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FROM: 

SUBJECT: 

We are provi

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We consider

comments ar

n Appendix 

We apprecia

contact Mr. K

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the duties an

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Kurt Hyde, D

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Hardest Hit F

al Inspector G

under the au

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in the repor

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Deputy Spec

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801 L Street

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February 19, 2

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of TARP and 

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decision maki

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he extent to w

he programs 

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rdest Hit 

ary 

the Troubled

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hip. In early 2

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odification Pro

still faced a h

ant stress. O

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nd for the Ha

“Hardest Hit F

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easures” dev

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Treasury to he

ve been hit th

he housing bu

nounced as a 

ve states with

ter than 20%,

18 states and

ough four roun

roved HHF pr

assistance: (

second-lien r

ment through p

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assistance su

f foreclosure,

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he Troubled A

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in response t

n Darrell Issa,

eview of Trea

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ether Treasur

d transparent

states and pro

which Treasu

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asury goals a

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was to prese

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address the 

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housing marke

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ministration 

nance Agenc

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eloped by sta

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elp families in

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ubble. 

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nds of funding

rograms in fiv

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uch as a short

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asury’s 

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und may be a

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to be limited 

y for homeow

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official told S

rdest Hit Fund

ation of option

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help to home

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to participate

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for certain pro

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was originally 

in addressing

wners who are

April 12, 2

SIGTARP that

d came from 

ns to tackle 

allenges such

oyment not 

ousing 

 official told 

09 (when HH

oyment was 

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ars, the 

ced significan

eowners due t

of 

easury and a 

tion in the 

d the 

rises (“GSEs”

). As of 

data available

t only 

tance to 

mately 3% of 

HF and 

um number o

HFAs estimate

gram, which 

ovided to 

st Hit Fund ha

assistance o

unts, the only

he GSEs 

e. The great 

homeowners 

ssistance. 

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conservator,

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states with hig

population in c

rate greater th

distressed, bu

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was not transp

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unemploymen

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selected until 

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all states with 

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of assistance 

TARP’s requir

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ink to this req

define “innova

whether the p

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nstead consid

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ailored solutio

Treasury has 

metrics that w

and Congress

success of HH

for HHF: to h

preserve hom

require states

households to

programs, but

usefulness be

changed estim

baseline that m

performance a

states’ estima

be assisted by

steadily decre

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rdest Hit 

nd that Treas

teria to choos

the first three

wever, in the s

why Treasury 

gh percentage

counties with 

han 12% were

ut that states w

nt were not. T

lection of stat

parent becau

Ohio (with 22

ties with a gre

nt rate), which

ssee (with 21

five months l

de another rou

above-avera

round, no ne

ther, Treasury

r days before 

ARP investme

ermined that t

it approved w

rement that p

eclosures and

grams for not

quirement. Tr

ative” or perfo

roposed prog

duplicative of

dering the pro

cause it provi

ons. 

not set meas

would allow Tr

s to measure 

HF. Treasury

elp prevent fo

meownership. 

 to estimate t

o be assisted 

t this number 

ecause states

mates, creatin

makes it diffic

against expec

ated number o

y the Hardest

eased over the

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sury consisten

se states to 

 rounds of fun

second round

determined t

es of their 

an unemploy

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with 11% 

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tes in Round 

se one perce

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age unemploy

ew states wer

y nearly doub

the expiration

ent authority. 

he five catego

were complian

rograms prev

d rejected oth

t having a suff

reasury did no

orm an analys

grams were 

f other progra

ogram design

des for locally

surable goals 

reasury, the p

the progress 

y set a single 

oreclosures a

 Treasury doe

the number of

by their HHF 

has limited 

 can, and hav

ng a shifting 

cult to measu

ctations. The

of homeowne

t Hit Fund has

e last year. 

ntation 

ogram

ntly 

nding 

d, it 

hat 

yment 

ly 

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entage 

ulation 

%

d, 

as not 

g to 

yment. 

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bled 

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nt with 

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their p

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ctively estima

632 and 486,5

me of HHF, wh

sury has not a

reported it. I

sury to set me

minimum, ado

mate or develo

y homeowner

 Treasury ca

parency by p

mation on the

mation, so tha

performance

pite Treasury’s

s – “This is no

programs.” –

Treasury is th

TARP found th

ibuted to the 

ficant delay in

eowners. HH

ning by Treas

ram without a

stakeholders. 

one to two da

ght weeks to d

ral states off g

yed HHF prog

gage servicer

ral HFAs told

ary challenge 

cer participati

cers, the HFA

on of strugglin

ained, “Withou

much, much l

ust communit

uld be a trickl

great shortco

ementation wa

n to enlist larg

cipation in sta

ng it to the HF

cers. Treasu

of bargaining 

iting servicers

ained to SIGT

rs has been a

cers in Florida

31, 2011, the 

ate helping be

536 homeown

hich will end 

adopted this e

It is not too la

easurable goa

opting the HF

oping its own 

rs Treasury ex

an also do mo

ublishing agg

e program, an

at taxpayers d

e on 19 HFA w

s statement a

ot our program

HHF is a TA

e steward ov

hat several fa

Hardest Hit F

n getting assis

F lacked com

ury, which rus

appropriate co

 Treasury’s d

ays’ notice to 

develop progr

guard. Sever

grams becaus

rs were not pa

d SIGTARP th

was the lack

ion. Without 

As could not r

ng homeowne

ut big service

longer to get 

ty banks and 

e of eligible a

oming in HHF’

as Treasury’s

ge servicer su

ate HHF progr

FAs to negotia

ry failed to re

power that st

s. A Florida H

TARP, “The on

a nice carrot t

a, but there is

Apr

19 HFAs 

etween 

ners over the 

in 2017. 

estimate or 

ate for 

als, including 

As’ collective

goal of how 

xpects HHF to

ore to improve

gregate 

d other usefu

do not have to

websites. 

about state 

m. These are 

RP program,

ver TARP. 

actors 

Fund’s 

stance to 

mprehensive 

shed out the 

ollaboration of

decision to 

states and six

rams caught 

ral states 

se the large 

articipating. 

hat their 

k of large 

large 

reach a large 

ers. One HFA

rs, it would 

the funds out

credit unions

applicants.” 

’s 

s lack of timely

upport for and

rams while 

ate with 

ecognize the 

tates had for 

HFA official 

ne billion 

to use for 

s no stick with

ril 12, 2012 

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he carrot to fo

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months, citing

different progr

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Servicers cite

before they co

program. Tre

for HHF progr

Treasury, resp

accountable fo

been, and still

ensure that th

support the H

n order to rea

whom the HFA

hrough HHF, 

ncrease in the

helped. As w

HHF, states n

support to inc

homeowners 

everything it c

success. Trea

goals, measur

goals, and dev

hat the next f

Hit Fund fulfill

homeownersh

Affecting 

rdest Hit 

orce servicers

rs did not par

g administrativ

rams, lack of 

d lack of GSE

d the need fo

ould begin pa

asury did not

rams for eight

ponsible for H

or HHF result

l should be, th

he GSEs and 

FAs’ program

ach the numb

As collectively

there needs 

e number of h

as clear in the

need Treasury

rease the num

helped, and T

can to ensure 

asury should 

re progress a

velop an actio

five years res

ing TARP’s g

hip. 

Impleme

Fund Pro

s to participat

rticipate for ni

ve burden of 5

program 

E guidance. 

or GSE guidan

rticipating in t

t gain GSE su

t months. 

HHF oversight

ts, should hav

he driving forc

large service

ms. 

er of homeow

y estimate he

to be a dram

homeowners 

e beginning o

y’s help and 

mber of 

Treasury shou

the program’

set measurab

against those 

on plan to ens

ult in the Hard

goal to preserv

ntation 

ogram

te.” 

ne 

50 

nce 

the 

upport 

t and 

ve 

ce to 

rs 

wners 

elping 

atic 

of 

uld do 

’s 

ble 

sure 

dest 

ve 

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SIGT

(a) se

perfo

minim

helpe

goals

agenc

mean

interim

at wh

in the

progr

make

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for as

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cash 

for th

to inc

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home

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shoul

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SIGT

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respo

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at SIGTAR

TARP recomm

et meaningful

rmance goals

mum the num

ed and measu

s; (b) instruct 

cies in the Ha

ningful and m

m performanc

hich the state 

e Hardest Hit 

ress of individ

e program adj

ublish on its w

ecard on a qu

ber of homeow

n down by sta

ssistance prov

tance commit

on hand; (e) 

e Hardest Hit

crease the nu

ted and to ga

sury-approved

sury cannot a

eowners assis

in the defined

ld put the fun

rams that are 

mmenting on 

sury stated th

TARP’s recom

gthier discuss

onse is contai

ments section

RP Recom

mends that Tre

 and measura

s for HHF inc

ber of homeo

ure progress a

state housing

ardest Hit Fun

easurable ov

ce goals; (c) s

housing finan

Fund must re

dual state prog

justments from

website and in

uarterly basis 

wners assiste

ates, and doll

vided to home

tted to homeo

and develop 

t Fund that in

mbers of hom

ain industry su

d HHF progra

achieve the de

sted in any on

d time period,

ds to better u

reaching hom

a draft of this

hat it will addre

mmendations a

sion of Treas

ined in the Ma

n of this repor

Apr

mmends 

easury: 

able 

luding at a 

owners to be 

against those

g finance 

nd to set 

verarching and

set milestone

nce agencies 

eview the 

grams and 

m the review;

n the Housing

the total 

ed, amounts 

lars expended

eowners, 

owners, and 

an action pla

cludes steps 

meowners 

upport for 

ams. If 

esired level of

ne program 

, Treasury 

use toward 

meowners. 

s report, 

ess 

at a later date

ury’s 

anagement 

rt. 

ril 12, 2012 

e

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;

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f

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F

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T

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B

T

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A

T

M

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Factors A

of the Ha

Table of

Introduction 

Background

Deteriorat

Treasury H

Treasury An

Round, Trea

Authority Un

Round On

In Round 

Round Th

for the Un

In Round F

Previously

Treasury R

Treasury C

State HHF

The Hardest 

Must Drama

Treasury’s

Off Guard

The Prima

Administr

Hesitant T

Treasury D

Treasury C

................

Once GSE

Programs 

GSEs and Se

Treasury’s G

Treasury a

Affecting 

rdest Hit 

f Conten ...................

...................

ting Market C

Held Four R

nounced the

sury Nearly 

nder TARP E

ne Targeted S

Two, Treasu

ree Used Ne

nemployed ..

Four, Treasu

y Funded HF

Rejected Pro

Considered t

F Programs W

Hit Fund Ha

tically Incre

s One to Tw

d ..................

ary Challeng

rative Burden

To Participat

Did Not Gain

Convened a 

...................

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ervicers Reje

Goals and Me

and Most HF

Impleme

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nts 

...................

...................

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e Selection o

Doubled the

Ended.........

States with H

ury Expande

ew Criteria T

...................

ury Added N

FAs .............

ograms as No

the Design o

Were Duplic

as Experienc

ase To Meet

o Days of N

...................

ge for HFAs 

n, Lack of P

e in HHF....

n GSE Supp

Servicer Sum

...................

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reased .........

ected Some H

etrics Fall Sh

FAs Did Not

ntation 

ogram

....................

....................

and Increasin

unding and A

f States at th

e Funds Ava

....................

Home Price D

ed HHF to Fi

To Target Sta

....................

No New State

....................

oncompliant

of the Progra

cative of Oth

ced Significa

t the Numbe

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....................

Was Lack o

rogram Unif

....................

port for HHF

mmit with K

....................

Large Servi

....................

HHF Progra

hort and Ma

t Set Numeri

....................

....................

ng Unemplo

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he Same Tim

ailable for HH

....................

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ive Addition

ates with Hi

....................

es, but Alloc

....................

t with EESA

am To Be Inn

her Programs

ant Delay in 

er of Homeow

tes Selected 

....................

of Participati

formity, and

....................

F Before App

Key Stakehol

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cer Participa

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ams, Leading

ake Effective

ic Goals ......

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oyment Led t

ve Categorie

me It Announ

HF Four Da

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xceeding 20%

nal States wi

igh Unemplo

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A ...................

novative and

s ..................

n Providing H

wners Whom

in the First T

....................

on by Large

d Lack of GS

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proving Stat

lders Seven 

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ation in Une

....................

g States To F

e Evaluation 

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....................

to the Devel

es of Program

nced the Pro

ays Before T

....................

% .................

ith High Une

oyment and F

....................

ditional $3.5

....................

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d Did Not Ev

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m HFAs Inte

Two Rounds

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e Servicers ...

SE Guidance

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te Programs .

Months Afte

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employment 

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Difficult .....

....................

April 12, 2

....................

....................

lopment of H

ms ...............

ogram. In th

Treasury’s Sp

....................

....................

employment

Focus on Pr

....................

5 Billion to 

....................

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valuate Whe

....................

meowners; A

end To Help

s Caught the

....................

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e Made Serv

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er Program L

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and Reinsta

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her Program

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012 

.............1

.............3

HHF ..... 3

............ 4

e Fourth 

pending 

.............6

............ 6

t ........... 7

ograms 

............ 8

............ 9

............ 9

ether 

.......... 11

ssistance 

p ..........13

e States 

.......... 17

.......... 19

icers 

.......... 21

.......... 23

Launch

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 1

 April 12, 2012 

Introduction 

When Congress authorized the creation of the Troubled Asset Relief Program 

(“TARP”) in 2008, the nation was in the midst of a housing crisis with a record 

number of foreclosures. Congress explicitly stated in the TARP legislation that 

one purpose of TARP was to preserve homeownership and specifically required 

the Secretary of the U.S. Department of the Treasury (“Treasury”) to take into 

consideration “the need to help families keep their homes and to stabilize 

communities” when exercising authority. 

The U.S. Government took several actions in response to the housing crisis that 

included rolling out in February 2009 the Making Home Affordable (“MHA”) 

Program, which contained TARP’s signature housing program, the Home 

Affordable Modification Program (“HAMP”). Treasury intended for HAMP to 

help as many as three to four million financially struggling homeowners avoid 

foreclosure by modifying loans to a level that is affordable for homeowners now 

and sustainable over the long term. 

Despite these Government programs, in 2009 and early 2010, homeowners faced 

a housing market still under significant stress, with nearly 2.8 million foreclosures 

initiated in 2009, and 932,000 foreclosure filings in the first quarter of 2010. At 

the end of 2009, 66,465 homeowners were in permanent mortgage modifications 

under HAMP. In the first quarter of 2010, Treasury announced the expansion of 

MHA through several new efforts and program revisions. 

In addition, on February 19, 2010, the Administration announced a new 

foreclosure prevention program under TARP called the Housing Finance Agency 

Innovation Fund for the Hardest Hit Housing Markets (“Hardest Hit Fund,” or 

“HHF”). Phyllis Caldwell, former Chief of Treasury’s Homeownership 

Preservation Office (“HPO”), told the Office of the Special Inspector General for 

the Troubled Asset Relief Program (“SIGTARP”) that the idea of the Hardest Hit 

Fund came from an overall examination of options to tackle home foreclosure 

economic challenges such as negative equity and unemployment not being 

addressed by HAMP. According to the program announcement, TARP dollars 

would fund “innovative measures to help families in the states that have been hit 

the hardest by the aftermath of the housing bubble.” Two years have passed since 

HHF was announced, and 30,640 homeowners have received assistance as of 

December 31, 2011. 

In a letter to SIGTARP dated June 23, 2010, Chairman Darrell Issa of the House 

Committee on Oversight and Government Reform requested that SIGTARP 

initiate a review of HHF, stating, “First, Treasury has not revealed, in a fully 

transparent manner, the scope and objectives of the state programs that will 

receive Hardest Hit Fund monies. ... Second, the details of Hardest Hit Fund 

programs that have so far emerged suggest that they will not effectively address 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 2

 April 12, 2012 

the national foreclosure crisis ... .” Consequently, SIGTARP began a review to 

meet the following objectives: 

 assess the extent to which Treasury applied consistent and transparent criteria, 

including applicable provisions of the Emergency Economic Stabilization Act 

of 2008 (“EESA”), in selecting the states and programs to receive money from 

HHF; 

 assess the extent to which Treasury determined that the programs to be funded 

by HHF are innovative and not duplicative of existing state and Federal 

programs; and 

 identify the goals and metrics that Treasury adopted and reported to the public 

for the operation of HHF. 

SIGTARP will address a fourth objective, to determine whether Treasury put 

sufficient mechanisms in place to prevent waste, fraud, and abuse of HHF, in a 

future audit report. 

In conducting this audit, SIGTARP gathered information from officials from 

Treasury, Government-sponsored enterprises (“GSEs”) – the Federal National 

Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage 

Corporation (“Freddie Mac”) – the Federal Housing Finance Agency (“FHFA”), 

state housing finance agencies (“HFAs”) participating in the program, and the 

largest mortgage servicers. For discussion of the audit scope and methodology, 

see Appendix A. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 3

 April 12, 2012 

Background 

HHF is one of three TARP-funded housing programs, along with MHA programs 

and a Federal Housing Administration (“FHA”) refinancing program.1 Treasury 

has allocated $45.6 billion to these programs. MHA includes subprograms such 

as Treasury’s principal housing program, HAMP. HAMP focuses on loan 

modifications and is intended to use incentive payments to encourage loan 

servicers (“servicers”) and investors to modify eligible first-lien mortgages so that 

the monthly payments of homeowners who are currently in default or at imminent 

risk of default will be reduced to affordable and sustainable levels. 

Deteriorating Market Conditions and Increasing Unemployment Led 

to the Development of HHF 

Treasury officials told SIGTARP that HHF program development began around 

the end of 2009, when the housing crisis had grown worse and encompassed more 

of the housing market. At that time, home prices declined and unemployment 

rose to 9.9%. As part of the program development, the Administration, the 

National Economic Council, the Council of Economic Advisers, the U.S. 

Department of Housing and Urban Development (“HUD”), and Treasury officials 

discussed how to address the evolving housing crisis. Housing and mortgage 

sector participants, including the Mortgage Bankers Association, the National 

Council of State Housing Agencies, and HOPE NOW,2

 also advised Treasury on 

the development of HHF. 

Former HPO Chief Caldwell told SIGTARP that Treasury wanted to do more 

regarding home foreclosure prevention. She told SIGTARP that the idea of HHF 

came from an overall examination of options to tackle foreclosure challenges, 

such as negative equity and unemployment, which were not addressed by HAMP 

or other MHA programs, and that at the end of 2009, unemployment was 

hovering around 9%, and one in four homes was underwater.3 Treasury stated 

that HHF’s goals are to help families in states hit the hardest by the burst of the 

housing bubble, allow for “locally focused” programs, support “innovative” 

foreclosure prevention efforts, prevent foreclosures, and stabilize the housing 

market. Treasury designed the HHF program to provide TARP funding for 

foreclosure prevention programs designed and run by HFAs. HFAs are 

authorities created by state law that help provide affordable housing. One 

Treasury official noted that HHF offered locally tailored solutions, something that 

 

1

 FHA in the U.S. Department of Housing and Urban Development (“HUD”) provides mortgage insurance on loans 

made by FHA-approved lenders. 

2

 HOPE NOW is an alliance of mortgage counselors, mortgage companies, investors, and other mortgage market 

participants that aims to maximize outreach efforts to homeowners in distress. 

3

 Declining home prices may result in “negative equity,” when the value of the home is less than the mortgage loan 

balance. Being “underwater” is a term also used to describe negative equity. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 4

 April 12, 2012 

nationally focused HAMP did not. The Administration noted in announcing HHF 

that HFAs were “already familiar with the urgent challenges facing their 

communities and have demonstrated the ability to address these challenges.” 

