Programs/housing/Pages/Program-Documents.aspx, accessed on 7/20/2017. Based on SIGTARP analysis of Treasury’s HHF Quarterly Performance Reports accessed at https://www.treasury.gov/initiatives/financial-stability/ TARP-Programs/housing/Pages/Program-Documents.aspx, accessed on 7/20/2017. SIGTARP, Quarterly Report to Congress, July 27, 2016, Pages 104-106, https://www.sigtarp.gov/Quarterly%20Reports/July_27_2016_Report_ To_Congress.pdf, accessed 7/20/2017. SIGTARP, Quarterly Report to Congress, July 29, 2015, Pages 58-63, https://www.sigtarp.gov/Quarterly%20Reports/July_29_2015_Report_to_ Congress.pdf, accessed 7/20/2017. Unless otherwise noted, sources for SIGTARP's HHF state level analysis are: HHF quarterly performance and quarterly financial reports for the quarter ended 3/31/2017, obtained from Treasury via 7/6/2017 data call; Bureau of Labor Statistics, STATE EMPLOYMENT AND UNEMPLOYMENT — May 2017, https://www.bls.gov/news.release/pdf/laus.pdf, accessed 7/18/2017; SIGTARP analysis of CoreLogic data; SIGTARP analysis of HHF Participation Agreement amendments obtained from Treasury “Hardest Hit Fund – Additional Program Information” website @ https://www.treasury.gov/initiatives/financial-stability/TARP-Programs/housing/hhf/Pages/Archival-information. aspx?Program=Hardest+Hit+Fund, accessed 7/13/2017 and Treasury “Hardest Hit Fund – Current Program Documents” website @ https:// www.treasury.gov/initiatives/financial-stability/TARP-Programs/housing/Pages/Program-Documents.aspx, accessed 7/13/2017 141 142 SPECIAL INSPECTOR GENERAL I TROUBLED ASSET RELIEF PROGRAM Criminal Law Enforcement Agency Prevent Fraud, Identify Waste, Abuse, and Cost Savings
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