TROUBLED ASSET 

RELIEF PROGRAM

Status of Housing 

Programs

Report to Congressional Committees

January 2017

GAO-17-236

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-17-236, a report to 

congressional committees

January 2017

TROUBLED ASSET RELIEF PROGRAM

Status of Housing Programs

What GAO Found

As of October 31, 2016, the Department of the Treasury (Treasury) had 

disbursed $22.6 billion (60 percent) of the $37.51 billion Troubled Asset Relief 

Program (TARP) funds obligated to the three housing programs (see fig.). 

• The Making Home Affordable (MHA) program allowed homeowners to apply 

for loan modifications to avoid foreclosure. Under this program, which was 

closed to applicants on December 31, 2016, Treasury provides incentive 

payments for certain loan modifications. As of October 31, 2016, Treasury had 

disbursed or committed for future incentive payments $23.6 billion (about 85

percent) of about $27.8 billion MHA funds.

• The Housing Finance Agency Innovation Fund for the Hardest Hit Housing 

Markets (Hardest Hit Fund) provides funds to 18 states and the District of 

Columbia (collectively, “states,” which were chosen based on unemployment 

rates and house price declines) to help struggling homeowners through 

programs designed by states. Congress extended Treasury’s authority to 

commit TARP funds to the program to December 31, 2017. As of October 31, 

2016, Treasury had disbursed $6.84 billion (about 71 percent) of the $9.6 

billion program funds. 

• The Federal Housing Administration (FHA) Short Refinance program allowed

eligible homeowners to refinance into an FHA-insured loan. Under this 

program, Treasury made TARP funds available to provide coverage to lenders 

for a share of potential losses on these loans for borrowers who entered the 

program by December 31, 2016. As of October 31, 2016, Treasury had 

disbursed $0.02 billion (about 15 percent) of the $0.13 billion obligated to this 

program.

Status of Troubled Asset Relief Program Housing Program Funds as of October 2016

a

According to the Department of the Treasury (Treasury), these funds have been committed to future 

financial incentives for existing Making Home Affordable transactions.

b

This is the amount of funds that states and the District of Columbia have drawn from Treasury. c

The amount of funds disbursed under the Federal Housing Administration (FHA) Short Refinance

program includes about $10.6 million in administrative expenses and approximately $10 million of 

reserve funds as of September 30, 2016. Treasury will be reimbursed for unused reserve amounts.

View GAO-17-236. For more information, 

contact Daniel Garcia-Diaz at (202) 512-8678 

or garciadiazd@gao.gov.

Why GAO Did This Study

Since 2009 Treasury has obligated

$37.51 billion in TARP funds to help 

struggling homeowners avoid 

foreclosure. The Emergency Economic 

Stabilization Act of 2008 included a 

provision for GAO to report at least

every 60 days on TARP activities. This 

report provides an update on the status 

and condition of Treasury’s TARPfunded housing programs as of 

October 31, 2016. To do this work, 

GAO reviewed Treasury 

documentation and prior GAO reports 

on TARP. We also interviewed 

Treasury officials. This report contains 

the most recently available public data 

in Treasury’s reports at the time of our 

review, including obligations, 

disbursements, and program 

participation.

What GAO Recommends

GAO is making no new 

recommendations. Of the 29 

recommendations that GAO has 

previously made related to the TARPfunded housing programs, 5 remain 

open or not fully implemented. More 

information on these recommendations 

and their status is included in this 

report. GAO will continue to monitor 

and assess the status of these 

recommendations considering the 

termination of MHA at the end of 2016,

program activity, and any further 

actions taken by Treasury.
Page i GAO-17-236 Troubled Asset Relief Program

Letter 1

Status of TARP Housing Programs 2

Agency Comments 8

Appendix I Making Home Affordable 11

Appendix II Hardest Hit Fund 17

Appendix III FHA Short Refinance 22

Appendix IV GAO Contact and Staff Acknowledgments 24

Figures

Figure 1: Percentage and Amount of Troubled Asset Relief 

Program Housing Funds Disbursed, Committed, and 

Remaining as of October 2016 5

Figure 2: Making Home Affordable Funds Disbursed, Committed, 

and Remaining as of October 2016 12

Figure 3: Monthly Combined Home Affordable Modification 

Program (HAMP) Tier 1, Tier 2, and Streamline HAMP 

Activity Levels through October 2016 14

Figure 4: Hardest Hit Fund Program Funds Drawn and Remaining 

as of October 2016 18

Figure 5: Hardest Hit Fund: Percentage of Funds Drawn by States 

andNumber of Homeowners Assisted 20

Figure 6: Federal Housing Administration Short Refinance Funds 

Disbursed and Remaining as of October 2016 23

Contents
Page ii GAO-17-236 Troubled Asset Relief Program

Abbreviations

2MP Second Lien Modification Program

EESA Emergency Economic Stabilization Act of 2008

FHA Federal Housing Administration

HAFA Home Affordable Foreclosure Alternatives

HAMP Home Affordable Modification Program

Hardest Hit Fund Housing Finance Agency Innovation Fund for the

 Hardest Hit Housing Markets

MHA Making Home Affordable

PRA Principal Reduction Alternative

RD Rural Development

RHS Rural Housing Service

TARP Troubled Asset Relief Program

Treasury Department of the Treasury

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Page 1 GAO-17-236 Troubled Asset Relief Program