Treasury Held Four Rounds of Funding and Approved Five 

Categories of Programs 

Initially, Treasury announced that TARP funds would be allocated to states where 

home prices had declined more than 20%. Former HPO Chief Caldwell told 

SIGTARP that there were differences in the housing crisis at the state level, citing 

the example of the “sand states” of Arizona, California, Nevada, and Florida, 

which had substantial negative equity. Although Treasury had not specifically 

contemplated a total funding amount for HHF, Treasury later expanded the 

program in four rounds of funding in 2010. Treasury allocated $7.6 billion in 

TARP funds for HHF programs at 18 Treasury-selected states and the District of 

Columbia. The funds remain available until December 31, 2017. Treasury 

announced the four rounds as follows:4

 Round One: Announced February 19, 2010, $1.5 billion for five states with 

home price declines greater than 20% (Arizona, California, Florida, Michigan, 

and Nevada); 

 Round Two: Announced March 29, 2010, $600 million for five states with 

high concentrations of people living in economically distressed areas defined 

by Treasury as counties with unemployment rates that exceeded 12% (North 

Carolina, Ohio, Oregon, Rhode Island, and South Carolina); 

 Round Three: Announced August 11, 2010, $2 billion for states with 

unemployment above the then-national average of 9.8% (17 states and the 

District of Columbia); and 

 Round Four: Announced September 29, 2010, $3.5 billion for states already 

in HHF. 

Treasury subsequently approved HHF programs in five categories of assistance: 

(1) principal reduction; (2) second-lien reduction or payoff; (3) reinstatement 

through payment of past due amounts; (4) unemployment/underemployment 

assistance; or (5) transition assistance such as a short sale (in which the home is 

sold for less than the mortgage loan balance), deed-in-lieu of foreclosure (in 

which the homeowner transfers ownership to the lender or investor), or relocation 

 

4

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

round, see Appendix E. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 5

 April 12, 2012 

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

approval.5

 

5 For all HHF participation agreements and amendments by HFAs containing program descriptions, the estimated 

number of households served, and the funds allocated to each program, see the Contracts & Agreements tab at 

http://www.treasury.gov/initiatives/financial-stability/programs/housing-programs/hhf/Pages/default.aspx. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 6

 April 12, 2012 

Treasury Announced the Selection of States at 

the Same Time It Announced the Program. In the 

Fourth Round, Treasury Nearly Doubled the 

Funds Available for HHF Four Days Before 

Treasury’s Spending Authority Under TARP 

Ended 

For each round, Treasury internally decided on criteria for that round, applied 

the criteria to all states and the District of Columbia, decided the states and the 

amount of funds to distribute among the states, and then publicly announced the 

decisions. Treasury used a different method and criteria for selecting states for 

each round. Treasury consistently applied its announced criteria in the first three 

rounds, but in Round Two, the choice of the cutoff for its selection of states was 

not transparent. Four days before Treasury’s TARP investment authority expired, 

Treasury nearly doubled the funds for the program, giving the funds to the 

participating states without expanding the program to additional states. 

Round One Targeted States with Home Price Declines 

Exceeding 20% 

As first announced, HHF would fund states where the average home price had 

declined more than 20%. In the first round, Treasury selected five states, 

applying the 20% criteria. Former HPO Chief Caldwell told SIGTARP, “We 

focused on price declines, which were expected to include the ‘sand states’ since 

they had homes that were greater than 20% underwater. We thought about 

principal reduction and negative equity to address that in places where 

homeowners had put down 20% or more and were still underwater.” Caldwell 

explained that Treasury thought it “could capture the responsible borrower caught 

in the bubble and then price declines.” 

Treasury used the FHFA seasonally adjusted purchase-only house price index to 

calculate the statewide percentage decline from each state’s home price peak 

(which most frequently occurred in 2007).6 Former HPO Chief Caldwell told 

SIGTARP the breakpoint for the first five states selected made sense, and that 

after the first five, there was a big gap. Michigan, the fifth state selected for 

 

6 The FHFA seasonally adjusted purchase-only house price index measures changes in single-family house prices. It is a 

repeat-sales index, using price changes from repeat sales of the same properties. The index is based on sale prices of 

detached houses with mortgages that were conventional, were conforming, and were securitized or purchased by 

Fannie Mae or Freddie Mac. A conventional mortgage is one that is not insured by FHA or guaranteed by the U.S. 

Department of Veterans Affairs. A conforming mortgage is one that has a loan balance no greater than that allowed by 

GSEs, and meets minimum underwriting standards. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 7

 April 12, 2012 

Round One, had a price decline of 24.1%, whereas Maryland – which was not 

selected for Round One – had a price decline of 19%. She explained that for the 

next five states, “there was not a good breakpoint, and the next five in the first 

criteria list did not meet our objectives.”7

 After the five states Treasury selected, 

the remaining states fell under 20% in home price decline.8

In Round Two, Treasury Expanded HHF to Five Additional States 

with High Unemployment 

On March 29, 2010, Treasury announced the expansion of HHF to states with 

high concentrations of people living in economically distressed counties in which 

the unemployment rate exceeded 12% in 2009. Treasury selected five states: 

North Carolina, Ohio, Oregon, Rhode Island, and South Carolina. Former HPO 

Chief Caldwell told SIGTARP that home foreclosures caused by concentrated 

unemployment were not being addressed by HAMP, and Treasury wanted to use 

HFAs to address the issue. Former Treasury Assistant Secretary for Financial 

Stability Herbert Allison told SIGTARP, “We heard from lots of other states after 

the first round. ... Members of Congress and community groups spoke out.” 

Treasury received letters from elected officials of Ohio and Pennsylvania, 

expressing concern as to why their states were not funded through the program 

and urging Treasury to expand the program to other states. 

Unlike for Round One, Treasury was unable to clearly explain how it selected the 

criteria of a greater than 12% unemployment rate other than to call it a “policy 

decision,” and explain how it drew a cutoff line for the five states that received 

funding when there was not a clear statistical cutoff point. Treasury’s press 

release stated, “Less than 15 percent of the U.S. population lives in such high 

unemployment rate counties.” In Round Two, Treasury selected North Carolina, 

Ohio, Oregon, Rhode Island, and South Carolina, states that had a range of 22% 

to 60% of their population living in counties with concentrated unemployment.9

 

Unlike Round One, Round Two did not have a clear statistical cutoff point for 

state eligibility. There was a small gap between states included and excluded for 

the second round, with Ohio included at 22% of state population in high 

unemployment counties and Tennessee excluded at 21%. Treasury’s 

 

7

 The state price decline percentages as calculated from the FHFA’s seasonally adjusted purchase-only house price index 

are identified in Appendix I. 

8

 Treasury allocated the $1.5 billion in TARP funds among the states using a Treasury-created formula that included 

housing price declines calculated from the FHFA seasonally adjusted purchase-only house price index, unemployment 

data from the U.S. Department of Labor’s Bureau of Labor Statistics (“BLS”), and the number of delinquent loans in 

the state. The methodology was based on the sum of two ratios. The ratio of a state’s unemployment rate compared to 

the highest unemployment rate in any state and the ratio of a state’s price decline compared to the largest price decline 

in any state were summed. Then, the sum of the ratios was multiplied by the number of delinquent loans in each state, 

and funding was allocated based on the “weighted share” of delinquencies. Treasury used the number of loans that 

were at least 60 days delinquent but not in foreclosure, from the Mortgage Bankers Association, fourth quarter of 2009.

9

 California and Michigan met the statistical requirements for Round Two, but Treasury disqualified them because they 

had already been selected for Round One. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 8

 April 12, 2012 

Frequently Asked Questions stated, “In order to help significant quantities of 

borrowers and test the effectiveness of these efforts, funding levels need to be 

high enough to make a significant impact. For this reason, HFAs in the five states 

most severely impacted will be allocated funding.” After selecting the states, 

Treasury allocated funds among the states in proportion to the number of people 

in each state living in counties with high unemployment. 

Treasury selected the states based on the greater than 12% unemployment rate in 

specific counties, but allowed the states to spend HHF dollars throughout the 

state, even if other areas of the state had unemployment of 12% or less because, 

according to a senior Treasury official, the White House wanted to provide states 

more flexibility and not be seen as being prescriptive. 

Round Three Used New Criteria To Target States with High 

Unemployment and Focus on Programs for the Unemployed 

On August 11, 2010, Treasury announced Round Three and an additional 

$2 billion. Although all states were eligible, even if already participating in HHF, 

Treasury selected states with unemployment at or above 9.8%, the national 

average at the time, using the U.S. Department of Labor’s Bureau of Labor 

Statistics (“BLS”) data.10 Applying these criteria, Treasury selected 17 states and 

the District of Columbia for Round Three and allocated funds based on the 

population size of eligible states. For detailed state selection rankings and 

allocations for Rounds One, Two, and Three, see Appendix I. 

A Treasury press release announcing Round Three said the funds had to be used 

for “targeted unemployment programs that provide temporary assistance to 

eligible homeowners to help them pay for their mortgage while they seek reemployment, additional employment or undertake job training.” Half of the states 

eligible for Round Three had previously received HHF funds and were allowed to 

amend their approved plans to create or modify programs to target 

unemployment.11 One HFA pointed out to SIGTARP the need for a targeted 

unemployment program building on HAMP, which focused on loan modification. 

The HFA official said, “HAMP is a loan modification program – this is not 

effective if people are unemployed – they need a targeted unemployment 

program.” 

 

 

10 Treasury used the BLS seasonally adjusted monthly unemployment rates (by state) and took the average for each state 

from July 2009 through June 2010. 11 The only state that had previously received funds but was not included in Round Three was Arizona because Arizona’s 

12-month average unemployment rate was not equal to or greater than the national average. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 9

 April 12, 2012 

In Round Four, Treasury Added No New States, but Allocated an 

Additional $3.5 Billion to Previously Funded HFAs 

On September 29, 2010, Treasury announced that in Round Four, an additional 

$3.5 billion would be provided to all states already approved for HHF, bringing 

total TARP funding for the program to $7.6 billion. Treasury officials told 

SIGTARP that the decision to provide a fourth round of funding was based on the 

belief that a state-driven solution could address the ongoing housing crisis and 

mentioned the impending October 3, 2010, expiration of Treasury’s investment 

authority under TARP.12

For the first three rounds, SIGTARP found that Treasury consistently applied the 

announced criteria to all states. Round Four provided more money to the states 

already in HHF. According to Treasury, in the first three rounds it assessed 

states’ capacity to implement HHF programs and funded the states according to 

what it thought the HFAs could use effectively. However, in Round Four, 

Treasury nearly doubled the program’s funding and allocated the funds to the 

participating states by population. Treasury officials told SIGTARP that Treasury 

called the HFAs and inquired as to their capacity before obligating additional 

funds. Despite a SIGTARP request, Treasury provided SIGTARP no 

documentation showing evaluation of each state’s ability to effectively absorb 

additional funding. Therefore, it is not clear how Treasury assessed the HFAs’ 

needs and requirements for receiving nearly double the TARP funding. For an 

overview of the funding, state selection criteria, states funded, and funding 

allocation method, see Appendix D. 

Treasury Rejected Programs as Noncompliant with EESA 

In announcing HHF on February 19, 2010, the Administration specifically stated 

that programs must meet funding requirements under EESA, which included “that 

the recipient of funds must be an eligible financial institution and that the funds 

must be used to pay for mortgage modifications or for other permitted uses under 

EESA.” Treasury determined which of the 19 HFAs were eligible financial 

institutions, and required each HFA that was not an eligible financial institution to 

establish one to receive the Government funds.13

 

12 The funds were allocated based on each of the participating state’s population. For detail on funding allocations 

among Round Four states, see Appendix E. 13 Treasury may only purchase a “troubled asset” from a “financial institution” as defined in EESA, and Treasury may 

use its authority under Section 109(a) to use loan guarantees and credit enhancements to facilitate loan modifications 

to prevent avoidable foreclosures. Treasury required each HFA to designate or create an entity (“Eligible Entity”) that 

complied with the definition of a “financial institution” under Section 3(5) of EESA, and Treasury entered into 

participation agreements – which it determined were “financial instruments” and therefore “troubled assets” under 

Section 3(9) of EESA – with the Eligible Entities, requiring the Eligible Entities to implement locally tailored 

programs to help prevent foreclosures and stabilize the housing markets in their respective states. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 10

 April 12, 2012 

Treasury also reviewed and approved or rejected state HFAs’ programs, focusing 

largely on whether the proposed program complied with EESA. Treasury’s HFAHardest Hit Fund Review Committee (“Review Committee”) was responsible for 

evaluating the proposed programs for compliance with EESA and in accordance 

with Treasury’s guidelines.14

Treasury determined that programs in the following five categories were 

authorized by Section 109(a) of EESA as “credit enhancements” to facilitate loan 

modifications for preventing avoidable foreclosures: 

 unemployment programs; 

 mortgage modification/principal reduction; 

 second-lien reduction; 

 reinstatement or short-term loan; and 

 relocation, short sale, or deed-in-lieu. 

SIGTARP has reviewed Treasury’s contracts with HFAs detailing each of the 49 

programs initially approved through the first three HHF rounds. SIGTARP found 

that all of the programs fall within one of the five categories set forth above. 

Treasury consistently rejected proposed programs for legal aid and foreclosure 

counseling. Treasury conducted a legal analysis that determined that proposals 

for legal aid services were not specifically authorized by EESA. In addition, 

Treasury determined that certain proposed legal aid services and broad-based 

foreclosure counseling were not necessary and incidental, as a matter of law, to 

the implementation of the HHF because Congress had provided other specific 

appropriations that fund similar services provided by the HFAs and because legal 

aid services were not “necessary” or “essential” to the implementation of a loan 

modification program. Treasury rejected some proposals because the programs 

did not establish enough of a link between the assistance offered and the 

prevention of avoidable foreclosures and therefore did not comply with EESA. 

According to HFAs, Treasury rejected proposed programs for down payment 

assistance, mediation, job training, job creation, and a program for the elderly 

with flood-damaged homes who qualified for reverse mortgages. However, 

beyond stating that the HFA-proposed programs did not establish enough of a link 

between the assistance offered and the prevention of avoidable foreclosures, 

Treasury has not provided additional explanation or documentation for the 

rejection of those particular programs. Treasury provided documentation such as 

Review Committee minutes showing decisions on proposed programs, and emails 

from a contracted law firm conveying Treasury guidance to the states on some 

types of assistance that were not permissible. However, this documentation was 

 

14 The Review Committee included seven voting representatives from Treasury’s Office of Financial Stability (“OFS”) 

and Treasury’s Office of Domestic Finance, and four non-voting participants including two attorneys from the Office 

of Chief Counsel, a Budget Officer, and a Financial Analyst. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 11

 April 12, 2012 

not sufficient for SIGTARP to analyze the basis for Treasury’s rejection of these 

programs or to form an opinion as to whether Treasury consistently applied that 

basis in rejecting these programs. 

Treasury Considered the Design of the Program To Be Innovative 

and Did Not Evaluate Whether State HHF Programs Were 

Duplicative of Other Programs 

Treasury officials, the GSEs, FHA, and some servicers considered the design of 

the HHF program to be innovative. Treasury officials stated that HHF is 

innovative in general by providing “locally tailored” solutions. The HHF 

Program Director told SIGTARP, “There was no definition of innovation required 

by Treasury. Treasury did not ask states to reinvent the wheel; states used their 

discretion and developed their own delivery mechanisms that Treasury considers 

to be innovative in general. There are only so many ways to implement 

foreclosure mitigation programs.” Former HPO Chief Caldwell said, “Innovation 

means different things to different people. HHF was innovative in that it’s 

different from HAMP. HAMP is a one-size-fits-all program.” She also said, 

“There was no litmus test for innovation.” Caldwell also noted that HHF could be 

considered innovative in the context of traditional mortgage modifications 

because HHF programs were different, and states have the flexibility to choose 

the type of program and set the amount of funding and the number of 

homeowners they wish to help. 

SIGTARP consulted Fannie Mae, Freddie Mac, FHA, three of the largest 

servicers, and an academic about whether HHF had innovative aspects. They told 

SIGTARP that they generally agreed that HHF programs have innovative aspects 

compared to existing Government programs because they provide different types 

of assistance at a local level or help borrowers for longer periods of time. Some 

mortgage industry stakeholders considered HHF unique in targeting the 

unemployed and second liens. Another mortgage industry stakeholder considered 

assistance to unemployed homeowners with no income to be innovative. 

Mortgage industry stakeholders also said that the HHF programs provide deeper 

relief to homeowners than before the housing crisis because previous programs 

were generally funded at too low a level to respond effectively to the housing 

crisis, were not designed to address negative equity or issues with second liens, or 

had eligibility requirements that excluded many current struggling homeowners 

such as the unemployed. 

Treasury told SIGTARP that it did not perform an analysis to determine whether 

HHF programs were duplicative of existing Federal and state programs. Treasury 

officials told SIGTARP that they did not require HFAs to design programs that 

had never before been implemented. Treasury encouraged states to borrow other 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 12

 April 12, 2012 

states’ effective programs,15 and told the states that their HHF proposals could 

complement existing foreclosure programs, including HAMP.16

 

 

15 For example, Treasury referred HFAs to existing programs that could serve as models for HHF programs. One such 

model program was Pennsylvania’s Homeowners’ Emergency Mortgage Assistance Program, which assists 

unemployed borrowers. Other existing foreclosure prevention programs used as models include the Delaware 

Emergency Mortgage Assistance Program, North Carolina’s Home Protection Pilot Program, and the Ohio Home 

Rescue Fund. 16 For example, HHF assistance can be used either to make a borrower eligible to participate in a HAMP program, or to 

assist a borrower who has already received a permanent HAMP loan modification. Treasury also issued guidance on 

how HHF programs should interact with MHA foreclosure prevention programs. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 13

 April 12, 2012 

The Hardest Hit Fund Has Experienced 

Significant Delay in Providing Help to 

Homeowners; Assistance Must Dramatically 

Increase To Meet the Number of Homeowners 

Whom HFAs Intend To Help

This section describes how Treasury’s planning and oversight created 

implementation issues that delayed participation by Fannie Mae, Freddie Mac, 

and the largest servicers. The delay in participation by these major stakeholders 

had a ripple effect on preventing the state HFAs from getting assistance to 

homeowners. 

State HFAs experienced delays in rolling out their programs and getting 

assistance to homeowners. Treasury reported that all 19 HFAs in the HHF 

program had begun offering assistance statewide by July 2011. According to the 

most recently available performance results data as of December 31, 2011, the 

HFAs had offered 55 HHF programs.17 

As of February 2012, two years after the launch of HHF, the HFAs had drawn 

down $828.6 million. The majority of these funds had been identified for 

administrative expenses and cash on hand.18 As of December 31, 2011, HFAs 

had spent $217.4 million (or 3% of $7.6 billion) to assist 30,640 homeowners, 

only 7% of the 458,632 to 486,536 homeowners whom HFAs plan to assist by 

December 31, 2017, when the program’s funding expires.19 See Table 1 for 

estimates of the number of homeowners to be assisted, and actual numbers for the 

applications approved, homeowners served, and the amount of funds spent on 

programs through December 31, 2011. 

 

 

17 HFAs had 55 programs as of December 31, 2011. Since then, HFAs added or eliminated programs with a net result of 

54 programs as of January 25, 2012. However, the most recent available quarterly performance results data analyzed 

for this report are from December 31, 2011. As a result, for many purposes in this report, SIGTARP uses data as of 

December 31, 2011. 18 Treasury monthly reports refer to funds paid to HFAs for HHF as “drawdowns,” or disbursements. “Cash on hand” 

refers to funds that the states have received from Treasury but not spent. According to Treasury, 16 of the 19 HFAs 

hold the funds in interest-bearing accounts. Any interest earned can be used only for HHF. For the amount drawn 

down by each HFA, see Appendix G. 19 SIGTARP aggregated the HFAs’ estimated number of homeowners to be assisted through December 2017 for all HHF 

programs to arrive at a single range of numbers the program plans to assist overall (see Table 1 note). The range is 

from 458,632 to 486,536 homeowners. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 14

 April 12, 2012 

TABLE 1 

Note: Treasury allocated Round Four funds by September 30, 2010, but the HFAs did not reflect this in estimates of the numbers they would serve until 

December 2010. As a result, the estimated number of participating households increased substantially from September 30, 2010, to December 31, 2010. a

 This column shows the totals of the individual program estimates. According to Treasury, these totals do not necessarily translate into the number of 

unique homeowners whom the states expect to assist because some homeowners may participate in more than one HHF program. 

b

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

assisted. 

c

 HFA quarterly reports did not include data for Homeowners Assisted until the March 31, 2011, report. 

Sources: HFA Participation Agreements, amendments through 12/31/2011, and Quarterly Performance Data reports, third and fourth quarters 2010, first, 

second, third, and fourth quarters 2011, reporting states. Some figures have changed from those previously published in SIGTARP Quarterly Reports as 

some HFAs revised previously reported numbers. 

ESTIMATED AND ACTUAL HHF USAGE 

Date 

 Estimated 

Number of Homeowners 

 to Assist Through 2017a

 Applications 

Approved 

(cumulative)b

Homeowners 

Assisted 

(cumulative) 

 Assistance Spent 

on Programs 

(cumulative) 

As of September 30, 2010 244,703-262,170 262 n/ac $1,060,390 

As of December 31, 2010 434,472-475,054 757 n/ac $3,819,129 

As of March 31, 2011 507,619-549,094 2,598 2,328 $10,949,749 

As of June 30, 2011 501,506-538,206 8,422 7,389 $40,726,410 

As of September 30, 2011 480,929-510,797 20,695 19,025 $112,494,322 

As of December 31, 2011 458,632-486,536 33,542 30,640 $217,427,372 

The initial months of the HHF program involved a ramp-up period – HFAs 

developed proposals for programs, Treasury reviewed and approved proposed 

programs, and HFAs established infrastructure for administering their programs. 

The rollout of HHF was also staggered – Treasury approved Round One HFAs’ 

programs in June 2010, Round Two HFAs’ programs in August 2010, and 

Round Three HFAs’ programs in September 2010. As is evidenced in Table 1, 

the estimated number of homeowners to be assisted by HHF has been steadily 

decreasing over the last year. There will have to be a dramatic increase in the 

number of homeowners served to reach the most recent minimum estimate of 

459,000 homeowners assisted.20

Three-fourths of the HHF assistance provided to homeowners so far was for 

unemployment assistance. The remaining assistance provided to homeowners can 

be broken down to 20% for reinstatement through payment of past due amounts, 

5% for principal reduction, 1% for second-lien reduction, and 0.1% for transition 

assistance (see Figure 1). This assistance ranged from approximately $3,000 to 

$50,000 per homeowner.21

 

20 For the programmatic expenses and homeowners assisted by HFAs through December 31, 2011, see Appendix F. 21 Treasury told SIGTARP that for two HHF loan purchase programs in Illinois and Oregon, the per-household 

assistance could be calculated when the programs are completed because all of the information would not be available 

until assistance is concluded. SIGTARP eliminated these two programs from the per-household assistance 

calculation.
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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 16

 April 12, 2012 

 taking a stronger role in securing early participation of the largest servicers – 

Round One and Two states told SIGTARP that without large servicers on 

board, they would not be able to help a significant portion of homeowners 

whom they originally estimated; 

 anticipating common implementation issues early on and resolving them in a 

timely manner; and 

 supplying critical guidance, information, and support to GSEs and other 

stakeholders earlier than they did. 

The former Assistant Secretary for Financial Stability, Herbert Allison, told 

SIGTARP that at the time Treasury announced the first round, Treasury did not 

expect to have a second or third round for the HHF program. However, in order 

to ensure that this initial $1.5 billion would be distributed efficiently and 

effectively to homeowners, Treasury should have brought all key stakeholders 

together early on to mitigate any barriers to participation. Even if the program 

had remained at the $1.5 billion or $2.1 billion funding level, early collaborative 

involvement of key stakeholders could have helped provide this assistance to 

homeowners more quickly than the program has done. 

Treasury did not use its influence with key stakeholders for effective 

implementation of the program. Treasury involved some key stakeholders 

individually in planning HHF late in 2009 and contacted the GSEs and FHFA on 

the day before the program was announced. A working group of FHFA, Fannie 

Mae, and Freddie Mac officials discussed HHF in the early months. The working 

group met several times in April, May, and June of 2010. A Treasury official said 

Treasury had monthly one-on-one calls with HFAs that began in the summer of 

2010; one-time visits to each state when its HHF programs opened statewide; 

calls with states explaining interaction between HAMP and HHF, and other 

issues; quarterly conference calls with HFAs; biweekly calls with more than 100 

servicers and states; and biweekly calls with large servicers. 

Despite Treasury’s contacts with these stakeholders, Treasury did not use its 

influence to enlist servicers’ support for and participation in state HHF programs, 

instead largely leaving that to the states. By July 2010, only one HFA (Michigan) 

had launched its pilot program and no large servicers were participating in HHF. 

Servicers cited the need for GSE guidance to begin participating in HHF. One 

GSE stated it had little direct contact with Treasury. This may have been a result 

of FHFA’s guidance. In June 2010, FHFA issued an email to Treasury, Fannie 

Mae, and Freddie Mac, stating: 

“FHFA’s OGC [Office of General Counsel] has determined that the GSEs 

should not work directly with Treasury on the design of HHF programs. If 

the GSEs work with Treasury directly on program terms, the GSEs could 

be perceived as having undue influence in the design of the HFA 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 17

 April 12, 2012 

programs. Given Treasury’s substantial investment in the GSEs, we don’t 

think that perception can be completely eliminated. However, we think it 

can be minimized by having the GSEs work directly with the affected 

HFAs on any program issues, rather than with Treasury staff.” 

An FHFA official later clarified that GSEs could work in general with Treasury 

but could not ask Treasury to review or approve proposed “partnership proposals” 

to HFAs. 

Key stakeholders stated that Treasury’s decision to make states responsible for 

negotiating with servicers without Treasury first using its influence to resolve 

common issues may have impeded progress in the early months of HHF. Nine of 

the 10 HFAs funded in Round One and Round Two launched their initial HHF 

programs without large servicer participation. One HFA told SIGTARP that 

getting national banks to participate would have “required lots of coaxing and 

planning on the part of Treasury” and it would have been helpful to bring 

potential participants together before the program was announced. One large 

servicer told SIGTARP, “Anytime all the parties can be involved in a program, 

the more success you will have. I think that if Treasury, the states, and the 

servicers were involved earlier on, that the program would be more successful and 

further along.” 

FHFA informed Treasury as early as April 2010 that the GSEs needed an official 

determination from Treasury that they were allowed to accept TARP funds, and 

Treasury provided that in August 2010. Despite these communication efforts, 

GSEs’ support for HHF was not finalized until after Treasury gathered the FHFA, 

HFAs, large servicers, and GSEs for a collaborative effort in September 2010. 

That meeting led to GSE guidance, which in turn led to large servicer 

participation in HHF. If Treasury had taken earlier efforts to collaborate with 

these key stakeholders, all may have been able to better anticipate barriers to 

participation in the program. 

Several issues delayed HHF’s implementation. What follows is a discussion of 

the most significant issues. 

Treasury’s One to Two Days of Notice to States Selected in the First 

Two Rounds Caught the States Off Guard 

Treasury gave the five states selected for Round One a single day’s notice before 

the announcement of the program on February 19, 2010. Until that time, four of 

the five states had no knowledge that they were under consideration to receive 

TARP funds or that the HHF program was being developed.22 On 

 

22 One state HFA’s representative was involved in discussions with Treasury on the development of HHF in the two 

weeks before the program announcement. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 18

 April 12, 2012 

February 18, 2010, Treasury held a conference call with the five states in which 

Treasury notified them about the program, their selection to receive TARP funds, 

and a “walk-through” of the application process. In Round Two, three of the five 

states told SIGTARP that Treasury provided one to two days’ advance notice that 

they were selected. Representatives from two state HFAs in Round Two told 

SIGTARP they did not know they were selected for the program until 

March 29, 2010, the day of Treasury’s announcement, when they received phone 

calls from the media. Treasury told SIGTARP that it did not provide HFAs in the 

first two rounds more than one day’s notice because “giving notice too early 

could lead to the premature release of information that is incomplete or 

inaccurate.” 

Treasury’s decision to give one to two business days’ notice to HFAs that they 

were selected for various rounds of HHF funding caught several HFAs off guard 

and did not allow them enough time to prepare to respond to the public’s inquiries 

about the program. One HFA official told SIGTARP that 10 minutes after the 

announcement, the HFA began receiving phone calls from the public about the 

program, and the HFA received 200 phone calls that day from people asking 

when the money would be available. 

HFAs had a matter of weeks to develop their programs after their selection was 

announced. On March 5, 2010, two weeks after announcing the Round One HHF 

program, Treasury told the states that they were required to submit proposals for 

their HHF programs by April 16, 2010,23 which had to comply with new Treasury 

guidelines.24 The HFAs gathered public input in developing proposed programs. 

In addition to developing proposed programs, the HFAs had to change their 

processes and hire and train staff to implement the programs. One HFA official 

told SIGTARP that the HFA “was not prepared to deal with the tsunami of the 

HHF. ... We had to build business processes.” A second HFA said that it had to 

“scramble and get a network in place.” One HFA had to add more staff assigned 

to HHF, going from seven employees to 42 employees, a sixfold increase. If 

Treasury had informed the HFAs before the announcement, the HFAs may have 

been able to identify their ramp-up requirements and been better prepared to 

handle inquiries from the public. 

 

 

23 On April 12, 2010, Treasury told the Round Two states that they were required to submit proposals for HHF programs 

by June 1, 2010. 24 The guidance stated that the states’ proposals could include innovative housing initiatives tailored to their local 

conditions to help prevent foreclosures and stabilize housing markets, including individual programs targeting 

unemployed borrowers, underwater borrowers, and second-lien relief. Treasury’s guidance limited any assistance to 

borrowers with loans that had an unpaid principal balance of $729,750 or less. This amount was the GSE conforming 

loan limit in effect from the start of HHF through October 1, 2011. The guidelines also emphasized that the programs 

must meet EESA requirements for funding, purpose, and accountability. Treasury also provided a list of foreclosure 

prevention tools or foreclosure alternatives that would meet EESA requirements. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 19

 April 12, 2012 

The Primary Challenge for HFAs Was Lack of Participation 

by Large Servicers 

Several HFAs told SIGTARP that their primary challenge with the 

implementation of HHF was the lack of participation by large servicers. In regard 

to the lack of servicer participation, one HFA told SIGTARP that on a scale of 

one to 10, “this was a 10.” Another HFA told SIGTARP, “Our biggest complaint 

is we were provided these funds, and we have such a need here, but we weren’t 

able to handle the mass numbers because of no participation from the large 

lenders.” 

SIGTARP found that Treasury’s delay in securing support from large servicers 

and the GSEs in Round One, and even in Round Two, was a planning and 

execution error. There was a very low volume of homeowners assisted until after 

the GSEs came on board, which in turn led to large servicer participation. A 

Treasury official told SIGTARP that the program was purposefully designed to 

have the HFAs negotiate with the servicers, but several HFAs reported being 

rebuffed by large servicers when seeking their participation for the Treasuryapproved programs. One HFA told SIGTARP that large lenders said that with the 

number of homeowners who would receive assistance and the lenders’ capacity, 

implementing the HHF program without a consistent process from the states 

would have been difficult for them. Another HFA told SIGTARP that servicers 

responded by saying that all of the HHF states with different programs would be 

too many different programs to handle. In designing the program this way, 

according to two HFAs, Treasury did not address the lack of bargaining power 

that smaller state HFAs had to recruit large servicers. A Florida HFA official 

explained to SIGTARP, “The one billion dollars has been a nice carrot to use for 

servicers in Florida, but there is no stick with the carrot to force servicers to 

participate.” Another HFA told SIGTARP that it would have been helpful if 

Treasury had been more aggressive in getting large lenders to participate. 

Treasury was aware of the HFAs’ lack of progress in recruiting large servicers. 

One HFA official said that at the time Round One states signed their HHF 

contracts, one question was unanswered – would large servicers participate in 

HHF? He said that Treasury did not have an answer but Treasury realized the 

large banks “were late to the table.” 

Prior to receiving crucial guidance from the GSEs in October 2010, none of the 

four largest servicers had agreed to participate with any of the 19 HFAs in HHF. 

Several HFAs launched pilot programs with local community banks, and credit 

unions signed up to participate – though these institutions held a relatively small 

number of loans. Several HFAs praised Treasury for encouraging HFAs to pilot 

their programs before a full rollout. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 20

 April 12, 2012 

Nine of the 10 HFAs funded in Round One and Round Two launched their initial 

HHF programs without large servicer participation, and one delayed its initial 

launch because large servicers were not participating. For example: 

 Michigan’s HFA signed up 136 local banks and launched its pilot program in 

July 2010 without major servicers. Michigan rolled out three HHF programs 

statewide in October 2010 without any of the four largest servicers 

participating. 

 Florida’s HFA said it delayed its pilot launch from August 2010 to 

October 2010 because large servicers were not participating. Florida launched 

with one large servicer. 

 Arizona’s HFA had planned to launch its pilot programs in July 2010, but 

instead launched in September 2010 with mostly community banks 

participating. Large servicers and the GSEs were not participating at that 

time; they were reluctant to join. 

 Nevada’s HFA took nearly a year to come to an agreement with Bank of 

America Corporation (“Bank of America”) for the bank’s participation in 

Nevada’s principal reduction program. Nevada stated that it had started 

working with Bank of America in April 2010. Nevada’s HFA and Bank of 

America reached agreement in January 2011, and Nevada’s HFA launched its 

pilot program in March 2011, one year after Nevada was selected for the 

program. 

 Ohio’s HFA launched all four of its programs in September 2010 without 

major servicers participating. 

 HFAs from California, Rhode Island, North Carolina, and South Carolina also 

cited issues with the lack of large servicer participation. 

For a timeline of HFAs’ pilot and statewide program launches between July 2010 

and July 2011, with the date the first large servicer signed up to participate with 

each HHF program, see Appendix H. 

HFAs launched their program without large servicer participation, and as a result, 

they could not reach all intended applicants. The HHF Program Director said that 

the Office of Financial Stability (“OFS”) thought that the first two HHF rounds 

would work with either community banks and credit unions alone, or one large 

servicer in some states, and that they did not need to have all the large servicers 

and the GSEs participating until the third round expanded the program to 19 states 

and $4.1 billion. However, as stated above, the HFAs in the first two rounds cited 

issues with the lack of large servicer participation. The largest mortgage servicers 

account for a substantial percentage of loans and dollar volumes serviced, making 

their participation key if HHF programs are to reach as many homeowners as was 

intended. The four largest servicers – Bank of America, Wells Fargo and 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 21

 April 12, 2012 

Company (“Wells Fargo”), JPMorgan Chase & Co. (“JPMorgan”), and 

CitiMortgage, Inc. (“CitiMortgage”) – together account for 53.9% of the top 50 

firms’ dollars serviced.25 Several HFAs said participation by the largest servicers 

would be necessary to assist a significant share of the struggling homeowners in 

their states. 

One HFA told SIGTARP that applicants were frustrated and wanted to know why 

ramping up the programs took so long, and the reason was that the national banks 

were not ready to jump in. Florida’s HFA explained, “Without big servicers, it 

would take much, much longer to get the funds out, with just community banks 

and credit unions. It would be a trickle of eligible applicants. Without the big 

servicers, we would only be able to help about 50%” of the applicants the HFA 

had originally estimated. Arizona’s HFA told SIGTARP that it could serve only 

20% of the original estimate of applicants without the big servicers. North 

Carolina’s HFA said if the big servicers are not on board, the HFA could help 

only 25% of its estimate. Michigan’s HFA said that because the large servicers 

were not involved, it was able to assist only a small percentage of the applicants 

in its state. One HFA told SIGTARP that “without the servicers’ participation, it 

would have been disastrous.” 

Administrative Burden, Lack of Program Uniformity, and Lack of 

GSE Guidance Made Servicers Hesitant To Participate in HHF 

Treasury’s decision to decentralize program development resulted in more than 50 

non-uniform programs, which created implementation issues for servicers. Some 

of the large servicers said that without uniformity it was difficult to operate in the 

more than 50 unique HHF programs offered by 19 different HFAs. One servicer 

said its experience with HAMP, a single national program with one set of rules, 

was less complex than HHF. Servicers said the large number of HHF programs 

and their complexity posed an operational challenge for servicers to develop and 

implement HHF infrastructure and properly train staff. Large servicers said HHF 

would greatly tax their resources, given the number of programs and their lack of 

uniformity. Servicers voiced concern over their capacity to implement required 

systems and changes and asked for standardized information and a process for 

each program. One large servicer explained that states were creating and rolling 

out different programs and there was no standardization of programs. The 

servicer explained that its staff had to learn each state’s different eligibility and 

coding requirements and that “the volume was unprecedented.” 

Treasury contacted large servicers after the program’s announcement, but until 

November 2010, none of the four largest servicers had signed on to participate. 

 

25 According to analysis by Inside Mortgage Finance, the servicer arms of Bank of America, JPMorgan, CitiMortgage, 

and Wells Fargo are the largest servicers by total dollar volume serviced nationally for 1-4 family mortgages in 2011. 

Market share data were compiled by Inside Mortgage Finance, “Top Mortgage Servicers in 2011.” 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 22

 April 12, 2012 

Treasury emailed the largest servicers in April 2010 suggesting a working group 

on the HHF program that included representatives from the largest servicers and 

FHFA. The HHF working group met in May 2010. Bank of America also liaised 

with Treasury and FHFA on the HHF program. One servicer explained that the 

states designed their own programs “in a vacuum,” without knowing whether the 

servicers would be able to execute the programs. 

Servicers also cited the need for GSE guidance to begin participating in HHF 

programs so they could ensure that they obeyed investor rules and acted correctly 

in processing loans and applying funds received from state HFAs. HFAs 

confirmed that large servicers identified the lack of GSE guidance as an obstacle 

to their participation in HHF programs. One HFA told SIGTARP that there was 

“no hint” of the big servicers’ participation until Fannie Mae and Freddie Mac put 

out guidance. 

Treasury told SIGTARP that after HHF expanded from $2.1 billion for 10 HFAs 

to $4.1 billion for 19 HFAs in August of 2010, “it became clear that servicer and 

GSE support would be critical to the full utilization of program funds.” However, 

HFAs in the first two rounds told SIGTARP that because the large servicers were 

not involved, they were able to assist only a small percentage of the applicants in 

their states. The HHF Program Director told SIGTARP that OFS wanted states to 

have an opportunity to innovate and develop their programs before involving 

servicers, which might have pushed for too much uniformity early on. In fact, 

servicers said they demanded and received uniformity and standardization 

because the variety of programs was unworkable. SIGTARP found that 

Treasury’s early experience in HAMP should have provided it a better 

understanding of servicers’ needs and the effect that servicers’ participation 

would have on a program’s success. SIGTARP found that, given Treasury 

experience with HAMP and the sheer volume of mortgages held or guaranteed by 

the GSEs, it should have been clear before HHF was announced that large 

servicers and GSE support would be critical. 