441 G St. N.W.

Washington, DC 20548

January 9, 2017

Congressional Committees

Under the authority granted to it by the Emergency Economic

Stabilization Act of 2008 (EESA), the Department of the Treasury

(Treasury) had obligated $37.51 billion in Troubled Asset Relief Program 

(TARP) funds for housing programs intended to help prevent avoidable

foreclosures and preserve homeownership, as of October 31, 2016.1

These TARP-funded housing programs are: Making Home Affordable 

(MHA), Housing Finance Agency Innovation Fund for the Hardest Hit 

Housing Markets (Hardest Hit Fund), and Department of Housing and 

Urban Development’s Federal Housing Administration (FHA) Short 

Refinance program.2

 

EESA included a provision that GAO report at least every 60 days on 

TARP activities and performance.3 We have continued to provide updates 

on TARP programs.4 This report provides an update on the status and 

condition of Treasury’s TARP-funded housing programs as of October 31, 

2016. 

To conduct this work, we reviewed documentation from Treasury, 

including publicly available Monthly Reports to Congress for TARP, 

Agency Financial Reports for TARP, Making Home Affordable quarterly 

Program Performance Reports, and Hardest Hit Fund quarterly 

Performance Summary reports. This report contains the most recently 

available public data in Treasury’s reports at the time of our review,

 1

Pub. L. No. 110-343, tit. I, 122 Stat. 3765, 3767-3800 (codified as amended at 12 U.S.C. 

§§ 5211-5241). 

2

Appendixes I, II, and III contain additional information on each program.

3

The GAO Mandates Revision Act of 2016 revised GAO’s reporting requirement under 

EESA from at least once every 60 days to annually. See Pub. L. No. 114-301, § 3(a), 130 

Stat. 1514 (amending 12 U.S.C. § 5226(a)(3)).

4

See, for example, our recent reports on TARP programs: GAO, Financial Audit: Office of 

Financial Stability (Troubled Asset Relief Program) Fiscal Years 2016 and 2015 Financial 

Statements, GAO-17-125R (Washington, D.C.: Nov. 10, 2016); Troubled Asset Relief 

Program: Status of Prior GAO Recommendations, GAO-16-831 (Washington, D.C.: Sept. 

6, 2016), and Troubled Asset Relief Program: Treasury Should Estimate Future 

Expenditures for the Making Home Affordable Program, GAO-16-351 (Washington, D.C.: 

Mar. 8, 2016).

Letter
Page 2 GAO-17-236 Troubled Asset Relief Program

including obligations, disbursements, and program participation. 

Generally, we used data that were current as of October 31, 2016 to 

describe program expenditures and activities. However, in some cases, 

the most recently available data were as of September 30, 2016.5 We 

also interviewed and obtained information from Treasury officials and 

reviewed prior GAO reports on TARP, including audits of TARP financial 

statements for fiscal years 2009 through 2016. As part of the financial 

statement audits, we tested the internal controls over financial reporting of 

Treasury’s Office of Financial Stability, an office created to implement 

TARP. We have used Treasury’s participation data in prior reports in 

which we concluded the data were sufficiently reliable for our purposes of 

describing program status and participation.6 We determined that the data 

used in this report were sufficiently reliable to assess the status and 

condition of TARP-funded housing programs.

We conducted this performance audit from September 2016 to January 

2017 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

In total, Treasury had disbursed $22.6 billion (about 60 percent) of the 

$37.51 billion in TARP funds obligated to the three housing programs as 

of October 31, 2016 (see fig. 1).7 According to Treasury, the programs 

have provided assistance to millions of homeowners, including nearly 2.7 

million homeowner assistance actions under MHA through October 

 5

For example, program activity data for the Principal Reduction Alternative program under 

MHA and the Hardest Hit Fund are reported in Treasury’s quarterly reports. At the time of 

our review, the latest available quarterly data were as of September 30, 2016.

6

See, for example, GAO, Troubled Asset Relief Program: Status of Housing Programs, 

GAO-16-279R (Washington, D.C.: Jan. 8, 2016) and Troubled Asset Relief Program: 

Treasury Could More Consistently Analyze Potential Benefits and Costs of Housing 

Program Changes, GAO-15-670 (Washington, D.C.: July 6, 2015).