The GSEs exert considerable influence over the number of homeowners that the 

HHF programs can reach because the GSEs own or guarantee 56% of the 

53 million outstanding first-lien mortgages in the United States, according to a 

June 2011 Freddie Mac analysis, the latest available. Moreover, the GSEs own or 

guarantee 28% (18% Fannie Mae, plus 10% Freddie Mac) of the 4 million 

seriously delinquent mortgages. Because Fannie Mae and Freddie Mac directly 

control policy for more than half of the residential mortgage market, their support 

for the HHF program is critical for the state programs to have a widespread effect. 

 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 23

 April 12, 2012 

Treasury Did Not Gain GSE Support for HHF Before Approving 

State Programs 

Treasury opened discussions with the GSEs early on, but Treasury did not secure 

support for some HHF categories of programs that it had approved, delayed key 

approvals for GSEs to accept TARP funds, and did not use its influence to obtain 

GSE guidance critical for servicer participation until eight months after the 

program launch. 

Treasury met with the GSEs and FHFA in planning the rollout of HHF, but 

Treasury did not determine what categories of programs the GSEs would support 

before the state HFAs designed their programs. The GSEs and their 

regulator/conservator FHFA told SIGTARP that Treasury contacted the GSEs in 

early 2010 to discuss HHF and how to get the GSEs involved with HHF 

programs. At that time, FHFA formed a working team with Fannie Mae and 

Freddie Mac to discuss HHF participation and the guidance to be issued to 

servicers. On April 1, 2010, two months after Round One of the HHF program 

was announced and one month after Round Two was announced, FHFA directed 

the GSEs “to discuss under FHFA auspices existing and possible new practices to 

mitigate losses,” including “partnering with HFAs participating in the HFA 

Hardest Hit Fund.” 

A senior Treasury official told SIGTARP that Treasury’s role was to work with 

the GSEs and gain their support for the types of assistance under HHF. However, 

in the first six months of the program, Treasury approved HFA program proposals 

without getting the buy-in of the GSEs. A Treasury official told SIGTARP that 

HHF programs are voluntary and that Treasury cannot compel GSEs to 

participate. The effect was very real on state HFAs. One HFA told SIGTARP 

that it did not limit applications to its HHF program, but that it happened on its 

own, explaining that when it rolled out its program, Fannie Mae and Freddie Mac 

were not on board. 

In addition, Treasury did not provide the GSEs with documentation needed to 

issue HHF guidance to servicers until August 2010, six months after the program 

was announced. Treasury became aware of the GSEs’ need for documented 

authority for the GSEs to accept borrower payments from TARP funds in 

April 2010. Treasury did not resolve the issue early on and therefore missed an 

opportunity to resolve it before program rollout. 

 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 24

 April 12, 2012 

Treasury Convened a Servicer Summit with Key Stakeholders 

Seven Months After Program Launch 

Treasury organized a Servicer Summit in Washington, D.C., on 

September 21, 2010, seven months after the announcement of the HHF program, 

inviting major participants and stakeholders. At the time of the summit, 

Round Three had already been announced, the announcement of Round Four was 

seven days away, none of the largest servicers had signed on to any of the HHF 

programs, and the GSEs had not issued any HHF program guidance. The 

Servicer Summit was a turning point for HHF as the state HFA programs prior to 

that were hobbled by lack of servicer participation and GSE support. One HFA 

called the Servicer Summit “the first big step,” explaining that FHFA, the GSEs, 

the big servicers, and the states looked to Treasury to instigate these 

improvements. One large servicer told SIGTARP that prior to the Servicer 

Summit, the interaction was fairly minimal, but after the summit, the large 

servicers began to meet as a group on state-level issues. 

At the Servicer Summit, servicers discussed a standard agreement between HFAs 

and servicers and guidance from investors including the GSEs on how to treat 

their loans under the HHF program. Treasury also communicated with the 

guarantors ‒ such as FHA, the U.S. Department of Veterans Affairs (“VA”), and 

the U.S. Department of Agriculture-Rural Development ‒ to obtain their 

participation in HHF. The GSEs and FHFA prepared for the summit by outlining 

the general terms under which the GSEs would participate in the HHF 

unemployment program, providing what they called a broad set of expectations 

for their participation. Some issues the servicers raised were resolved after the 

summit, such as developing an HFA “common data file” format, which would 

give the servicers standardized information from the HFAs, and obtaining 

guidance on how to report mortgage interest payments to the IRS when states 

cover any portion of mortgage payments. 

The outcome of the Servicer Summit was the resolution of several issues that had 

prevented GSEs and many servicers from participating in HHF. One large 

servicer said that participants at the summit worked on standardization of 

programs for HHF. The servicers agreed on a way to communicate with the 

HFAs and on a participation agreement between servicers and HFAs. Treasury 

finalized term sheets as a part of the participation agreements between Treasury 

and each HFA that describe each HHF program. The GSEs and FHFA met 

regularly following the summit to develop written guidance for servicers on 

participating in HHF programs.26

 

26 Treasury held a second summit on November 15, 2011, for states, servicers, and GSEs, and other stakeholders to 

discuss the status of the HHF program, issues that should be addressed, and opportunities to expand program 

participation. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 25

 April 12, 2012 

After the process and uniformity issues were addressed in the September 2010 

Servicer Summit, Fannie Mae and Freddie Mac issued guidance to servicers on 

October 29, 2010, directing them to accept funds from HFAs for mortgage loans 

owned or guaranteed by the GSEs for only the HHF unemployment and 

reinstatement programs.27 Neither guidance document provided an explanation of 

why the GSEs supported the HHF unemployment and reinstatement programs, 

but not other HHF programs; however, it may have been because the GSEs do not 

have to fund any costs associated with these programs. For unemployment and 

reinstatement programs, Treasury, rather than the homeowner, pays all or part of 

the monthly mortgage payment or reinstatement payment without changing the 

terms of the mortgage. The servicers, investors, and GSEs make no financial 

sacrifices in the unemployment and reinstatement programs because the 

mortgages are essentially paid by the Government in whole or in part. 

Once GSE Guidance Was Issued, Large Servicer Participation in 

Unemployment and Reinstatement Programs Greatly Increased 

After the GSEs issued guidance, large servicer participation began and swiftly 

rose, but only in the two types of HHF programs approved by the GSEs – 

unemployment and reinstatement. One HFA told SIGTARP that Fannie Mae’s 

and Freddie Mac’s direction in October 2010 “opened up HHF for the larger 

lenders.” For two types of HHF programs approved by Treasury – unemployment 

and reinstatement programs – the largest servicers are participating actively in the 

19 states, and the GSEs, the Government insurer (FHA), and guarantors 

(U.S. Department of Agriculture and VA) have issued servicer guidance or 

encouraged servicer participation. Large servicers also indicated that other 

investors and private mortgage insurers were generally willing to participate in 

HHF unemployment and reinstatement programs. 

According to the largest servicers, as of August 1, 2011, all 20 of the HHF 

unemployment programs had at least three of the largest servicers participating, 

and all seven HHF reinstatement programs had at least two participating. As of 

December 31, 2011, unemployment and reinstatement programs accounted for 27 

of the 55 HHF programs in place and 69% of the total $7.6 billion in HHF 

program funding. 

 

27 Freddie Mac’s guidance was silent on the three other types of HHF programs approved by Treasury ‒ principal 

reduction, second lien, and transition assistance. Fannie Mae’s guidance said it would not support principal reduction 

and was silent on the other two. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 26

 April 12, 2012 

GSEs and Servicers Rejected Some HHF 

Programs, Leading States To Focus on Other 

Programs 

This section discusses Treasury’s inability to obtain GSE and servicer support for 

all of the HHF programs offered. This affected participation levels in the 

programs. 

The GSEs rejected principal reduction programs, citing primarily moral hazard28

and execution issues. “Principal reduction could increase the incentive for 

homeowners to become delinquent on their mortgage (i.e., increased ‘moral 

hazard’ leading to more ‘strategic defaults’),” according to one GSE’s analysis of 

HHF principal reduction supplied to FHFA. Freddie Mac officials told SIGTARP 

that the moral hazard impact could affect the whole market, ultimately ending in 

losses for the GSEs if homeowners able to pay their loan stopped paying in order 

to get their principal reduced. 

As the GSEs’ conservator, FHFA refused to have the GSEs participate in HHF 

principal reduction programs. FHFA Executive Advisor David Pearl told 

SIGTARP: “We have regular conversations with Fannie Mae and Freddie Mac as 

their regulator and conservator. With any new policy action, FHFA has to give 

them the green light.” FHFA did not “give [GSEs] the green light” and the GSEs 

therefore have not participated in HHF principal reduction programs.29

Despite the GSEs’ stance on principal reduction, Treasury encouraged HFAs to 

pursue principal reduction programs with individual lenders. “Principal reduction 

is difficult. We have spent a lot of time with Fannie, Freddie, and FHFA, ...” 

former HPO Chief Caldwell told SIGTARP. “The GSEs were crystal clear in 

their objections to principal reduction, which was not a secret to the 

HFAs. That’s why we encouraged the HFAs to work on principal reduction 

programs within servicers’ non-GSE book,” she said. “The overall message from 

Treasury on principal reduction has been consistent in its guidance on tools for 

foreclosure prevention ‒ it makes sense for certain HFAs. We have some initial 

servicer support and can encourage more with or without the GSEs.” Officials of 

three HFAs ‒ Arizona, California, and Nevada ‒ told SIGTARP that they worked 

 

28 Moral hazard occurs when a party is insulated against a risk (such as in the context of a Government assistance 

program) and may behave differently than if it bore the full risk. The Government Accountability Office (“GAO”) 

defines moral hazard related to principal reduction as the risk that borrowers would default on their mortgages to 

receive principal reduction when they otherwise would not have. 29 Fannie Mae on October 26, 2011, and Freddie Mac on December 13, 2011, issued guidance to their servicers that 

require servicers to accept funds from HFAs that are assisting borrowers in qualifying for mortgage modifications as 

long as the GSEs and the servicer are not required to match the HFA assistance and certain other criteria are met. This 

guidance extends Fannie Mae’s and Freddie Mac’s October 2010 guidance beyond unemployment and reinstatement 

programs to include some modification assistance programs that Treasury classifies as principal reduction programs. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 27

 April 12, 2012 

together to focus on principal reduction and other issues they shared. 

Subsequently Bank of America became the first large servicer to participate in 

HHF first-lien principal reduction. It remains the only one as of the drafting of 

this report. 

FHFA, which determines whether Freddie Mac and Fannie Mae can participate in 

HHF, told SIGTARP in February 2011 that GSE analysis showed that the target 

population for HHF principal reduction was so small that operational costs would 

offset any gains. The GSE analysis also cited concerns about the diverting of 

resources from other projects. An FHFA official told SIGTARP it was a “systems 

nightmare” for servicers to change their accounting and information systems to 

accommodate HHF principal reduction terms. Guidance from Fannie Mae and 

Freddie Mac was silent on second-lien and transition assistance programs. 

Without GSE buy-in, large servicers generally would not agree to participate in 

state HFA programs on principal reduction and transition assistance. Although 

some lenders have signed on to HHF second-lien programs, participation has been 

very low. One large servicer told SIGTARP that 80% of its portfolio is with 

Fannie and Freddie, and said, “...We had to hold up on certain programs, waiting 

for Fannie and Freddie.” Another large servicer told SIGTARP that “principal 

reduction programs could have a big impact” on home foreclosures, but that 60% 

to 80% of the loans the company services are GSE loans, and because the GSEs 

will not participate in principal reduction, the servicer cannot process GSE loans 

in HHF principal reduction programs.30

The GSEs, with their large market share, directed servicers to participate in the 

unemployment and reinstatement programs, and these programs account for nearly all 

(98%) of the HHF assistance provided to date. As of December 31, 2011, the latest data 

available, according to Treasury only approximately 436 homeowners had received 

principal reductions under HHF and only approximately 72 homeowners had received 

transition assistance. According to Treasury, there may be a delay between when HFAs 

approve homeowners’ applications for HHF assistance and when homeowners actually 

receive funding. Therefore, the number of homeowners receiving assistance is 

approximate due to this lag time between approval and funding. (See Figure 2 on the 

following page and Table 2 on page 31.) 

 

30 Bank of America was the first and only large servicer to sign on to participate in HHF principal reduction programs, 

beginning with Nevada in January 2011, and later with Arizona, California, and Rhode Island, only for loans in its 

portfolio or third-party investor loans with appropriate authority delegations. 
F

F

N

O

S

FACTORS AFFE

FIGURE 2 

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Source: HFA quarte

ECTING IMPLEM

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PRINCIPAL R

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28

ril 12, 2012 

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3

FACTORS AFFE

FIGURE 3 

FUNDING FO

Source: HFA partici

 

31 Amounts as 

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OR HHF PRO

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31, 2011. 

UNEMPLOYME

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58%

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THE HARDEST

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 Treasury co

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29

ril 12, 2012 

ust be 

am’s 

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w

ram 

N

NT
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 30

 April 12, 2012 

at 19 state HFAs by ensuring that the key stakeholders in the mortgage industry 

were on board and actively participating early on. However, the HFAs should be 

out of their ramp-up period and into full execution of the programs. Because 

HHF’s assistance to homeowners has been nominal, the HFAs will have to 

dramatically increase assistance to meet their own estimates for the number of 

homeowners they intend to help by the end of 2017, when the program ends. In 

the next section, SIGTARP discusses how Treasury needs to set appropriate 

numeric goals and metrics to ensure that the expected number of homeowners 

assisted is met. 

However, as was clear in the beginning of HHF, the HFAs need Treasury’s help 

and support to increase the number of homeowners helped. Treasury approved 

HHF programs knowing that the GSEs did not support principal reduction 

assistance. In October 2010, the GSE guidance issued for HHF was silent on 

supporting transition assistance programs.32 These programs continue in HHF ‒

with limited participation. Treasury also has these very same types of assistance 

in other TARP-funded housing support programs, including HAMP. Participation 

in HHF principal reduction programs has been limited, even though investor 

incentives were generally double that initially offered in HAMP, and GSEs have 

opted not to reduce principal on any cost-sharing basis for HHF programs. 

Because HAMP was having similar issues, Treasury recently took steps to further 

increase the number of homeowners assisted in HAMP by tripling the incentives 

paid to investors for HAMP principal reduction and making those incentives 

available to GSEs without making a corresponding change in HHF. 

After nearly two years,33 HFAs have assisted 7% of the homeowners they 

expected to assist over the life of the program. HFAs have spent only 

approximately $217 million (3% of the funds allocated for the program) for 

assistance to homeowners. (See Table 2 on the following page.) To expedite 

assistance to homeowners, Treasury should develop an action plan that includes 

steps that Treasury intends to take to increase dramatically the numbers of 

homeowners assisted in all the programs, including the two known areas Treasury 

supports but are lacking broad industry support ‒ principal reduction and secondlien reduction. Further, if in a reasonable time Treasury cannot achieve the 

desired level of homeowners assisted in any one type of assistance ‒ for example, 

principal reduction, second-lien reduction, or transition assistance ‒ Treasury 

should put the funds to better use toward programs that are reaching homeowners. 

 

 

32 On March 6, 2012, Fannie Mae issued servicer guidance directing servicers to facilitate HHF transition assistance 

provided to borrowers for loans it owns and for certain securitized loans. 33 As of December 31, 2011.
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 31

 April 12, 2012 

TABLE 2 

Note: *This percentage is the total spent on programs as a percent of the total amount allocated to programs ($7.6 billion less

administrative expenses). 

** This number is an average of the high and low estimated number of homeowners HFAs plan to assist, rounded up to the 

nearest 5,000. 

Source: SIGTARP analysis of HFA quarterly performance reports and latest state participation amendments as of December 31, 2011. 

PERCENT OF HHF USAGE AND TIME ELAPSED 

HHF Program 

Categories 

Applications 

Approved by 

Dec. 31, 2011 

Spent by 

Dec. 31, 2011 

Allocated as of 

Dec. 31, 2011 Percent 

Principal 

Reduction 436 $10,397,621 $1,420,210,180 0.7% 

Unemployment 

Assistance 26,100 $162,146,435 $4,382,850,567 3.7% 

Reinstatement 6,764 $42,744,862 $817,409,716 5.2% 

Second-Lien 

Reduction 170 $1,882,683 $83,298,292 2.3% 

Transition 

Assistance 72 $255,771 $45,400,464 0.6% 

Administrative 

Expenses* – – $850,830,780 – 

Total 33,542 $217,427,372 $7,600,000,000 3.2% 

Homeowners 

Assisted as of 

Dec. 31, 2011 

Average of Aggregate 

Number of 

Homeowners HFAs 

Plan To Assist 

Through 2017 

Homeowners 30,640 475,000** 6.5% 

Months Elapsed: 

 February 2010 to 

 December 2011 

Total months in 

program: 

February 2010 to 

December 2017 

Months 23 95 24% 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 32

 April 12, 2012 

Treasury’s Goals and Metrics Fall Short and 

Make Effective Evaluation Difficult 

This section discusses the goals and metrics for HHF. Treasury set a goal to 

prevent avoidable foreclosures but did not define measurable targets for this. 

Treasury required HFAs to set goals for each of their programs, but most HFAs 

set nonnumeric goals. 

Treasury’s goals and metrics for the HHF program fall short of those used in best 

practices and make effective program evaluation difficult. Best practices for 

results-oriented organizations are to define goals and desired outcomes, set 

overall and incremental measurable targets to gauge progress, and use 

performance information as a basis for decision making. Treasury’s stated goal 

for the overall HHF program is to prevent avoidable foreclosures and thereby 

preserve homeownership, but Treasury did not set a measurable overall target or 

require states to produce measurable goals. Treasury does require states to 

estimate the number of households that will participate in the states’ HHF 

programs, but this number has limited usefulness because states can and have 

changed estimates, creating a shifting baseline. In fact, the aggregate of these 

estimated ranges has steadily decreased in the last year, from 507,619–549,094 as 

of March 31, 2011, to 458,632–486,536 as of December 31, 2011. 

In addition, Treasury does not publicly report HHF performance information. 

Treasury’s website provides links to performance data on HFAs’ websites, but 

Treasury does not publish aggregate HFA data or connect the data to goals for 

HHF. Tracking performance of all HHF programs would require a taxpayer to 

gather pieces of information from 19 separate HFA websites, but it is not clear 

how the data can be used to assess the program. Treasury totals the number of 

homeowners assisted and dollars expended by all states on HHF programs, but 

does not make these aggregate statistics public. As a result, it is difficult for 

Congress and the public to assess HHF program performance. Therefore, 

SIGTARP publishes in its Quarterly Report to Congress the total of the HFAs’ 

estimated numbers of homeowners to be served, the actual number of 

homeowners assisted, and the dollars expended by all states on HHF. Treasury, in 

its oversight role for $7.6 billion in TARP funds, should publish the HFAs’ 

performance data collectively, in one place, in a format that facilitates 

comparisons across HFAs, programs, and time. 

Treasury and Most HFAs Did Not Set Numeric Goals 

In Government and business, goals and metrics are vital tools to clearly measure 

implementation and progress of programs. However, Treasury did not establish 

overall goals for HHF that are clear, reliable, objective, measurable, and linked to 

higher-level goals. Instead, it deferred to the individual HFAs to establish goals 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 33

 April 12, 2012 

for their individual programs and did not require these goals to be measurable. In 

addition, Treasury did not require HFAs to establish at least one goal that is 

consistent across the HFAs, resulting in a single goal for the program. This would 

allow an assessment of HHF in its entirety. Treasury told SIGTARP that 

Treasury’s goal – instead of setting measurable targets against which to assess 

performance data – is to continually improve the performance of the program over 

time, taking into account the context in which the program operates, such as 

changing market conditions and differing local conditions. Treasury refers to this 

as its “continuous improvement” model. Treasury says that it uses a “feedback 

loop” to help HFAs improve the performance of HHF programs. Treasury told 

SIGTARP that HFAs have made more than 80 changes to HHF programs based 

on discussions with Treasury. 

The former Assistant Secretary for Financial Stability, Herbert Allison, told 

SIGTARP that Treasury did not want to impose measurable goals on the HFAs 

but wanted each state to develop its own. Another Treasury official told 

SIGTARP that the states, not Treasury, should report data that show progress, 

saying, “This is not our program. These are their programs.” However, the 

source of the funds for all HHF programs is the Federal Government, with 

Treasury as the steward over TARP funds. Congress and the public rightfully 

expect Treasury to administer the program and ensure that TARP funds are 

appropriately spent and are achieving the desired goals. 

Treasury initially considered requiring HFAs to establish targets and metrics for 

HHF programs in their agreements with Treasury, but later eliminated this 

requirement. In April 2010 and May 2010, draft versions of the agreement 

included a requirement for HFAs to specify “performance metrics” and later 

“program success metrics.” As an example, Oregon initially listed goals in its 

agreement for 90% of program participants to remain in their homes after one 

year. One OFS official supported requiring goals to benchmark success. On the 

other hand, another OFS official preferred not to require measurable targets for 

new programs, and suggested that stating a target would probably set a program 

up for failure. Treasury also initially considered and then rejected using 

performance metrics to determine whether HFAs could continue to draw down 

HHF funds. 

Based on SIGTARP’s review of the 19 agreements, most program goals are high 

level and describe what the HFAs want their programs to achieve in broad terms, 

with no numeric measurable targets. For example, Florida’s Unemployment 

Mortgage Assistance Program goal is: “preserving homeownership” and 

“protecting home values.” South Carolina’s HAMP Assistance Program goal is: 

“To provide limited funding to help homeowners become eligible for HAMP.” 

However, five of the 19 states did set numeric program goals. Three of those five 

states (Georgia, Nevada, and North Carolina) used their estimates for the number 

of households to be served as program goals. Arizona set a goal for one of its 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 34

 April 12, 2012 

programs to achieve a 90% success rate in modifying loans. California set a 

numeric goal for one of its programs to have 21% of principal write-downs 

contributed by a city grant. In addition, the measurable goals the states establish 

are a moving target ‒ HFAs can change their program goals with Treasury 

approval in amendments to the original formal agreement. For example, Nevada 

had a goal for its Principal Reduction Program to serve at least 3,000 homeowners 

in April 2011. In the sixth amendment to its agreement with Treasury in 

October 2011, the HFA dropped that numeric goal and reduced the estimated 

number of households to be served by the program from 3,016 to 1,008, while 

increasing the maximum per-household assistance. Appendix K lists the HFAs’ 

program goals for the 55 HHF programs, as of December 31, 2011. 

HFAs Publish Quarterly Numeric Data on Their Own Websites, but 

Without Stated Numeric Goals, It Is Difficult To Assess Performance 

Treasury’s agreements with HFAs require each HFA to report the same 

performance data elements to Treasury in a standardized format and to post the 

information on their own websites, but Treasury does not publish the data either 

by individual HFA or in the aggregate. The quarterly performance reports34

contain more than 25 data points about each program and more than 15 data 

points about an HFA’s programs in the aggregate. For example, the quarterly 

performance reports include data such as the number of applications approved and 

denied, the number of homeowners assisted, the range of borrower incomes, the 

number of homeowners in each county, the number of homeowners by race and 

ethnicity, and the number of homeowners who remain in their homes after six 

months and 12 months. 

These data points can be compared from quarter to quarter. Although these 

measures are helpful for determining whether activity is occurring in each 

program, Treasury has not established desired outcomes to assess whether these 

activities are meeting intended targets and whether they can add up to an overall, 

measurable performance goal. For example, if an HFA reports that 25% of 

homeowners in an HHF program remained in their homes six months after 

receiving HHF assistance, this performance could be compared to the 

performance of other states or programs, but Treasury and HFAs have not 

established a target to show what performance they intended. 

Treasury’s HHF Program Director described a three-step process for evaluating 

HHF programs. He told SIGTARP that to evaluate HHF, one would: 

 

34 See Appendix J for a template/data dictionary of the quarterly performance report that Treasury provided to HFAs 

describing each data element. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 35

 April 12, 2012 

 look at the HFA’s goals for its HHF programs for what HFA officials 

intended to do (HHF program goals are in agreements posted on Treasury’s 

website); 

 look at the HFA’s quarterly performance reports for what it did (HFA 

quarterly performance reports are posted on each of the 19 HFA websites); 

and 

 contact the HFA and other stakeholders for context and explanation of how 

the program is working. 

Estimates of the Number of Participating Households That Change 

Each Quarter Have Limited Value for Assessing Performance 

Treasury requires HFAs to establish in their agreements with Treasury estimates 

of the number of households that each of their HHF programs will assist through 

2017, but Treasury allows HFAs to revise their estimates anytime by amending 

the agreements. The HFAs’ estimates of the numbers of households to be assisted 

have changed over the life of the HHF program (decreasing since 

March 31, 2011) and do not provide a consistently measurable target. Evaluating 

performance against a shifting baseline presents a challenge to assessing program 

outcomes. If the estimate of the number of households to be assisted changes, 

consistent performance measurement over the life of the program is not possible, 

progress is no longer measured based on a goal established at the outset, and 

opportunities for accountability to the public are diminished. HFAs can change 

their estimates when they shift funds between programs, change the amount of 

per-household assistance in a program, or change the amount allocated to 

administrative expenses. Each type of adjustment can change the number of 

households that can be helped. As a result, these estimates are of limited value 

for performance measurement. 

Best Practices Call for Setting Goals and Measuring Program 

Performance 

According to an official in the Treasury Office of Strategic Planning and 

Performance Management, to follow good management practice that in turn 

would reflect HHF progress toward meeting its goal, Treasury should establish a 

mix of performance measures for activities the organization can hold itself 

accountable to and indicators that show the intended effect or outcomes of the 

program or activity. When asked by SIGTARP whether Treasury’s approach of 

setting one broad operational goal without setting performance measures or 

indicators allows for measurement of the HHF program, the official said it means 

that one cannot evaluate, but can only infer the program’s performance and 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 36

 April 12, 2012 

results. The official told SIGTARP that Treasury could report HHF performance 

in the monthly Housing Scorecard published by HUD and Treasury.35

Treasury has not defined desired quantifiable outcomes for HHF. Treasury has 

resisted measuring performance to gauge progress at the Federal level, saying 

HHF programs are the states’ programs. Treasury required HFAs to estimate the 

number of households to be served, but these estimates change. Treasury has 

performance data from individual HFAs, but it does not have measurable 

performance information that ties to program-wide goals with which to make 

appropriate decisions. 

Rather than follow best practices by establishing performance metrics by which 

Treasury can be held accountable, Treasury officials expressed several concerns 

with using numeric targets: 

 numeric targets for a new program in an ever-changing housing market will 

have little or no value, especially across states with different economic 

conditions; 

 numeric goals may lead to a “ceiling effect” (if the goals are too low); and 

 numeric goals may create incentives for unwanted actions such as HFAs 

pursuing a type of foreclosure assistance to meet a goal rather than 

implementing the right type of assistance for each borrower’s situation. 

At the start of HHF, Treasury should have set one or more measurable 

performance goals for the HHF program overall, including, at a minimum, the 

number of homeowners Treasury hopes to help under HHF, a number that should 

not change each quarter. However, it is not too late for Treasury to set these 

goals. For each goal, Treasury should have established metrics to measure the 

performance of the program against the goal. Additionally, Treasury should have 

established milestones and a periodic schedule to assess the progress the HHF 

program is making toward the intended outcome. Finally, Treasury should use 

this performance information as a basis for working with the state HFAs to make 

program adjustments as needed to ensure the success of the program at meeting 

its goals. 

Setting measurable performance goals is not difficult. For example, Treasury 

could at a minimum adopt the HFAs’ collective estimates of homeowners to be 

assisted through 2017. Treasury should set interim goals to target the intended 

 

35 The Housing Scorecard reports on the status of the nation’s housing market, providing key housing market indicators 

and highlighting Government programs, including HAMP. The scorecard lists HHF as part of the Administration’s 

housing plan, but does not report HHF performance metrics, as it does for HAMP. Treasury also produces a 

Monthly 105(a) Report for TARP that includes the amount of HHF funds drawn and a narrative update on the HHF 

program, such as which HFAs have made recent changes to their programs. However, the report does not assess HHF 

performance based on predetermined measures. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 37

 April 12, 2012 

progress of the program. For example, Treasury could set interim goals, such as a 

number of homeowners that the program should reach each year. 

In addition, Treasury should have ensured that states set measurable goals and 

related metrics to assess performance for each HFA. Treasury should also require 

states to provide the specific performance data it needs to roll up to any overall 

and interim goals, and if necessary, the methodology and calculations states 

should perform to arrive at these data. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 38

 April 12, 2012 

Conclusions 

The Hardest Hit Fund was announced in February 2010 when the housing market 

was still under significant stress, despite Government efforts to address recordhigh foreclosures with programs such as TARP’s HAMP. A senior Treasury 

official told SIGTARP that the idea of the Hardest Hit Fund came from an 

examination of options to tackle home foreclosure economic challenges such as 

negative equity and unemployment not being addressed by HAMP. The Treasury 

official told SIGTARP that at the end of 2009 (when HHF was being developed), 

unemployment was hovering around 9%, and one in four homes was underwater. 

Under HHF, TARP dollars fund “innovative measures” developed by state 

housing finance agencies (“HFAs”) and approved by Treasury to help families in 

states that had been hardest hit by the economic crisis and the collapse of the 

housing bubble. HHF expanded from its original announcement of $1.5 billion in 

TARP funds for five states with 20% home price declines in four iterative rounds 

of funding. Each round had specific criteria, resulting in Treasury obligating a 

total of $7.6 billion in TARP funds to 18 states and Washington, D.C. The 19 

HFAs could propose multiple programs within categories of assistance for 

Treasury approval. As of December 31, 2011, Treasury had approved 55 HHF 

programs, which have through 2017 to use TARP funds. 

After two years, the Hardest Hit Fund has experienced significant delay in 

providing help to homeowners due to several factors, including a lack of 

comprehensive planning by Treasury and a delay and limitation in participation in 

the program by large servicers and the GSEs (Fannie Mae and Freddie Mac). As 

of December 31, 2011, the latest data available, HHF has spent only 

$217.4 million to provide assistance to 30,640 homeowners – approximately 

3% of the TARP funds allocated to HHF and approximately 7% of the minimum 

number of homeowners whom the state HFAs estimate helping over the life of the 

program. Nearly all (98%) of the help provided to homeowners under HHF has 

been related to unemployment assistance or reinstatement through payment of 

past due amounts, the only types of assistance for which the GSEs directed 

servicers to participate. The great bulk (78%) of the HHF help to homeowners 

has been for unemployment assistance. Unless there is a drastic change in the 

assistance the GSEs and their conservator, FHFA, will support, the Hardest Hit 

Fund may be much narrower in scope and scale than what was originally expected 

due to the lack of servicer and GSE support for certain programs. Without 

significant change, while the Hardest Hit Fund may be able to reach unemployed 

homeowners as was originally intended, it is likely to be limited in addressing 

negative equity for homeowners who are underwater. 

SIGTARP found that Treasury consistently applied its criteria to choose states to 

participate in the first three rounds of funding for HHF. However, in the second 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 39

 April 12, 2012 

round, it was unclear why Treasury determined that states with high percentages 

of their population in counties with an unemployment rate greater than 12% were 

economically distressed, but that states with 11% unemployment were not. The 

cutoff for Treasury’s selection of states in Round Two was not transparent 

because one percentage point divided Ohio (with 22% of its population living in 

counties with an unemployment rate higher than 12%), which was selected, and 

Tennessee (with 21%), which was not selected until five months later, when 

Treasury made another round of funding to all states, including Tennessee, with 

above-average unemployment. For the fourth round, no new states were selected. 

Rather, Treasury nearly doubled the funds available for HHF four days before the 

expiration of Treasury’s TARP investment authority. Treasury determined that 

the five categories of assistance it approved were compliant with TARP’s 

requirement that programs prevent avoidable foreclosures and rejected other 

proposed programs for not having a sufficient link to this requirement. The five 

categories Treasury approved are: (1) principal reduction; (2) second lien; 

(3) reinstatement through payment of past due amounts; (4) unemployment; and 

(5) transition assistance. 

SIGTARP was unable to analyze whether Treasury consistently applied its criteria 

for rejecting individual state programs because Treasury has not provided 

additional explanation of the rejection except for its rationale for rejecting legal 

and housing counseling programs as not being specifically authorized by EESA or 

necessary for the implementation of HHF. Treasury did not define “innovative” 

or perform an analysis of whether proposed programs were innovative or 

duplicative of other programs, instead considering the design of the program to be 

innovative because it provides locally tailored solutions. The GSEs, FHA, three 

of the largest servicers, and an academic told SIGTARP that they generally 

agreed that HHF has innovative aspects because it provides different types of 

assistance at a local level, helps homeowners for longer periods of time, or 

provides greater funding to respond to the housing crisis. 

Treasury has not set measurable goals and metrics that would allow Treasury, the 

public, and Congress to measure the progress and success of HHF. Treasury set a 

single goal for HHF: to prevent avoidable foreclosures and help preserve 

homeownership. Treasury instead deferred to individual states to set goals but did 

not require states to set measurable goals. Most states’ goals are high-level 

expectations with no measurable targets, such as Florida’s “preserving 

homeownership” and “protecting home values.” Treasury does require states to 

estimate the number of households to be assisted by their HHF programs, but this 

number has limited usefulness because states can, and have, changed estimates, 

creating a shifting baseline that makes it difficult to measure performance against 

expectations. The states’ estimated number of homeowners to be assisted by 

HHF has steadily decreased over the last year. As of December 31, 2011, the 19 

HFAs collectively estimate helping between 458,632 and 486,536 homeowners 

over the lifetime of HHF, which will end in 2017. Treasury has not adopted this 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 40

 April 12, 2012 

estimate or even reported it. Consistent with best practices, Treasury should have 

set meaningful and measurable goals at the start of the program. However, it is 

not too late for Treasury to set measurable goals, including at a minimum, 

adopting the HFAs’ collective estimate or developing its own goal of how many 

homeowners Treasury expects HHF to help. 

The 19 individual HFAs have provided a significant amount of transparency on 

their 55 HHF programs on their websites as required by Treasury; however, 

Treasury can do more to improve transparency. Tracking performance of all HHF 

programs would require a taxpayer to gather information from 19 separate HFA 

websites. Treasury aggregates the number of homeowners assisted and dollars 

expended by all states on HHF programs, but SIGTARP, not Treasury, publishes 

this information. Treasury should publish this information, along with other 

useful information on HHF’s performance, on its website and in the monthly 

Housing Scorecard that reports on the Administration’s efforts in housing 

programs, such as HAMP. A Treasury official told SIGTARP that it is 

appropriate to leave reporting of the data to the states: “This is not our program. 

These are their programs.” However, HHF is a TARP program, the source of the 

funds is TARP, and Treasury is the steward over TARP. Congress and the public 

rightfully expect Treasury to administer the program and ensure that TARP funds 

are appropriately spent and are achieving the desired goals. 

SIGTARP found that several factors contributed to the Hardest Hit Fund’s 

significant delay in getting assistance to homeowners, some of which have been 

successfully resolved, and some of which are likely to continue to affect the 

program: 

 HHF lacked comprehensive planning by Treasury, which rushed out the 

program without appropriate collaboration of key stakeholders, including state 

HFAs, large mortgage servicers, and the GSEs (Fannie Mae and Freddie 

Mac). In the creation of HHF, Treasury solicited input from mortgage 

industry participants, but in planning the program, it did not gather all key 

stakeholders together to anticipate and assess needs, participation, and barriers 

for effective implementation of the program. HHF suffered from a rushed 

rollout of state HHF programs without a comprehensive implementation plan 

by Treasury that would ensure success. Treasury delegated program 

development to state HFAs, but generally gave one to two days’ notice to state 

housing officials before announcing that they would receive TARP funds and 

would have approximately six to eight weeks to develop programs. Despite 

the fact that the states could not reach a significant amount of homeowners 

unless large servicers agreed to participate, Treasury did not contact some of 

the largest servicers to gain their support until April 2010, and did not resolve 

large servicers’ issues sufficiently for them to participate with states until 

November 2010, after a Treasury-convened Servicer Summit. Treasury 

opened discussions with the GSEs early on, but did not do enough initially to 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 41

 April 12, 2012 

secure support for some HHF programs. SIGTARP found in its 

March 25, 2010, audit of HAMP that “taking more time at the outset to 

adequately plan” may have resulted in assisting more homeowners more 

quickly. Similarly, had Treasury taken more time to adequately plan HHF, it 

may have helped the state HFAs gain support for their programs from large 

servicers and GSEs, and resulted in more homeowners receiving help during 

the first two years of the program. One large servicer said it best: “Anytime 

all the parties can be involved in a program, the more success you will have. I 

think that if Treasury, the states, and the servicers were involved earlier on, 

that the program would be more successful and further along.” 

 Treasury’s decision to give one to two days’ notice to states and six to eight 

weeks to develop programs caught several states off guard. One HFA official 

told SIGTARP that 10 minutes after the program was announced, the HFA 

began receiving phone calls from the public asking when the money would be 

available. The office received 200 calls in the first 24 hours. HFAs had six to 

eight weeks to develop their programs. Treasury provided informal guidance 

throughout these weeks and the HFAs gathered public input. The HFAs also 

had to build or change their processes and hire and train staff. One HFA had 

seven employees dedicated to HHF and had to increase its staff for HHF by 

500%. Another state HFA said that it had to scramble and get a network into 

place. One HFA official explained to SIGTARP that the HFA “was not 

prepared to deal with the tsunami of the HHF.” 

 Several states delayed HHF programs because the large mortgage servicers 

were not participating. One great shortcoming in HHF’s implementation was 

Treasury’s lack of timely action to enlist large servicer support for and 

participation in state HHF programs. Treasury officials told SIGTARP that it 

was up to the HFAs to negotiate with the servicers. HFAs reported to 

SIGTARP that they were rebuffed by the large servicers. Several HFAs told 

SIGTARP that their primary challenge with the implementation of HHF was 

the lack of participation by the large servicers, with one HFA official 

explaining that on a scale of one to 10, “this was a 10.” Without the 

participation of the large servicers, the HFAs’ programs could not reach a 

large portion of struggling homeowners. One HFA explained, “Without big 

servicers, it would take much, much longer to get the funds out, with just 

community banks and credit unions. It would be a trickle of eligible 

applicants.” Some HFAs told SIGTARP that without the largest servicers, 

they would have been able to help only 20% to 50% of applicants. Another 

HFA told SIGTARP, “Our biggest complaint is we were provided these funds, 

and we have such a need here, but we weren’t able to handle the mass 

numbers because of no participation from the large lenders.” One HFA told 

SIGTARP that “without the servicers’ participation, it would have been 

disastrous.” 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 42

 April 12, 2012 

 Large servicers did not participate for the first nine months of the program 

citing administrative burden of more than 50 different programs, lack of 

program uniformity, and lack of GSE guidance. One large servicer said that 

its experience with HAMP, a national program, was less complex than HHF. 

Servicers told SIGTARP that the large number of HHF programs and their 

complexity posed an operational challenge for servicers to develop and 

implement HHF infrastructure and properly train staff. One servicer 

explained to SIGTARP that with each state’s differing eligibility and coding 

requirements, “the volume was unprecedented.” In addition, servicers cited 

the need for GSE guidance before they could begin participating in HHF 

programs so they could ensure that they acted correctly in obeying investor 

rules, processing loans, and applying funds received from the states. One 

servicer explained that the states designed their HHF programs “in a vacuum,” 

without knowing whether the servicers would be able to execute the programs. 