7

Appendixes I, II, and III provide additional information on the funding, expenditures, and 

activity levels of the three TARP-funded housing programs. 

Status of TARP 

Housing Programs
Page 3 GAO-17-236 Troubled Asset Relief Program

2016.8 Congress established December 31, 2016, as the termination date 

for the MHA program, with an exemption for Home Affordable 

Modification Program (HAMP) loan modification applications made before 

that date.9 Additionally, Treasury and FHA established the same date as 

the deadline for eligible homeowners to apply to the FHA Short Refinance 

program. Congress also extended Treasury’s authority to commit TARP 

funds to the Hardest Hit Fund program to December 31, 2017.10

• MHA. The MHA program, which, among other things, provides loan 

modifications to help eligible borrowers avoid foreclosure, terminated 

on December 31, 2016, except with respect to certain loan 

modification applications made before that date.11 As figure 1 shows,

Treasury had disbursed $15.74 billion (about 57 percent) of the 

$27.78 billion in TARP funds obligated to the MHA program as of 

October 31, 2016. Treasury also had committed another $7.83 billion 

for the payment of future financial incentives with respect to existing 

MHA transactions as of the same date, leaving $4.21 billion (about 15 

percent) for future expenditures. According to Treasury officials, 

Treasury plans to update its estimate of the lifetime cost for MHA 

based on November 2016 data. Treasury stated that once servicers 

have submitted data on all final transactions, Treasury plans to 

calculate the maximum potential expenditures under MHA and 

deobligate any estimated excess funds at that time. As a result, the 

agency does not expect to deobligate any additional excess funds 

from MHA prior to December 2017, when servicers report data on all 

final transactions. In our March 2016 report, we recommended that 

Treasury deobligate funds that its review shows will likely not be 

expended, so that Congress could use those funds for other 

 8

In this report, we are using “assistance to homeowners” to describe the assistance 

provided to homeowners through the three TARP housing programs. Also, homeowners 

can receive multiple assistance actions under the MHA program.

9

See Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, Div. O, tit. VII, 

§ 709(b), 129 Stat. 2242, 3030 (2015). 

10§ 709(a), 129 Stat. at 3030. 

11The original deadline for acceptance into MHA programs was December 31, 2012, but 

Treasury extended the deadline three times. In December 2015, Congress mandated that 

the MHA programs be terminated on December 31, 2016, with an exemption for HAMP 

loan modification applications made before that date. See § 709(b), 129 Stat. at 3030.
Page 4 GAO-17-236 Troubled Asset Relief Program

priorities.12 See appendix I for additional information on the status and 

condition of the MHA program. 

• Hardest Hit Fund. The Hardest Hit Fund provides funds to 18 states 

and the District of Columbia (each referred to as a “state”)—hit 

hardest by unemployment and house price declines—that allowed 

them to design programs tailored to the needs of struggling 

homeowners in their states. In December 2015, Congress extended 

Treasury’s authority to commit TARP funds under EESA to December 

31, 2017, for current Hardest Hit Fund program participants and 

authorized Treasury to obligate up to $2 billion of additional TARP 

funds.13 As shown in figure 1, Treasury had disbursed $6.84 billion 

(about 71 percent) of the $9.6 billion program funds to 18 states and 

the District of Columbia as of October 31, 2016. States have until 

December 31, 2021, to disburse their funds.14 See appendix II for 

additional information on the status and condition of the Hardest Hit 

Fund. 

• FHA Short Refinance. The FHA Short Refinance program allowed 

eligible homeowners to refinance into FHA-insured mortgage loans 

through December 31, 2016. Under this program, Treasury has made 

TARP funds available to provide coverage to lenders for a share of 

potential losses on these loans.15 As of October 31, 2016, Treasury 

had disbursed $0.02 billion of the $0.13 billion obligated to this 

program (see fig. 1).16 According to Treasury, the agency will 

 12GAO-16-351. Treasury agreed with our recommendation and indicated that it has

updated its cost estimates for MHA and subsequently deobligated $2 billion of MHA funds 

on February 25, 2016.

13See § 709(a), 129 Stat. at 3030. Treasury announced in February 2016 that it would 

allocate an additional $2 billion to the Hardest Hit Fund, and by June 2016, Treasury had 

obligated the funds to the states.

14Participating states submit requests to Treasury to draw their funds under the Hardest 

Hit Fund.

15Treasury established a letter of credit facility with TARP funds to pay claims associated 

with this program. Treasury will draw on the letter of credit to pay its share of claims 

through December 31, 2022. 

16As of September 30, 2016, the disbursed amount includes about $10.6 million in 

administrative expenses to establish and maintain the letter of credit and another 

approximately $10 million of reserve funds. As of October 31, 2016, Treasury had paid 

$207,381 in claims under the program, according to Treasury. 
Page 5 GAO-17-236 Troubled Asset Relief Program

determine the maximum potential expenditures associated with the 

program and deobligate excess funds by June 2017. See appendix III 

for additional information about the status and condition of the FHA 

Short Refinance program.

Figure 1: Percentage and Amount of Troubled Asset Relief Program Housing Funds 

Disbursed, Committed, and Remaining as of October 2016

a

According to the Department of the Treasury (Treasury), these funds have been committed to future 

financial incentives for existing Making Home Affordable transactions.

b

This is the amount of funds that states and the District of Columbia have drawn from Treasury.

c

This amount of funds disbursed under the Federal Housing Administration (FHA) Short Refinance 

program includes about $10.6 million in administrative expenses and approximately $10 million of 

reserve funds as of September 30, 2016. The reserve funds are on deposit with Citibank, N.A. to 

provide loss coverage for the program. Treasury will be reimbursed for all unused amounts from this 

Citibank account.
Page 6 GAO-17-236 Troubled Asset Relief Program

As of December 2016, 5 of the 29 recommendations GAO has made to 

Treasury related to the TARP-funded housing programs remained open.17

Specifically, Treasury has taken some actions to address our 

recommendations that it (1) deobligate MHA funds that its review showed 

would likely not be expended, (2) conduct periodic evaluations using 

analytical methods, such as econometric modeling, to help explain 

differences among MHA servicers in redefault rates, and (3) report the 

extent to which servicers offered principal reduction and determined that 

principal reduction was beneficial to investors, but did not offer it.18 For 

example, Treasury had updated its cost estimates for MHA and 

subsequently deobligated $2 billion of MHA funds on February 25, 

2016.19 However, as of December 2016, Treasury has taken no action on 

our recommendations that it (1) assess the extent to which servicers have 

established internal control programs that effectively monitor compliance 

with fair lending laws applicable to MHA programs and (2) develop and 

implement policies and procedures to better ensure that changes to 

TARP-funded housing programs are based on evaluations that 

comprehensively and consistently met the key elements of benefit-cost 

analysis. In response to the first open recommendation, Treasury officials 

stated that they planned to continue efforts to promote fair lending 

policies. However, they noted that the federal agencies with supervisory 

authority over fair lending laws remain in the best position to monitor 

servicer compliance with such laws and that they did not plan to 

implement this recommendation. In response to the second open 

recommendation, Treasury agreed that it is important to assess the 

benefits and costs of proposed program improvements, and that it would 

continue to do so. Treasury also noted that it did not anticipate making 

significant policy changes to the MHA programs given the application 

deadline of December 30, 2016.

Although the deadline for MHA and FHA Short Refinance program 

applicants was in December 2016, elements of the two programs remain 

in effect after the application deadline. For example, in the case of a 

 17For a full description of the five open recommendations, see GAO-16-831.

18For more information on principal reduction and other MHA program features, see 

appendix I.

19For additional information on Treasury’s actions to address our recommendations, see 

GAO-16-831.
Page 7 GAO-17-236 Troubled Asset Relief Program

HAMP loan modification, participating borrowers can receive program 

incentive payments for up to 6 years if the borrower does not redefault 

and remains current on the modified loan.20 Additionally, it will be 

important for Treasury to update its cost estimates as additional 

information becomes available and take timely action to deobligate likely 

excess funds, so that Congress could use those funds for other priorities. 

As such, we will continue to monitor and assess the status of these 

recommendations considering the termination of MHA at the end of 2016, 

program activity, and actions taken by Treasury.

 20Treasury uses TARP funds to provide both one-time and ongoing incentives for up to 6 

years after a loan is modified. For example, if a borrower’s monthly mortgage payment is 

reduced by 6 percent or more and the mortgage loan remains in good standing, the 

servicer receives an annual pay-for-success incentive for 3 years, and the borrower 

receives a pay-for-performance incentive annually for the first 6 years after the due date of 

the first trial loan payment. If the mortgage payment is not reduced by at least 6 percent, 

but remains in good standing, the borrower receives a one-time incentive payment after 

the sixth year.
Page 8 GAO-17-236 Troubled Asset Relief Program

We provided a draft of this report to Treasury for review and comment. 

Treasury provided technical comments that we have incorporated as 

appropriate.

We are sending copies of this report to the appropriate congressional 

committees. This report will be available at no charge on our website at 

http://www.gao.gov. 

If you or your staff members have any questions about this report, please 

contact me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for 

our Offices of Congressional Relations and Public Affairs may be found 

on the last page of this report. GAO staff who made major contributions to 

this report are listed in appendix IV.