 Treasury did not initially use its influence on the largest servicers to gain their 

support. By leaving the responsibility of recruiting large servicers to the 

states and not taking more aggressive efforts to gain servicer support for the 

state programs, Treasury failed to recognize the lack of bargaining power that 

states had for recruiting servicers. Florida’s HFA official explained to 

SIGTARP, “The one billion dollars has been a nice carrot to use for servicers 

in Florida, but there is no stick with the carrot to force servicers to 

participate.” One HFA told SIGTARP that it would have been helpful if 

Treasury had been more aggressive in getting large lenders to participate. 

Treasury officials chose to decentralize program development with the HFAs, 

but their lack of comprehensive planning, such as involving servicers early on, 

resulted in Treasury not anticipating and initially not addressing the 

implementation issues that approximately 50 non-uniform programs created 

for servicers. SIGTARP found that Treasury’s experience with HAMP should 

have provided a better understanding of servicers’ needs and the effect that 

servicers’ participation would have on a program’s success. Several state 

HFAs delayed programs until the large servicers came on board, which did 

not happen until the GSEs issued guidance on October 29, 2010. One large 

servicer told SIGTARP that 80% of its portfolio is with the GSEs, explaining, 

“... We had to hold up on certain programs, waiting for Fannie and Freddie.” 

 Treasury did not gain GSE support for HHF programs until eight months after 

the announcement of the program. Treasury, responsible for HHF oversight 

and accountable for HHF results, should have been the driving force to ensure 

that the GSEs and large servicers supported the HFAs’ programs. Although 

Treasury sought GSE guidance in creating the program, it did not use its 

influence to gain GSE support for state HHF programs for the first eight 

months of the program. One Treasury official told SIGTARP that after HHF 

expanded from $2.1 billion for 10 HFAs to $4.1 billion for 19 HFAs in 

August 2010, “it became clear that servicer and GSE support would be critical 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 43

 April 12, 2012 

to the full utilization of program funds.” However, HFAs in the first two 

rounds told SIGTARP that because the large servicers were not involved, they 

were able to assist only a small percentage of applicants. SIGTARP found 

that, based on Treasury’s experience with HAMP and the sheer volume of 

mortgages held or guaranteed by the GSEs, it should have been clear before 

the announcement of HHF that large servicers and GSE support would be 

critical.36 In addition, Treasury was aware before August that no large 

servicers had signed on. 

The largest servicers did not participate in HHF and the GSEs did not issue 

guidance to servicers on HHF until Treasury formally interceded by holding a 

Servicer Summit in September 2010, when it brought all of the key stakeholders 

together. This summit was a turning point, and out of it came the resolution of 

several issues such as process standardization and GSE guidance that had 

prevented GSEs and large servicers from participating in HHF. 

The GSEs’ guidance issued on October 29, 2010, to servicers stated that the GSEs 

supported mortgage assistance programs for unemployed or underemployed 

homeowners and programs to reinstate past due amounts on mortgages. These 

two programs require no financial sacrifice from the servicers or investors. GSEs 

examined principal reduction in connection with HHF and concluded that 

principal reduction could increase moral hazard by incentivizing homeowners to 

become delinquent on their mortgages. Without GSE buy-in, large servicers 

generally would not agree to participate in HHF principal reduction, and transition 

assistance programs for those loans with the GSEs. Although some servicers 

have signed on to HHF second-lien programs, participation has been very low. 

One large servicer told SIGTARP that 80% of its portfolio is with the GSEs. 

Another large servicer told SIGTARP that 60% to 80% of its servicing book is 

GSE loans, and because the GSEs are not participating in principal reduction, the 

servicer cannot process GSE loans in HHF principal reduction programs. 

Treasury approved 16 HHF principal reduction programs, knowing that the GSEs 

did not support principal reduction. Treasury encouraged HFAs to work on 

principal reduction programs with servicers’ mortgages that were not owned by 

the GSEs, but so far the results of those efforts have been minimal. As of 

December 31, 2011, the latest data available, approximately 436 homeowners 

have received principal reductions under HHF. 

HHF eventually may be effective in the areas where there is broad GSE and large 

servicer support such as unemployment and reinstatement through payment of 

past due amounts. Unless there is a drastic change in the assistance the GSEs and 

their conservator, FHFA, will support, HHF may be limited in the types of 

homeowners it can reach. While it may be able to reach homeowners who are 

 

36 The GSEs own or guarantee 56% of the 53 million outstanding first-lien mortgages in the United States as of 

June 2011, according to Freddie Mac. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 44

 April 12, 2012 

unemployed, underemployed, or have past due amounts that can be reinstated, 

without a significant change by the GSEs or servicers, it is likely to be limited in 

reaching homeowners who are underwater, have mortgages with second liens, or 

need transition assistance, including a short sale or deed-in-lieu of foreclosure. 

Because Treasury does not set performance metrics for the various programs 

under HHF, it is not clear whether providing approximately 436 homeowners with 

principal reduction assistance meets performance expectations for the first two 

years of the program. However, at this rate it is unlikely that Treasury will spend 

the $1.4 billion allocated to HHF principal reduction without taking other actions. 

Treasury should seek to apply lessons learned from HAMP to give state HFAs the 

support that they need. For example, Treasury recently announced that it will 

triple its incentives for principal reduction in HAMP. Treasury should work with 

the state HFAs to determine whether a change is appropriate in any of the 16 state 

HHF principal reduction programs. 

In order to reach the number of homeowners that the HFAs collectively estimate 

helping over the life of HHF, there needs to be a dramatic increase in the number 

of homeowners helped. As was clear in the beginning of HHF, states need 

Treasury’s help and support to increase the number of homeowners helped. 

Treasury should do all that it can to ensure the program’s success. Treasury 

should set measurable goals, measure progress against those goals, and develop 

an action plan to ensure that the next five years result in the HHF program 

fulfilling TARP’s goal to preserve homeownership. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 45

 April 12, 2012 

Recommendations 

1. Treasury should set meaningful and measurable performance goals for the 

Hardest Hit Fund program including, at a minimum, the number of 

homeowners Treasury estimates will be helped by the program, and measure 

the program’s progress against those goals. 

2. Treasury should instruct state housing finance agencies in the Hardest Hit 

Fund to set meaningful and measurable overarching and interim performance 

goals with appropriate metrics to measure progress for their individual state 

programs. 

3. Treasury should set milestones at which the state housing finance agencies in 

the Hardest Hit Fund must review the progress of individual state programs 

and make program adjustments from this review. 

4. Treasury should publish on its website and in the Housing Scorecard on a 

quarterly basis the total number of homeowners assisted, funds drawn down 

by states, and dollars expended for assistance to homeowners, assistance 

committed to homeowners, and cash on hand, aggregated by all state Hardest 

Hit Fund programs. 

5. Treasury should develop an action plan for the Hardest Hit Fund that includes 

steps to increase the numbers of homeowners assisted and to gain industry 

support for Treasury-approved HHF programs. Treasury should set interim 

metrics for how many homeowners it intends to assist in a Treasury-defined 

time period in each particular program (such as principal reduction, secondlien reduction, or reinstatement). If Treasury cannot achieve the desired level 

of homeowners assisted in any one program area in the defined time period, 

Treasury should put the funds to better use toward programs that are reaching 

homeowners. 

 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 46

 April 12, 2012 

Management Comments and SIGTARP’s 

Response 

Treasury provided an official written response to this report in a letter dated 

March 28, 2012, which is reproduced in full in Appendix L. The letter states that 

“we appreciate the findings of the report with respect to the three stated objectives 

of the audit,” but Treasury did not address in detail the five recommendations in 

the report. 

Treasury disagreed that the time it took for states to build infrastructure should be 

characterized as delay. Treasury said that state programs are gaining traction and 

focused on the fact that there was growth last quarter in the number of 

homeowners assisted and the amount of dollars going to assist those homeowners. 

Treasury stated that it will address each of SIGTARP’s recommendations in detail 

at a later date, but “generally believes that measures that would erode the 

fundamental character of the HHF program – which empowers the states rather 

than dictates a one-size fits all approach – would not be appropriate.” In response 

to SIGTARP’s recommendation that Treasury set meaningful and measurable 

goals for HHF, Treasury said that it believes establishing static numeric targets is 

not well suited to HHF. 

SIGTARP requested that within 30 days of the date of this report, Treasury 

provide its rationale for nonconcurrence on each of the recommendations. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 47

 April 12, 2012 

Appendix A – Objectives, Scope, and Methodology 

SIGTARP performed this audit under authority of Public Law 110-343, as amended, which also 

incorporates the duties and responsibilities of inspectors general under the Inspector General Act of 

1978, as amended. We initiated this audit as part of our continuing oversight of TARP and to 

respond to a request from House Committee on Oversight and Government Reform Chairman 

Darrell Issa.37 The audit’s objectives were to:38

 assess the extent to which Treasury applied consistent and transparent criteria, including 

applicable provisions of the Emergency Economic Stabilization Act of 2008 (“EESA”), in 

selecting the states and programs to receive money from HHF; 

 assess the extent to which Treasury determined that the programs to be funded by HHF are 

innovative and not duplicative of existing state and Federal programs; and 

 identify the goals and metrics that Treasury adopted and reported to the public for the operation 

of HHF. 

HHF funds foreclosure prevention programs run by state HFAs in states hardest hit by decreases in 

home prices and high unemployment rates. The scope of this audit covered the four rounds of 

Treasury funding of HHF and HHF program activity through December 31, 2011. Treasury 

provided $7.6 billion for HHF in four increments: $1.5 billion made available on June 23, 2010; 

$600 million made available on August 3, 2010; $2 billion made available on September 23, 2010; 

and $3.5 billion made available on September 29, 2010. We conducted our audit work from 

August 2010 through March 2012 in Washington, D.C., and New York, N.Y. (engagement code 

022). 

SIGTARP interviewed the 10 HFAs that participated in Round One or Round Two of HHF, and 

conducted an email survey of the nine HFAs that joined HHF in Round Three. SIGTARP 

judgmentally selected to interview the first 10 HFAs because they entered the program earlier and 

had more experience to convey, and had a variety of program types. The HFAs that joined in Round 

Three had fewer months of experience and at the time of the interviews offered unemployment 

programs only. Treasury did not add any HFAs to HHF in Round Four. SIGTARP also surveyed all 

19 HFAs about the goals for their programs (one HFA did not respond). In addition, SIGTARP 

interviewed and sent a written survey on their participation in the HHF program to officials from the 

nation’s four largest mortgage servicers. 

To determine whether Treasury applied consistent and transparent criteria, including applicable 

provisions of EESA used in selecting states and programs, SIGTARP interviewed officials from 

Treasury’s Office of Financial Stability; officials from the 10 state housing finance agencies first 

selected for the HHF program out of the 19 HFAs participating; and mortgage industry 

stakeholders. We analyzed the criteria and data used by Treasury when making its state selection 

 

37 Chairman Issa was the ranking member of the committee when he made the request. 38 A fourth question, whether Treasury has put sufficient mechanisms in place to prevent waste, fraud, and abuse of the 

Hardest Hit Fund, will be addressed in a future audit report. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 48

 April 12, 2012 

decisions and reviewed available documentation, including Treasury’s HHF proposal guidelines, 

written methodologies, emails, selection criteria such as unemployment rates and house price 

declines, Review Committee meeting minutes, and decision memoranda regarding the HHF 

program. 

To determine whether Treasury’s HHF programs are innovative and not duplicative of existing state 

and Federal programs, we synthesized Treasury guidance and testimonial evidence to determine 

what definition or criteria for innovation Treasury established, and what processes Treasury 

established and used to determine whether HFA programs for HHF are “innovative” and not 

duplicative of existing state and Federal programs. We also synthesized testimonial evidence from 

mortgage industry stakeholders and professionals on the extent to which HHF programs are 

innovative. For this objective, SIGTARP interviewed officials from Treasury’s Office of Financial 

Stability and officials from the 10 state housing finance agencies first selected for the HHF program, 

out of the 19 HFAs participating. We also conducted email surveys with the nine additional HFAs 

selected for the third round of HHF funding. We also interviewed officials from the four largest 

servicers (Bank of America, CitiMortgage, JPMorgan Chase, and Wells Fargo) and the GSEs 

(Freddie Mac and Fannie Mae) and their regulator and conservator, FHFA. 

To address the goals and metrics of the HHF program, we interviewed Treasury officials including a 

former Assistant Secretary for Financial Institutions, current and former OFS officials, and the 

Director for Strategic Planning and Performance Management. We conducted a written survey of 

the 19 state HFAs participating in HHF. We reviewed Treasury’s proposal guidelines, the proposals 

state HFAs submitted to Treasury, the Participation Agreements between Treasury and state HFAs, 

and the reports Treasury required state HFAs to publish quarterly about their HHF program activity. 

We analyzed the estimates state HFAs made of the number of households their HHF programs 

would serve. We reviewed statements made by the Government Accountability Office (“GAO”) and 

COP about performance measurement of other TARP-funded housing programs, and reviewed GAO 

reports on best practices for performance measurement. We reviewed other documents provided by 

Treasury, including emails among Treasury officials related to HHF, as well as documents that 

Treasury and HUD made available to the public. 

SIGTARP conducted this performance audit in accordance with generally accepted government 

auditing standards prescribed by the Comptroller General of the United States. Those standards 

require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a 

reasonable basis for our findings and conclusions based on our audit objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings and conclusions based on our audit 

objectives. 

Limitations on Data 

SIGTARP relied upon Treasury to identify and provide email communication and documents related 

to the Hardest Hit Fund. It is possible that the documentation provided did not reflect a 

comprehensive response to SIGTARP’s documentation requests, potentially limiting the review. 

 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 49

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Use of Computer-Processed Data 

SIGTARP relied upon computer-processed data from each of the 19 HFAs (quarterly performance 

reports) and OFS (aggregate quarterly performance reports) to report the number of applications 

approved, the number of homeowners assisted, and the amount spent on the program from the 

quarter ending September 30, 2010, through the quarter ending December 31, 2011. We did not 

validate the accuracy of these data because we did not have access to the underlying HFA or OFS 

data. We were able to cross-reference data from the 19 HFA quarterly performance reports to the 

OFS aggregate quarterly report to check the internal validity of the figures. Further, we relied upon 

monthly statements from OFS on the amount the 19 HFAs drew down, by month and cumulatively, 

for HHF program and administrative expenses and cash on hand. We did not validate the accuracy 

of these data because we did not have access to the HFA data that appeared in the OFS reports. 

Finally, we were able to assess the validity of the 19 HFA quarterly performance reports from 

quarter to quarter by checking whether the program expenses and figures of homeowners assisted to 

date plus the latest quarter’s data equaled the current cumulative figure. 

Internal Controls 

To address the reporting objectives in this audit, consideration of internal controls was not necessary. 

SIGTARP plans to conduct an assessment of OFS’ internal controls for the HHF program in followon work. 

Prior Coverage 

SIGTARP, GAO, and COP have provided information about HHF and updates on its status but have 

not performed other audits related to HHF with the same or similar audit objectives. 

 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 50

 April 12, 2012 

Appendix B – Acronyms and Abbreviations

Acronym or 

Abbreviation Definition 

BLS U.S. Department of Labor – Bureau of Labor Statistics 

COP Congressional Oversight Panel 

EESA Emergency Economic Stabilization Act of 2008 

Fannie Mae Federal National Mortgage Association 

FHA Federal Housing Administration 

FHFA Federal Housing Finance Agency 

Freddie Mac Federal Home Loan Mortgage Corporation 

GAO Government Accountability Office 

GSE Government-Sponsored Enterprise 

HAMP Home Affordable Modification Program 

HFA Housing Finance Agency 

HHF Housing Finance Agency Innovation Fund for the Hardest Hit Housing 

Markets (“Hardest Hit Fund”) 

HPO Homeownership Preservation Office 

HUD U.S. Department of Housing and Urban Development 

MHA Making Home Affordable Program 

OFS Office of Financial Stability 

SIGTARP Office of the Special Inspector General for the Troubled Asset Relief 

Program 

TARP Troubled Asset Relief Program 

VA U.S. Department of Veterans Affairs 

 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 51

 April 12, 2012 

Appendix C – Timeline of Key HHF Events 

Source: SIGTARP analysis of Treasury data. 

September 

21: 

 Treasury 

holds 

Servicer 

Summit 

August 11: 

$2 billion 

announced for 

Round Three 

September 1: 

Round Three 

proposals due

July 12: State 

HFA program 

launches begin

FEB 2010 MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN 2011 FEB MAR APR MAY JUN 

June 30: 

7,389 borrowers 

assisted 

March 31: 

2,328 borrowers 

assisted

February 19: 

Announcement of 

creation of HHF; 

$1.5 billion for Round 

One 

October 29: GSE 

HHF guidance for 

servicers published 

December 31: 

757 borrower 

applications approved 

June 23: Round 

One funds 

allocated 

September 29: 

$3.5 billion 

announced for 

Round Four 

March 29: 

$600 million 

announced for 

Round Two 

April 16: 

Round One 

proposals 

due 

June 1: Round 

Two proposals due 

September 23: 

Round Three funds 

allocated 

August 3: 

Round Two 

funds 

allocated 

 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 52

 April 12, 2012 

Appendix D – HHF State Selection and Funding Allocation 

Methodology 

a Index utilized was the FHFA seasonally adjusted purchase-only house price index. 

b Allocation formula: (State’s population in high-unemployment counties / sum of states’ populations in high-unemployment counties in 

states funded in that round). 

c Allocation formula: (State’s population / sum of populations in states funded in that round). 

Source: Treasury. 

A LOOK AT THE FUNDING ALLOCATION METHODOLOGY

HHF 

Funding 

Round 

Funding 

($ billions) 

Total Funding – 

$7.6 billion 

State Selection 

Criteria Statistic 

States Funded 

and Criteria Statistic 

Funding Allocation 

Method to States 

Round 1 

February 

2010 

1.5 

Greater than 20% 

house price decline 

(from peak to 4Q 

2009)a

Nevada -49.9% 

California -38.9% 

Florida -37.4% 

Michigan -24.1% 

Arizona -36.8% 

Weighting based on: 

 House price decline 

 State’s unemployment rate 

 State’s number of delinquent 

loans 

Round 2 

March 

2010 

0.6 

Not funded in 

Round 1 and 

highest percentage 

of state’s population 

residing in counties 

exceeding 12% 

unemployment for 

2009 

Rhode Island 60% 

South Carolina 44% 

Oregon 34% 

North Carolina 25% 

Ohio 22% 

Allocatedb

 based on state’s 

population residing in 

Distressed counties, where 

Distressed = over 12% 

unemployment for 2009 

Round 3 

August 

2010 

2.0 

Unemployment rate 

at or above national 

average for prior 12 

months (July 2009-

June 2010) 

District of Columbia, 

Tennessee, New Jersey, 

Illinois, Kentucky, 

Alabama, Georgia, 

Mississippi, Indiana, and 

all Round 1 and Round 2 

states except Arizona 

Allocatedc

 based on state’s 

population 

Round 4 

September 

2010 

3.5 All states funded in 

Rounds 1, 2, or 3 

All states funded in 

Rounds 1, 2, or 3 

Allocated based on state’s 

population 

 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 53

 April 12, 2012 

Appendix E – HHF Funding Allocations and Amounts 

Obligated by State, Total Finalized September 29, 2010 

FUNDING ALLOCATIONS AND AMOUNTS OBLIGATED

State Round One Round Two Round Three Round Four Amount Obligated 

Alabama – – $60,672,471 $101,848,874 $162,521,345 

Arizona $125,100,000 – – $142,666,006 $267,766,006 

California $699,600,000 – $476,257,070 $799,477,026 $1,975,334,096 

Florida $418,000,000 – $238,864,755 $400,974,381 $1,057,839,136 

Georgia – – $126,650,987 $212,604,832 $339,255,819 

Illinois – – $166,352,726 $279,250,831 $445,603,557 

Indiana – – $82,762,859 $138,931,280 $221,694,139 

Kentucky – – $55,588,050 $93,313,825 $148,901,875 

Michigan $154,500,000 – $128,461,559 $215,644,179 $498,605,738 

Mississippi – – $38,036,950 $63,851,373 $101,888,323 

Nevada $102,800,000 – $34,056,581 $57,169,659 $194,026,240 

New Jersey – – $112,200,637 $188,347,507 $300,548,144 

North Carolina – $159,000,000 $120,874,221 $202,907,565 $482,781,786 

Ohio – $172,000,000 $148,728,864 $249,666,235 $570,395,099 

Oregon – $88,000,000 $49,294,215 $82,748,571 $220,042,786 

Rhode Island – $43,000,000 $13,570,770 $22,780,803 $79,351,573 

South Carolina – $138,000,000 $58,772,347 $98,659,200 $295,431,547 

Tennessee – – $81,128,260 $136,187,333 $217,315,593 

Washington, D.C. – – $7,726,678 $12,970,520 $20,697,198 

Total $1,500,000,000 $600,000,000 $2,000,000,000 $3,500,000,000 $7,600,000,000 

Note: Treasury announced Round One funding on February 19, 2010, Round Two funding on March 29, 2010, Round Three funding on 

August 11, 2010, and Round Four funding on September 29, 2010. 