Daniel Garcia-Diaz

Director, Financial Markets and Community Investment

Agency Comments
Page 9 GAO-17-236 Troubled Asset Relief Program

List of Congressional Committees

Chairman

Committee on Appropriations

United States Senate 

Vice Chairman

Committee on Appropriations

United States Senate 

Chairman

Committee on Banking, Housing, and Urban Affairs

United States Senate

Ranking Member

Committee on Banking, Housing, and Urban Affairs

United States Senate 

Chairman

Committee on the Budget

United States Senate

Ranking Member

Committee on the Budget 

United States Senate 

Chairman

Committee on Finance

United States Senate

Ranking Member

Committee on Finance

United States Senate 

Chairman

Committee on Appropriations

House of Representatives

Ranking Member

Committee on Appropriations

House of Representatives
Page 10 GAO-17-236 Troubled Asset Relief Program

Chairman

Committee on the Budget 

House of Representatives

Ranking Member

Committee on the Budget 

House of Representatives

Chairman

Committee on Financial Services

House of Representatives

Ranking Member

Committee on Financial Services

House of Representatives

Chairman

Committee on Ways and Means

House of Representatives

Ranking Member

Committee on Ways and Means

House of Representatives
Appendix I: Making Home Affordable

Page 11 GAO-17-236 Troubled Asset Relief Program

The Department of the Treasury (Treasury) announced Making Home 

Affordable (MHA) in February 2009. The program was intended to help 

stabilize the housing market and assist homeowners facing foreclosure. 

MHA includes several programs that are intended to encourage the 

modification of eligible mortgages and provide other relief to struggling 

borrowers.

As of October 31, 2016, Treasury had disbursed $15.7 billion (about 56 

percent) of the $27.8 billion in Troubled Asset Relief Program (TARP) 

funds that had been obligated to MHA programs (see fig. 2).1 Additionally, 

Treasury had committed $7.8 billion to future financial incentives for 

existing MHA transactions while $4.2 billion remained available for future 

MHA expenditures. MHA terminated on December 31, 2016, except with 

respect to certain loan modification applications made before that date.2

According to Treasury officials, Treasury plans to update its estimate of 

the lifetime cost for MHA based on November 2016 data. Treasury stated 

that once servicers have submitted data on all final transactions, Treasury 

plans to calculate the maximum potential expenditures under MHA and 

deobligate any estimated excess funds at that time. As a result, the 

agency does not expect to deobligate any additional excess funds from 

MHA prior to December 2017, when servicers report data on all final 

transactions.

 1

Another MHA program, the Home Affordable Unemployment Program, does not use 

TARP funds. This program requires participating servicers to grant qualified unemployed 

borrowers a forbearance period for a minimum of 12 months. During this period, mortgage 

payments are temporarily reduced or suspended while borrowers seek employment. As of 

September 2016, 46,251 forbearance plans had been started.

2

The original deadline for acceptance into MHA programs was December 31, 2012, but 

Treasury extended the deadline three times. In December 2015, Congress mandated that 

the MHA programs be terminated on December 31, 2016, with an exemption for Home 

Affordable Modification Program loan modification applications made before that date. 

See Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, Div. O, tit. VII, § 709(b), 

129 Stat. 2242, 3030 (2015).

Appendix I: Making Home Affordable
Appendix I: Making Home Affordable

Page 12 GAO-17-236 Troubled Asset Relief Program

Figure 2: Making Home Affordable Funds Disbursed, Committed, and Remaining as 

of October 2016

a

According to the Department of the Treasury, these funds have been committed to future financial 

incentives for existing Making Home Affordable transactions.

Treasury reported that nearly 2.7 million homeowner assistance actions 

had taken place under MHA programs through October 2016.

3 These 

included permanent first- and second-lien mortgage modifications, 

completed short sales and deeds-in-lieu of foreclosure, and 

unemployment forbearance plans.4 Treasury’s estimated lifetime cost for 

MHA was $25.09 billion as of September 30, 2016. 

The Home Affordable Modification Program (HAMP), MHA’s largest 

program, was intended to help eligible borrowers stay in their homes and 

avoid foreclosures by reducing monthly mortgage payments to affordable 

 3

A homeowner can receive assistance from more than one MHA program.

4

In a short sale, a homeowner sells a house rather than allowing the property to go into 

foreclosure. Proceeds from short sales are generally less than the mortgage amount, so 

the homeowner must have the lender’s permission for the sale. Under a deed-in-lieu of 

foreclosure, the homeowner voluntarily conveys all ownership interest in the home to the 

lender as an alternative to foreclosure proceedings.
Appendix I: Making Home Affordable

Page 13 GAO-17-236 Troubled Asset Relief Program

levels. HAMP provides financial incentives for servicers, mortgage 

holders/investors, and borrowers for modifications to mortgages 

originated prior to January 1, 2009.5

HAMP has three components—HAMP Tier 1, HAMP Tier 2, and 

Streamline HAMP. 

• HAMP Tier 1, announced in March 2009, is generally available to 

qualified borrowers who occupy their properties as their primary 

residence and whose first-lien mortgage payments are more than 31 

percent of their monthly gross income. The percentage is calculated 

using the debt-to-income (DTI) ratio.6

• HAMP Tier 2, announced in January 2012, is available to borrowers 

on their primary residence or borrowers who own a rental property 

(those with fewer than four units), and borrowers’ monthly mortgage 

payments prior to modification may be equivalent to a DTI ratio of less 

than 31 percent. 

• Streamline HAMP, announced in July 2015, is designed to help 

borrowers who meet HAMP eligibility criteria and, among others, 

those who have not completed an application by the time their loan is 

90 days delinquent. Servicers were required to have a Streamline 

HAMP policy in place by January 1, 2016, and to proactively identify 

borrowers who qualify. When servicers identify borrowers who are 

eligible for a modification under Streamline HAMP, they must offer 

trial modifications within 15 calendar days.

 5

Treasury uses TARP funds to provide both one-time and ongoing incentives for up to 6 

years after a loan is modified. For example, if a borrower’s monthly mortgage payment is 

reduced by 6 percent or more and the mortgage loan remains in good standing, the 

servicer receives an annual pay-for-success incentive for 3 years, and the borrower 

receives a pay-for-performance incentive annually for the first 6 years after the due date of 

the first trial loan payment. If the mortgage payment is not reduced by at least 6 percent, 

but remains in good standing, the borrower receives a one-time incentive payment after 

the sixth year.

6

For first-lien mortgages, the DTI ratio under HAMP is the percentage of a borrower’s 

gross monthly income that is required to pay monthly housing expenses (mortgage 

principal, interest, taxes, insurance, and, if applicable, condominium or cooperative fees or 

homeowners association dues).
Appendix I: Making Home Affordable

Page 14 GAO-17-236 Troubled Asset Relief Program

Through October 2016, about 1.66 million permanent modifications had 

been started under HAMP. Overall, HAMP participation (measured by trial 

and permanent modifications started each month) declined in 2011 after 

its initial peak in 2010 and held relatively steady until a further decrease in 

2014 (see fig. 3). Since then, HAMP participation had remained relatively 

stable but temporarily increased in June 2016 (when Treasury began 

reporting Streamline HAMP activity). The total number of new permanent 

modifications ranged from approximately 8,000 to 16,000 per month from 

October 2015 through October 2016 (the most recent month for which 

data were available).

Figure 3: Monthly Combined Home Affordable Modification Program (HAMP) Tier 1, 

Tier 2, and Streamline HAMP Activity Levels through October 2016 

Note: HAMP was expanded to include Tier 2 and Streamline HAMP effective June 2012 and January 

2016, respectively. The Department of the Treasury began reporting HAMP Tier 2 and Streamline 

HAMP activities in November 2012 and June 2016, respectively.

From January through October 2016, approximately 21,000 borrowers 

had entered into a Streamline HAMP permanent modification. This 
Appendix I: Making Home Affordable

Page 15 GAO-17-236 Troubled Asset Relief Program

number represents about 22 percent of all permanent HAMP 

modifications (21,061 modifications out of 97,499) started during that 

period. The number of Streamline HAMP modifications declined from 

June to October, which was consistent with the trend in the overall HAMP 

modifications in that period as shown in figure 3. According to Treasury, 

overall HAMP activity was expected to remain relatively steady from 

August through December 2016. 

In October 2010, MHA’s Principal Reduction Alternative (PRA) took 

effect to give servicers more flexibility in offering relief to borrowers whose 

homes were worth significantly less than their mortgage loan balance. 

Under PRA, Treasury provides mortgage holders/investors with incentive 

payments in the form of a percentage of each dollar in principal reduction. 

As of September 30, 2016, a total of 283,240 permanent HAMP 

modifications had included principal reduction.

MHA’s Second Lien Modification Program (2MP) is designed to work in 

tandem with HAMP modifications to provide a comprehensive solution to 

help borrowers afford their mortgage payments. A participating servicer of 

a second lien for which the first lien receives a HAMP Tier 1 or Tier 2 

modification must offer to modify the borrower’s second lien and accept a 

lump sum payment from Treasury and either (1) fully extinguish the 

second lien or (2) partially extinguish the second lien and modify the 

remaining portion. As of October 31, 2016, a total of 162,122 

modifications had been started under 2MP. 

Under MHA’s Home Affordable Foreclosure Alternatives (HAFA)

program, servicers offer foreclosure alternatives (short sales and deedsin-lieu of foreclosure). Borrowers must have met the basic eligibility 

requirements for HAMP but failed to qualify for a modification, defaulted 

on a modification by missing three or more consecutive payments, or 

requested a short sale or deed-in-lieu of foreclosure. As of October 31, 

2016, a total of 447,845 HAFA transactions had been completed. 