Source: Treasury Transactions Report for period ending 9/30/2010. 

 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 54

 April 12, 2012 

Appendix F – HHF Programmatic Expenses and 

Homeowners Assisted, by State, as of December 31, 2011 

PROGRAMMATIC EXPENSES, HOMEOWNERS ASSISTED 

State 

Programmatic 

Expenses 

Homeowners 

Assisted 

Alabama $7,506,166 1,299 

Arizona $1,011,154 325 

California $38,630,554 4,357 

Florida $15,156,356 3,302 

Georgia $1,795,447 524 

Illinois $4,804,262 539 

Indiana $1,510,656 226 

Kentucky $7,003,585 1,045 

Michigan $10,485,488 2,897 

Mississippi $1,332,799 193 

Nevada $3,404,243 682 

New Jersey $218,032 54 

North Carolina $31,718,521 3,685 

Ohio $34,169,125 3,924 

Oregon $36,140,389 4,426 

Rhode Island $6,429,243 1,031 

South Carolina $9,146,929 1,207 

Tennessee $5,259,731 752 

Washington, D.C. $1,704,691 172 

Total $217,427,372 30,640 

Note: Numbers affected by rounding. 

Source: Quarterly performance data reports, fourth quarter 2011. 

 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 55

 April 12, 2012 

Appendix G – HHF Funding Allocations and Amount 

Drawdown by HFAs, by State, as of February 2012 

AMOUNTS OBLIGATED AND DRAWN 

State 

Amount 

Obligated 

Amount 

Drawn 

Alabama $162,521,345 $16,000,000 

Arizona $267,766,006 $21,255,000 

California $1,975,334,096 $217,490,000 

Florida $1,057,839,136 $63,350,000 

Georgia $339,255,819 $38,200,000 

Illinois $445,603,557 $46,500,000 

Indiana $221,694,139 $22,000,000 

Kentucky $148,901,875 $24,000,000 

Michigan $498,605,738 $30,166,175 

Mississippi $101,888,323 $5,094,416 

Nevada $194,026,240 $12,302,000 

New Jersey $300,548,144 $7,513,704 

North Carolina $482,781,786 $78,000,000 

Ohio $570,395,099 $96,100,000 

Oregon $220,042,786 $83,501,070 

Rhode Island $79,351,573 $13,000,000 

South Carolina $295,431,547 $30,000,000 

Tennessee $217,315,593 $20,315,593 

Washington, D.C. $20,697,198 $3,834,860 

Total $7,600,000,000 $828,622,818 

Source: State HFA Invoice, Treasury, February 2012. 

 
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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 57

 April 12, 2012 

Appendix I – State Selection Rankings for Rounds One, Two, 

and Three 

Round One 

HOUSING PRICE DECLINE FROM PEAK, MOST FREQUENTLY IN 2007, 

TO 4TH QUARTER 2009 

Rank State 

Home Price 

Decline Rank State 

Home Price 

Decline 

1 Nevada -49.9% 27 District of 

Columbia -5.5% 

2 California -38.9% 28 Missouri -5.0% 

3 Florida -37.4% 29 Alaska -4.9% 

4 Arizona -36.8% 30 Tennessee -4.7% 

5 Michigan -24.1% 31 Wisconsin -4.5% 

6 Maryland -19.0% 32 New York -4.3% 

7 Rhode Island -17.2% 33 Pennsylvania -4.1% 

8 Utah -16.2% 34 Maine -3.9% 

9 Oregon -15.5% 35 Vermont -3.9% 

10 Hawaii -14.5% 36 North Carolina -3.8% 

11 Idaho -13.6% 37 Indiana -3.2% 

12 Washington -12.9% 38 West Virginia -3.1% 

13 New Hampshire -12.7% 39 Arkansas -2.9% 

14 Illinois -12.3% 40 South Carolina -2.3% 

15 New Jersey -12.3% 41 Colorado -1.8% 

16 Minnesota -12.1% 42 Louisiana -1.5% 

17 Massachusetts -11.8% 43 Nebraska -1.4% 

18 Delaware -11.5% 44 Alabama -1.2% 

19 Georgia -11.4% 45 Iowa -0.9% 

20 Virginia -9.7% 46 North Dakota -0.7% 

21 Connecticut -9.6% 47 Kentucky -0.1% 

22 Ohio -7.6% 48 Texas 0% 

23 New Mexico -7.2% 49 Kansas 0% 

24 Mississippi -6.4% 50 Oklahoma 0% 

25 Wyoming -6.3% 51 South Dakota 0% 

26 Montana -6.0% 

Source: Treasury. The original array provided by Treasury transposed Michigan and Arizona. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 58

 April 12, 2012 

ROUND ONE ALLOCATIONS 

Housing Price Decline Unemployment

Housing 

Price 

Decline from 

Peak 

Ratio 

Relative 

to 

Largest 

Decline 

December 

2009 

Unemployment 

Rate 

Ratio Relative 

to Highest 

Unemployment 

Rate 

Sum of 

Ratios 

(State’s 

Weight) 

Number of 

Delinquent 

Loans in 

Q4 2009 

Weighted 

Number of 

Delinquent 

Loans 

Weighted 

Share of 

Delinquent 

Loans in 

These 

States 

Allocation 

($millions) 

Nevada -49.9% 1.00 13.0% 0.89 1.9 62,622 118,382 6.9% $102.8 

California -38.9% 0.78 12.4% 0.85 1.6 494,640 805,978 46.6% 699.6 

Florida -37.4% 0.75 11.8% 0.81 1.6 309,022 481,558 27.9% 418.0 

Arizona -36.8% 0.74 9.1% 0.62 1.4 105,853 144,073 8.3% 125.1 

Michigan -24.1% 0.48 14.6% 1.00 1.5 120,030 178,000 10.3% 154.5 

Total $1,500.0 

Source: Treasury.
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 59

 April 12, 2012 

Round Two 

PERCENTAGE OF STATE POPULATION LIVING IN HIGH-UNEMPLOYMENT COUNTIES 

Ranking State 

% of State Population 

in High-Unemployment 

Counties in 2009 Ranking State 

% of State Population 

in High-Unemployment 

Counties in 2009 

1 Michigan 79% 27 North Dakota 2% 

2 Rhode Island 60% 28 New Jersey 2% 

3 South Carolina 44% 29 New Mexico 1% 

4 Oregon 34% 30 Missouri 1% 

5 California 26% 31 Maine 1% 

6 North Carolina 25% 32 Louisiana 1% 

7 Ohio 22% 33 Minnesota 1% 

8 Tennessee 21% 34 Texas 1% 

9 Kentucky 19% 35 Pennsylvania 0% 

10 Mississippi 18% 36 Colorado 0% 

11 Alabama 16% 37 Connecticut 0% 

12 Indiana 16% 38 Delaware 0% 

13 Florida 12% 39 Hawaii 0% 

14 Washington 12% 40 Iowa 0% 

15 Georgia 10% 41 Kansas 0% 

16 Arizona 7% 42 Massachusetts 0% 

17 Alaska 7% 43 Maryland 0% 

18 Illinois 6% 44 Nebraska 0% 

19 West Virginia 4% 45 New Hampshire 0% 

20 Nevada 4% 46 New York 0% 

21 Idaho 3% 47 Oklahoma 0% 

22 Wisconsin 3% 48 Utah 0% 

23 Montana 3% 49 Vermont 0% 

24 South Dakota 3% 50 Wyoming 0% 

25 Virginia 2% 51 District of Columbia 0% 

26 Arkansas 2% 

Source: Treasury. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 60

 April 12, 2012 

ROUND TWO ALLOCATIONS

State Totals Unemployment Allocation of TARP Funds 

State 

State 

Population in 

2009 

Population in HighUnemployment* 

Counties 

% of State 

Population in 

HighUnemployment 

Counties 

% of Total 

Population in 

HighUnemployment* 

Counties for 

Top 5 States 

Allocation 

Cap 

Rhode Island 1,053,209 627,690 60% 7% $43,000,000 

South Carolina 4,561,242 2,022,492 44% 23% $138,000,000 

Oregon 3,825,657 1,281,675 34% 15% $88,000,000 

North Carolina 9,380,884 2,332,246 25% 27% $159,000,000 

Ohio 11,542,645 2,514,678 22% 29% $172,000,000 

Total $600,000,000 

Source: Treasury, March 29, 2010, Hardest Hit Fund Frequently Asked Questions.

* Treasury defined “high unemployment” as exceeding 12%. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 61

 April 12, 2012 

Round Three 

AVERAGE UNEMPLOYMENT RATE 

Rank State 

Average 

Unemployment 

Rate, 

July 2009 

through 

 June 2010 Rank State 

Average 

Unemployment 

Rate, 

July 2009 

through 

June 2010 

1 Michigana 14.1% 27 Delaware 8.7% 

2 Nevadaa 13.2% 28 New York 8.7% 

3 Californiaa 12.3% 29 Wisconsin 8.6% 

4 Rhode Islandb 12.3% 30 Alaska 8.3% 

5 South Carolinab 12.0% 31 New Mexico 8.2% 

6 Floridaa 11.6% 32 Texas 8.2% 

7 District of 

Columbia 11.2% 33 Maine 8.1% 

8 Illinois 10.9% 34 Colorado 7.7% 

9 North Carolinab 10.8% 35 Arkansas 7.6% 

10 Alabama 10.8% 36 Minnesota 7.5% 

11 Oregonb 10.8% 37 Maryland 7.4% 

12 Ohiob 10.8% 38 Wyoming 7.2% 

13 Mississippi 10.7% 39 Louisiana 7.2% 

14 Tennessee 10.7% 40 Virginia 7.0% 

15 Kentucky 10.6% 41 Utah 6.9% 

16 Georgia 10.2% 42 Hawaii 6.8% 

17 Indiana 10.0% 43 Montana 6.8% 

18 New Jersey 9.8% 44 Oklahoma 6.8% 

19 Missouri 9.5% 45 New 

Hampshire 6.7% 

20 Arizonaa 9.4% 46 Kansas 6.7% 

21 Washington 9.2% 47 Vermont 6.6% 

22 Massachusetts 9.2% 48 Iowa 6.6% 

23 Idaho 9.0% 49 Nebraska 4.8% 

24 West Virginia 8.9% 50 South Dakota 4.7% 

25 Connecticut 8.8% 51 North Dakota 4.1% 

26 Pennsylvania 8.8% 

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

received funding in Round Two. 

Source: Treasury. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 62

 April 12, 2012 

ROUND THREE ALLOCATIONS 

Rank State 

Average 

Unemployment 

Rate, 

July 2009 

through 

 June 2010 

Population Share of 

Population Allocation 

1 Michigan 14.1 9,969,727 6% $128,461,559 

2 Nevada 13.2 2,643,085 2% $34,056,581 

3 California 12.3 36,961,664 24% $476,257,070 

4 Rhode Island 12.3 1,053,209 1% $13,570,770 

5 South Carolina 12.0 4,561,242 3% $58,772,347 

6 Florida 11.6 18,537,969 12% $238,864,755 

7 District of 

Columbia 11.2 599,657 0% $7,726,678 

8 Illinois 10.9 12,910,409 8% $166,352,726 

9 North Carolina 10.8 9,380,884 6% $120,874,221 

10 Alabama 10.8 4,708,708 3% $60,672,471 

11 Oregon 10.8 3,825,657 2% $49,294,215 

12 Ohio 10.8 11,542,645 7% $148,728,864 

13 Mississippi 10.7 2,951,996 2% $38,036,950 

14 Tennessee 10.7 6,296,254 4% $81,128,260 

15 Kentucky 10.6 4,314,113 3% $55,588,050 

16 Georgia 10.2 9,829,211 6% $126,650,987 

17 Indiana 10.0 6,423,113 4% $82,762,859 

18 New Jersey 9.8 8,707,739 6% $112,200,638 

Total 100% $2,000,000,000 

Note: Totals affected by rounding. 

Source: Treasury. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 63

 April 12, 2012 

Appendix J – HFA Quarterly Performance Report 

Template/Data Dictionary

DATA DICTIONARY (FOR QUARTERLY PERFORMANCE REPORT)* MAY 2011 VERSION

HFA Performance Data Reporting – Borrower Characteristics 

The Following Data Points Are To Be Reported in Aggregate for All Programs: 

Unique Borrower Count 

Number of Unique Borrowers Receiving 

Assistance 

Total number of unique borrowers having received some form of assistance under 

any one of the HFA’s programs. The number of borrowers represented in the other 

“Borrower Characteristics” fields should foot to this number. 

Number of Unique Borrowers Denied 

Assistance 

Total number of unique borrowers not receiving assistance under any of the 

programs and not withdrawn 

Number of Unique Borrowers Withdrawn 

from Program 

Total number of unique borrowers who do not receive assistance under any 

program because of voluntary withdrawal after approval or failure to complete 

application despite attempts by the HFA 

Number of Unique Borrowers in Process Total number of unique borrowers who have not been decisioned for any program 

and are pending review. 

Total Number of Unique Applicants Total number of unique borrowers. This should be the total of the four above 

fields. 

Borrower Income 

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

thousand. 

Borrower Income as Percent of Area Median Income (AMI) 

All Categories At the time of assistance, borrower’s annual income as a percentage of area 

median income. 

Geographic Breakdown (by County) 

All Categories Number of aggregate borrowers assisted in each county listed. 

Home Mortgage Disclosure Act (HMDA) 

Borrower 

Race 

All Categories All totals for the aggregate number of borrowers assisted. 

Ethnicity 

All Categories All totals for the aggregate number of borrowers assisted. 

Sex 

All Categories All totals for the aggregate number of borrowers assisted. 

Co-Borrower 

Race 

All Categories All totals for the aggregate number of borrowers assisted. 

Ethnicity 

All Categories All totals for the aggregate number of borrowers assisted. 

Sex 

All Categories All totals for the aggregate number of borrowers assisted. 

Hardship 

All Categories All totals for the aggregate number of borrowers assisted. 

Current Loan to Value Ratio (LTV) 

All Categories Market loan to value ratio calculated using the unpaid principal balance at the time 

of assistance divided by the most current valuation at the time of assistance. 

Current Combined Loan to Value Ratio (CLTV) 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 64

 April 12, 2012 

All Categories 

Market combined loan to value ratio calculated using the unpaid principal balance 

for all first and junior liens at the time of assistance divided by the most current 

valuation at the time of assistance. 

Delinquency Status (%) 

All Categories Delinquency status at the time of assistance. 

Household Size 

All Categories Household size at the time of assistance. 

HFA Performance Data Reporting – Program Performance 

Program Intake/Evaluation 

Approved 

Number of Applications Approved The total number of applications approved for assistance for the specific program 

% of Total Number of Applications Total number of applications approved for assistance for the specific program 

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

Denied

Number of Applications Denied 

The total number of applications denied for assistance for the specific program. A 

borrower that has provided the necessary information for consideration for program 

assistance, but is not approved for this assistance. 

% of Total Number of Applications Total number of applications denied for assistance for the specific program divided 

by the total number of applications received for the specific program. 

Withdrawn

Number of Applications Withdrawn 

The total number of applications withdrawn from the specific program. A withdrawal 

is defined as a borrower who was approved but never received funding, or a 

borrower who drops out of the process despite attempts by the HFA to complete 

application. 

% of Total Number of Applications Total number of applications for assistance withdrawn for the specific program 

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

In Process 

Number of Applications In Process The total number of applications for the specific program that have not been 

decisioned and are pending review 

% of Total Number of Applications 

Total number of applications for the specific program that have not been decisioned 

and are pending review divided by the total number of applications received for the 

specific program. 

Total

Total Number of Applications Received Total number of applications received for the specific program (approved, denied, 

withdrawn and in process). 

Number of Borrowers Participating in 

Other HFA HHF Programs or Program 

Components 

Number of households participating in other HFA sponsored HHF programs or 

other HHF program components. 

Program Characteristics 

General Characteristics 

Median 1st Lien Housing Payment Before 

Assistance 

Median first lien housing payment paid by homeowner for all approved applicants 

prior to receiving assistance. In other words, the median contractual borrower 

payment on their first lien before receiving assistance. 

Median 1st Lien Housing Payment After 

Assistance 

Median first lien housing payment paid by homeowner for after receiving 

assistance. In other words, the median contractual first lien payment less HFA 

contribution. 

Median 2nd Lien Housing Payment 

Before Assistance 

Median second lien housing payment paid by homeowner for all approved 

applicants prior to receiving assistance. In other words, the median contractual 

borrower payment on their second lien before receiving assistance. 

Median 2nd Lien Housing Payment After 

Assistance 

Median second lien housing payment paid by homeowner for after receiving 

assistance. In other words, the median contractual second lien payment less HFA 

contribution. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 65

 April 12, 2012 

Median 1st Lien UPB Before Program 

Entry 

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

assistance. 

Median 1st Lien UPB After Program Entry Median principal balance of all applicants approved for assistance after receiving 

assistance. 

Median 2nd Lien UPB Before Program 

Entry 

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

to receiving assistance. 

Median 2nd Lien UPB After Program 

Entry 

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

receiving assistance. 

Median Principal Forgiveness 

Median amount of principal forgiveness granted ($). This should only include 

extinguished fees in the event that those fees have been capitalized. *Includes 

second lien extinguishment. 

Median Length of Time Borrower 

Receives Assistance 

Median length of time a borrower receives on-going assistance (e.g., 

unemployment programs). Please report in months (round up to closest integer). 

This only need be reported in the cumulative column. 

Median Assistance Amount Median amount of assistance ($). 

Assistance Characteristics 

Assistance Provided Total amount of aggregate assistance provided by the HFA (does not include lender 

matching assistance). 

Total Lender/Servicer Assistance Amount 

Total amount of aggregate assistance provided by the lenders / servicers (does not 

include HFA assistance). Lender waiving fees and / or forbearance does not count 

towards lender / servicer assistance. 

Borrowers Receiving Lender/Servicer 

Match (%) 

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

assisted applicants. 

Median Lender/Servicer Assistance per 

Borrower 

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

Other Characteristics 

Median Length of Time from Initial 

Request to Assistance Granted 

Median length of time from initial contact with borrower (general eligibility 

determination) to granted assistance. Please report in days (round up to closest 

integer). 