Treasury’s Federal Housing Administration (FHA)-HAMP and Rural 

Development (RD)-HAMP provide incentives to borrowers and servicers 

for mortgages insured by FHA or guaranteed by the Department of 

Agriculture’s Rural Housing Service (RHS), respectively, for modifications 

similar to those offered through HAMP. If a modified FHA-insured or 
Appendix I: Making Home Affordable

Page 16 GAO-17-236 Troubled Asset Relief Program

RHS-guaranteed mortgage loan meets Treasury’s eligibility criteria, the 

borrower and servicer can receive TARP-funded incentive payments.7 As 

of October 31, 2016, a total of 128,570 FHA- and RD-HAMP permanent 

modifications had been started.

 7

The incentive payments for FHA-HAMP and RD-HAMP modifications are structured like 

HAMP incentive payments. 
Appendix II: Hardest Hit Fund

Page 17 GAO-17-236 Troubled Asset Relief Program

The Department of the Treasury (Treasury) established the Housing 

Finance Agency Innovation Fund for the Hardest Hit Housing Markets 

(Hardest Hit Fund) in February 2010 to help stabilize the housing market 

and assist homeowners facing foreclosure in the states hardest hit by the 

housing crisis. States selected for funding had unemployment rates at or 

above the national average or had housing price declines of 20 percent or 

more that left some borrowers owing more on their mortgages than their 

homes were worth. State housing finance agencies, which are statechartered authorities established to help meet affordable housing needs, 

were allocated funds to help unemployed homeowners and others 

affected by house price declines.

As of December 2016, the Hardest Hit Fund remained active. Treasury 

had obligated a total of $9.6 billion to help borrowers in 18 states and the 

District of Columbia (each referred to as a “state”) as of October 31, 2016. 

As of the same date, states had drawn approximately $6.8 billion (about 

71 percent) of the funds (see fig. 4). As of September 30, 2016, the states 

had assisted 280,866 homeowners. Treasury had allocated all of the 

original $7.6 billion Hardest Hit Fund program funds among the states by 

September 2010. In December 2015, Congress extended Treasury’s 

authority to commit Troubled Asset Relief Program (TARP) funds to the 

Hardest Hit Fund to December 31, 2017, for current program participants 

and authorized Treasury to obligate up to $2 billion of additional TARP 

funds to the Hardest Hit Fund.

1 Treasury announced in February 2016

that it would allocate an additional $2 billion, and by June 2016, Treasury 

had obligated the funds to the states. States have until December 31, 

2021, to disburse their funds.2

 1

See Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, Div. O, tit. VII,

§ 709(a), 129 Stat. 2242, 3030 (2015).

2

Participating states submit requests to Treasury to draw their funds under the Hardest Hit 

Fund.

Appendix II: Hardest Hit Fund
Appendix II: Hardest Hit Fund

Page 18 GAO-17-236 Troubled Asset Relief Program

Figure 4: Hardest Hit Fund Program Funds Drawn and Remaining as of October 

2016

States operated a total of 80 different programs under the Hardest Hit 

Fund, as reported by Treasury in October 2016. Each state can have 

multiple programs. The type of assistance provided has varied by state, 

but all the states have used some of the program funds to help 

unemployed homeowners make mortgage payments. Some states have 

principal reduction programs to help make mortgage payments more 

affordable, reduce or eliminate borrowers’ second liens, facilitate short 

sales, and provide transition assistance to borrowers leaving their homes. 

As of October 31, 2016, California, North Carolina, and Oregon had each 

drawn more than 75 percent of their allocated funds (see fig. 5). Alabama 

had drawn approximately 35 percent. In February 2016, Treasury 

announced drawdown thresholds for states receiving funds from the 

additional $2 billion Hardest Hit Fund allocation. States that do not meet 

the thresholds will have their funds reallocated to other states that meet 

the thresholds. For example, a state that receives additional funds must 

use at least 70 percent of the original funds by the end of 2016 or the 
Appendix II: Hardest Hit Fund

Page 19 GAO-17-236 Troubled Asset Relief Program

state must forfeit half of any additional funds.3 Treasury officials stated 

that states have until December 31, 2021, to spend their full allocation of 

funds.

 3

Data on states’ drawdowns of Hardest Hit Fund program funds for December 2016 were 

not yet available at the time of our review. Treasury reports on the participating states’ use 

of Hardest Hit Fund program funds in its Monthly Report to Congress on TARP. The report 

for a given month is usually published in the following month. For example, the November 

2016 report was published on December 9, 2016.
Appendix II: Hardest Hit Fund

Page 20 GAO-17-236 Troubled Asset Relief Program

Figure 5: Hardest Hit Fund: Percentage of Funds Drawn by States andNumber of 

Homeowners Assisted

In two recent reports, the Office of the Special Inspector General for the 

Troubled Asset Relief Program (SIGTARP) expressed concerns with 

respect to states’ use of Hardest Hit Fund program funds and 
Appendix II: Hardest Hit Fund

Page 21 GAO-17-236 Troubled Asset Relief Program

recommended that Treasury take steps to address such concerns.4

Treasury officials told us in October 2016 that the agency is reviewing the 

SIGTARP recommendations and has met with officials of states’ housing 

finance agencies to evaluate potential actions to improve the Hardest Hit 

Fund program. In a letter to Congress in October 2016, Treasury stated 

that it has processes to monitor states’ use of Hardest Hit Fund program 

funds. For example, Treasury requires states to provide an annual 

independent verification of the effectiveness of internal controls related to 

the use of program funds. Treasury also conducted 85 on-site compliance 

reviews across the states from 2011 through September 2016. We will 

continue monitoring Treasury's implementation of the Hardest Hit Fund 

and its oversight of state programs.

 4

Office of the Special Inspector General for the Troubled Asset Relief Program, Waste 

and Abuse in the Hardest Hit Fund in Nevada, SIGTARP-16-004 (Washington, D.C.: Sept. 

9, 2016) and Treasury’s HHF Blight Elimination Program Lacks Important Federal 

Protections Against Fraud, Waste, and Abuse, SIGTARP-16-003 (Washington, D.C.: June 

16, 2016).
Appendix III: FHA Short Refinance

Page 22 GAO-17-236 Troubled Asset Relief Program

The Department of the Treasury (Treasury) and the Department of 

Housing and Urban Development established the Federal Housing 

Administration (FHA) Short Refinance program in September 2010 to 

help stabilize the housing market and assist homeowners at risk of 

foreclosure. Specifically, this program enables underwater borrowers 

(those with properties that are worth less than the principal remaining on 

their mortgages) whose loans are current and not FHA-insured to 

refinance into an FHA-insured mortgage. Treasury has obligated 

Troubled Asset Relief Program (TARP) funds in case the agency must 

pay claims for losses on these loans.

The FHA Short Refinance program allowed homeowners to refinance into 

FHA-insured mortgage loans through December 2016. In the event of a 

default on the refinanced loan, Treasury pays up to a certain percentage 

of the claim after FHA has paid its share. Treasury established a letter of 

credit facility with TARP funds to pay claims associated with this 

program.1 Treasury will draw on the letter of credit to pay its share of 

claims through December 31, 2022. 

As of October 31, 2016, Treasury had disbursed $20 million (about 15 

percent) of the $130 million in funds obligated to support the FHA Short 

Refinance program (see fig. 6).2 As of October 31, 2016, Treasury had 

paid $207,381 in claims under the program and provided loss coverage to

4,165 refinanced loans totaling almost $613 million that could require a 

Treasury contribution, according to Treasury. As of September 30, 2016, 

Treasury estimated that the lifetime costs of the program would be $20 

million. Treasury officials said the agency will determine the maximum 

potential expenditures associated with the program and deobligate any 

excess funds by June 2017.

 1

As of September 30, 2016, Treasury had disbursed about $10.6 million in administrative 

expenses to establish and maintain the letter of credit facility and another approximately 

$10 million of reserve funds.

2

In 2013, Treasury reduced the amount obligated to this program from $8.1 billion to $1.0 

billion, in part because participation levels were lower than originally projected. According 

to Treasury officials, the reduction was also intended to minimize the administrative costs 

associated with the program. In March 2015, Treasury further reduced the amount 

obligated to the program from $1.0 billion to $0.13 billion. 

Appendix III: FHA Short Refinance
Appendix III: FHA Short Refinance

Page 23 GAO-17-236 Troubled Asset Relief Program

Figure 6: Federal Housing Administration Short Refinance Funds Disbursed and 

Remaining as of October 2016 

a

This includes about $10.6 million in administrative expenses and approximately $10 million of 

reserve funds, as of September 30, 2016. The reserve funds are on deposit with Citibank, N.A. to 

provide loss coverage for the program. Treasury will be reimbursed for unused reserve amounts from 

this Citibank account.
Appendix III: FHA Short Refinance

Page 24 GAO-17-236 Troubled Asset Relief Program

Daniel Garcia-Diaz, (202) 512-8678 or garciadiazd@gao.gov.

In addition to the individual named above, Harry Medina (Assistant 

Director), Anna Chung (Analyst-in-Charge), Bethany Benitez, Lynda 

Downing, Farrah Graham, John Karikari, Dragan Matic, Marc Molino, 

Tovah Rom, and Karen Tremba made major contributions to this report.

Appendix IV: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(101162)
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