Current 

Number Number of households current at the time assistance is received. 

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

Delinquent (30+) 

Number Number of households 30+ days delinquent but less than 60 days delinquent at the 

time assistance is received. 

% Percent of 30+ days delinquent but less than 60 days delinquent households 

divided by the total number of approved applicants. 

Delinquent (60+) 

Number Number of households 60+ days delinquent but less than 90 days delinquent at the 

time assistance is received. 

% Percent of 60+ days delinquent but less than 90 Days delinquent households 

divided by the total number of approved applicants. 

Delinquent (90+)

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

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

applicants. 

Program Outcomes 

Borrowers No Longer in the HHF 

Program (Program Completion/Transition 

or Alternative Outcome) 

Number of households who are no longer in the HFA program and reach an 

alternative outcome or program completion/transition. 

Alternative Outcomes 

Foreclosure Sale
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 66

 April 12, 2012 

Number Number of households transitioned out of the HHF program into a foreclosure sale 

as an alternative outcome of the program. 

% Percent of transitioned households that resulted in foreclosure. 

Cancelled

Number 

Number of borrowers who were approved and funded, then were disqualified or 

voluntarily withdrew from the program without 

re-employment or other intended transition. 

% Percent of transitioned households that were cancelled from the program. 

Deed in Lieu 

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

an alternative outcome of the program. 

% Percent of transitioned households that resulted in deed in lieu. 

Short Sale

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

alternative outcome of the program. 

% Percent of transitioned households that resulted in short sale. 

Program Completion/Transition 

Loan Modification Program 

Number Number of households that transitioned into a loan modification program (such as 

the Making Home Affordable Program) 

% Percent of transitioned households entering a loan modification program. 

Re-employed/Regain Appropriate Employment Level

Number Number of households transitioned out of the program due to regaining 

employment and/or appropriate levels of employment. 

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

employment levels. 

Reinstatement/Current/Payoff 

Number Number of households transitioned out of the program due to reinstating/bringing 

loan current or paying off their mortgage loan. 

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

Short Sale 

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

desired outcome of the program. 

% Percent of transitioned households that resulted in short sale. 

Deed in Lieu 

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

the desired outcome of the program. 

% Percent of transitioned households that resulted in a deed in lieu 

Other – Borrower Still Owns Home 

Number ouseholds transitioned out of the HHF program not falling into one of the transition 

bove, but still maintaining ownership of the home. 

% Percent of transitioned households in this category. 

Homeownership Retention1

Six Months Number of households assisted by the program in which the borrower retains 

ownership 6 months post initial assistance. 

% 

Percent of households assisted by the program in which the borrower retains 

ownership 6 months post initial assistance divided by the total number of 

households assisted by the program 6 months prior to reporting period. 

Twelve Months Number of households assisted by the program in which borrower retains 

ownership 12 months post initial assistance. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 67

 April 12, 2012 

 

% 

Percent of households assisted by the program in which the borrower retains 

ownership 12 months post initial assistance divided by the total number of 

households assisted by the program 12 months prior to reporting period. 

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

means. 

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

means. 

Note: 1 Borrower still owns home. 

* Information should reflect quarterly activity (e.g., borrowers assisted during the reporting quarter) 

Source: Treasury. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 68

 April 12, 2012 

Appendix K – HHF Program Goals by State and Program, 

as of December 31, 2011 

ALABAMA 

Hardest Hit for 

Alabama’s Unemployed 

Homeowners

Provide mortgage payment assistance to unemployed or underemployed 

Alabama homeowners with a chance of sustaining homeownership. 

ARIZONA 

Permanent Modifications 

Component 

The central goal of the Permanent Modification Component is to help homeowners 

avoid foreclosure by permanently modifying a borrower’s primary mortgage to achieve 

a monthly payment that does not exceed 31-32% of the borrower’s monthly income, 

depending on the agreement with the servicer. Loan modifications may include 

principal reduction (the amount of any principal reduction provided by HHF Program 

funds must be matched by a borrower’s lender/servicer), interest rate reduction, 

and/or term extension. The Permanent Modification Component aspires to achieve a 

ninety percent (90%) success rate in modifying loans with the borrowers’ 

lenders/servicers. 

Second Mortgage 

Assistance Component 

The goals of the Second Mortgage Assistance Component is to help homeowners 

avoid foreclosure by eliminating a second mortgage if necessary to modify the terms 

of the primary loan, and to reduce the likelihood that a borrower will re-default under 

its primary loan as a result of the burden of a second mortgage. 

Unemployment/ 

Underemployment 

Mortgage Assistance 

Component 

This program will provide assistance for a set period of time and/or maximum dollar 

amount so a qualified borrower can search for adequate work or obtain job training 

without fear of losing their home. The purpose of the program is to assist borrowers 

until they can obtain sufficient income to resume scheduled mortgage payments, or 

qualify for a modified mortgage payment. 

• Sustain the unemployed/underemployed borrower’s monthly mortgage payment until 

they can or the maximum assistance has been provided 

• Maintain the borrower’s contribution towards their monthly mortgage payment at 

31% of their current gross monthly income for the duration of the assistance 

excluding unemployment benefits. 

Short Sale Assistance 

Component 

Short sale assistance was designed to help stabilize communities by providing 

assistance to consumers in unrecoverable situations to transition from homeownership 

to renting as well as enhance the marketability of short sale properties and accelerate 

the stabilization of property value. 

CALIFORNIA 

Unemployment 

Mortgage Assistance 

Program

UMA’s goal is to help homeowners remain in their homes and prevent avoidable 

foreclosures despite loss of income due to unemployment. 

The UMA program will minimize past due payments, and provide a homeowner with 

additional time to find alternate employment and replace income needed to make their 

mortgage payment. 

UMA was designed to assist homeowners who are currently eligible to receive 

unemployment benefits. 

UMA was designed to complement other loss mitigation programs, including 

increasing a homeowner’s eligibility for an extended written forbearance plan and/or 

loan modification. 

Mortgage Reinstatement 

Assistance Program

The MRAP program will prevent avoidable foreclosures by helping homeowners 

reinstate their past due first mortgage loans. 

MRAP will also mitigate the need for large reinstatement dollars to be capitalized with 

remaining loan balance, and thus, broaden the population of homeowners who 

otherwise may not qualify for modification.

Principal Reduction 

Program 

The PRP program will, in cooperation with participating lenders, leverage the HHF 

dollars by reducing the principal balances of underwater mortgages and provide an 

incentive for qualifying homeowners to remain in their homes during this period of 

steep declines in value. 

A reduction in principal through PRP can achieve desired income ratios and 

affordability for a homeowner on the existing mortgage loan or can be used in 

conjunction with a loan modification.

The Transition 

Assistance Program 

CalHFA MAC envisions that these monies would be used to complement other federal 

or lender programs designed specifically to stabilize communities by providing 

assistance to homeowners who have suffered a financial hardship and as a result are 

no longer financially able to afford their mortgage payments. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 69

 April 12, 2012 

C2MPRP: Community 

2nd Mortgage Principal 

Reduction Program 

The goal of this program is to reduce foreclosures by reducing principal balances, on 

qualified amortizing subordinate debt, to those market levels needed to prevent 

avoidable foreclosures and promote sustainable homeownership. The C2M PRP thus 

provides an incentive for qualifying homeowners to remain in their homes during this 

period of steep declines in value, in situations when existing Making Home Affordable 

and CalHFA programs are unable to do so. 

Los Angeles Housing Department 

(“LAHD”) Principal Reduction 

Program 

Leverage existing neighborhood stabilization efforts in the City by targeting at-risk 

borrowers in those neighborhoods most impacted by foreclosures and providing 

sustainable loan modifications with affordable payments that include permanent 

principal reduction consistent with the guidelines outlined herein. The Program goals 

include maximizing leverage (City grant/Amount of Principal Write down) at 21%, with 

a Loan to Value/Combined Loan to Value (LTV, CLTV) ranging from 105% to 125%. 

NeighborWorks® Sacramento 

Short Sale Gateway 

Program

The Program will, in cooperation with participating lenders, provide an option for 

borrowers to remain in their homes after efforts to modify loans have been exhausted.

The Program goals are to prevent dislocation of households, prevent the creation of 

vacant units and return borrowers to successful homeownership. 

FLORIDA 

Unemployment Mortgage 

Assistance Program 

• Preserving homeownership. 

• Protecting home values. 

Mortgage Loan 

Reinstatement Program 

• Preserving homeownership. 

• Protecting home values.

GEORGIA 

Mortgage Payment 

Assistance (MPA) 

The goal is to provide assistance over the next 5 years to 18,300 homeowners to 

prevent foreclosures. Mortgage Payment Assistance (MPA) will be provided as 

follows: 

Short-Term Assistance 

Monthly mortgage payments to assist unemployed or substantially under-employed 

homeowners while they look for a new job. 

Reinstatement Assistance 

One-time payment for homeowners who have found a new job and can make ongoing 

payments, but need help to bring their mortgage current and avoid foreclosure due to 

arrearages accumulated during a period of unemployment or substantial 

underemployment. 

ILLINOIS 

Hardest Hit Fund 

Homeowner Emergency 

Loan Program (HHF 

HELP) 

The goal of the Program is to assist homeowners who have experienced an income 

reduction due to unemployment or underemployment with Monthly Mortgage Payment 

Assistance and Reinstatement Assistance that will allow them to pursue sustainable 

income and homeownership without the immediate threat of default or foreclosure. 

Mortgage Resolution 

Fund Program (MRF) 

The MRF Program aims to keep families in their homes or provide families with 

support for an orderly property disposition and transition to new housing, which will 

help to stabilize neighborhoods and housing markets. 

INDIANA 

Hardest Hit Fund 

Unemployment Bridge 

Program 

The goal of the UBP is to cover a portion of PITI for eligible unemployed homeowners, 

allowing them to: 

1) Secure re-employment in their occupation; or 

2) Access training made available through the Indiana Department of Workforce 

Development that will help them secure employment in a new occupation. 

KENTUCKY 

Kentucky Unemployment 

Bridge Program 

To prevent avoidable foreclosure for homeowners who have experienced loss of 

income due to unemployment or substantial underemployment by providing funds to 

reinstate, pay the household’s mortgage payments during the period of 

unemployment/underemployment and for two months after reemployment, if needed, 

up to the maximum dollar threshold for assistance of $25,000. 

MICHIGAN 

Principal Curtailment 

Program 

The Principal Curtailment will prevent avoidable foreclosures by helping homeowners 

who currently cannot refinance or modify their mortgages due to negative equity 

positions. Homeowners will benefit from both a restructured loan payment and the 

reduction in principal balance, reducing monthly payments and increasing 

sustainability. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 70

 April 12, 2012 

Loan Rescue Program 

This program will prevent avoidable foreclosures by putting homeowners, who 

otherwise are on the brink of foreclosure, but can now afford to sustain 

homeownership, back on solid footing without increasing their indebtedness. In so 

doing, the program will stem the oversupply of foreclosed homes and short sales that 

dominate many markets and help stabilize the broader housing market in Michigan. 

Unemployment Mortgage 

Subsidy Program 

Provide mortgage payment assistance to Michigan unemployed residents, helping 

them remain successful with homeownership. 

MISSISSIPPI 

Home Saver Program 

The goal of the HSP is to provide borrowers the time necessary to improve their 

chances of finding a job that pays them enough to cover their monthly mortgage 

payments. 

NEVADA 

Principal Reduction 

Program 

The primary goal is to reduce first mortgage principal balances such that their loan to 

value ratios are reduced and correspondingly, the PITI payment reduced to 43% or 

less of the homeowner’s gross income. 

Second Mortgage 

Reduction Plan 

The expected outcome of this program is to assist up to 2,200 families remove the 

impediment of a second lien on their property such that either a short sale, refinancing 

or first mortgage modification can be carried out and thus prevent a foreclosure. 

Short-Sale Acceleration 

Program 

It is expected that at an $8,025 level of average funding per family assisted up to 

1,371 families facing imminent foreclosure threat, will have the burden of their home 

mortgage eliminated and the threats of a default judgment removed. 

Mortgage Assistance 

Program (MAP) 

The MAP program’s goal is to increase the probability that a borrower and/or 

recipient’s family has a stronger chance of sustaining homeownership with the 

assistance from the HHF program. The enhanced home ownership through reemployment and job maintenance should decrease both the numbers and probability 

of foreclosures. 

NEW JERSEY 

New Jersey Homekeeper 

Program (NJHK) 

The goal of the NJHK Program is to promote neighborhood stability in New Jersey 

communities by providing assistance with mortgage arrears and mortgage payments 

to eligible homeowners who, through no fault of their own, are in danger of foreclosure 

due to a temporary loss of employment or unexpected substantial underemployment 

and are in the process of seeking work or job training that will enable them to resume 

making their mortgage payments in full. 

NORTH CAROLINA 

Mortgage Payment 

Program (MPP-1) 

To assist 5,750 homeowners over the next 3 years. The following types of assistance 

will be provided: 

Job Search or Short-term Assistance 

To help homeowners while they look for a new job. 

Job Training or Long-term Assistance 

To help homeowners while they complete a job training/education program to help 

secure a new job. 

Reinstatement Only or One-time Assistance 

To help homeowners who have found a new job but need help to bring their mortgage 

current. 

Mortgage Payment 

Program (MPP-2) 

To assist 14,100 homeowners over the next 5 years. The following types of assistance 

will be provided: 

Job Search or Short-term Assistance 

To help homeowners while they look for a new job. 

Job Training or Long-term Assistance 

To help homeowners while they complete a job training/education program to help 

secure a new job. 

Reinstatement Only or One-time Assistance 

To help homeowners who have found a new job but need help to bring their mortgage 

current due to arrearages accumulated during a period of unemployment. 

Second Mortgage 

Refinance Program 

(SMRP) 

To assist 2,000 homeowners facing foreclosure in all 100 North Carolina counties. 

The goal of this program is to extinguish the existing second mortgage and replace it 

with a 0%-interest, non-recourse, deferred-payment subordinate loan. This will reduce 

the borrower’s monthly mortgage payment and in some instances may expedite 

movement of a qualified applicant into a HAMP first mortgage modification process. 

Permanent Loan 

Modification Program 

(PLMP) 

To assist 440 homeowners facing foreclosure. 

The goal of the program is to decrease the number of home owners losing their 

homes to foreclosure. Secondary goals include stabilization of neighborhoods and 

protecting home values of surrounding properties. 

This program will provide immediate mortgage payment relief and stable long term 

mortgage payments for the life of the loan. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 71

 April 12, 2012 

OHIO 

Rescue Payment 

Assistance Program 

The goal of this program is to prevent avoidable foreclosure for homeowners who 

have experienced a temporary hardship by reinstating their past due first mortgage 

loans. 

Mortgage Payment 

Assistance Program 

The goal of MPA is to help unemployed and/or underemployed homeowners remain in 

their homes and make on-time, monthly payments on their mortgages so that they 

may avoid delinquency and foreclosure while seeking regular employment or applying 

for a mortgage modification. 

Modification with 

Contribution Assistance 

Program 

The goal of this program is to help stabilize the Ohio housing market by helping 

homeowners achieve affordable modifications. 

Lien Elimination 

Assistance 

The goals of LEA are to: 

• Help homeowners to achieve an affordable monthly payment; and 

• Reduce the probability of re-default after the lien elimination. 

Transition Assistance 

Program 

The goal of TA is to allow homeowners to achieve a graceful exit from their current 

situation and avoid foreclosure. 

Short Refinance 

Program 

The goals of the Program are to: 

• Help homeowners obtain mortgage loan refinances to lower their monthly loan 

payment; 

• Provide assistance to homeowners who may not be eligible for a traditional 

modification but cannot refinance due to a decline in their home’s value; and 

• Reduce the number of homeowners with negative equity. 

OREGON 

Loan Modification 

Assistance Program 

To provide a quick infusion of funds that will allow for a successful loan modification. 

Without these additional funds, homeowners would be ineligible for modification. 

Mortgage Payment 

Assistance Program 

The assistance provided by the Mortgage Payment Assistance Program will allow 

qualified borrowers to search for work or obtain job training without fear of losing their 

home. The purpose of this program is to assist borrowers until they can obtain 

sufficient income to resume scheduled mortgage payments or qualify for a modified 

mortgage payment. 

Loan Preservation 

Assistance Program 

To provide homeowners experiencing unemployment or financial distress the 

opportunity to pay arrearages and bring delinquent loans current. The program will 

preserve and/or maintain an existing loan and reduce risk of imminent foreclosure. 

Transition Assistance 

Program 

To provide funds to financially distressed borrowers so they may be able to find 

affordable housing while avoiding foreclosure. Additionally, funds will serve as an 

incentive to maintain the home’s condition prior to turning it over to a lender/servicer. 

Loan Refinancing 

Assistance Pilot Project 

The Loan Refinancing Assistance Pilot Project’s goals are to assist homeowners 

escape acute negative equity situations, help to slow the ongoing decline in property 

value, and provide approved homeowners with reliable, affordable, sustainable 

mortgages. 

RHODE ISLAND 

Loan Modification 

Assistance for HAMP 

Customers (LMA-HAMP) 

To help Rhode Island homeowners who cannot qualify for a HAMP modification 

because they do not have sufficient resources to achieve HAMP requirements. 

Loan Modification 

Assistance for NonHAMP Customers (LMANon-HAMP) 

This program is designed to help stabilize Rhode Island homeowners and help them 

achieve an affordable modification. This assistance will, at a minimum, temporarily 

adjust a homeowner’s payment to an affordable level for a 12 month period. 

Temporary and 

Immediate Homeowner 

Assistance (TIHA) 

To help a homeowner avoid foreclosure when faced with temporary or immediate 

crisis. 

Moving Forward 

Assistance 

Rhode Island Housing envisions that these monies would be used to complement 

other federal or lender programs designed specifically to stabilize communities by 

providing assistance to borrowers who have suffered a financial hardship and as a 

result are no longer financially able to stay in their home. 

Mortgage Payment 

Assistance - 

Unemployment Program 

(MPA-UP) 

To assist unemployed and substantially underemployed homeowners to remain in 

their homes and make on-time, monthly payments on their mortgages during their 

hardship so that they may avoid delinquency and foreclosure; and to help stabilize 

homeowners so that they can obtain a sustainable loan modification, if necessary, 

after they have regained full employment. 
FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 72

 April 12, 2012 

 

Principal Reduction 

Program 

Leverage HHF dollars by reducing the principal balances of “underwater mortgages” 

(specifically mortgages for which the mark-to-market LTV is greater than 115%) and 

provide financial assistance to qualifying homeowners to remain in their homes during 

this period of steep declines in value. 

A reduction in principal can achieve desired income and loan-to-value ratios that result 

in an affordable payment for a customer on the existing mortgage loan or can be used 

in conjunction with a loan modification. 

SOUTH CAROLINA 

Monthly Payment 

Assistance Program 

To bridge eligible borrowers across a gap in employment or other reduction in income, 

and allow them to stay current on their mortgages. 

Direct Loan Assistance 

Program 

To help borrowers become current on their mortgage during or following a brief 

interruption or reduction in income and to ensure long-term affordability. 

HAMP Assistance 

Program To provide limited funding to help borrowers become eligible for HAMP. 

Property Disposition 

Assistance Program 

To assist borrowers in unrecoverable situations in transitioning from homeownership 

to rental housing. 

TENNESSEE 

Hardest Hit Fund 

Program (HHFP) 

To assist unemployed, or substantially underemployed, homeowners to remain in their 

homes and make monthly payments on their mortgages and mortgage related 

expenses such as property taxes, homeowner insurance, homeowner dues, and/or 

past-due mortgage payments (arrearages) so that they may avoid delinquency and 

foreclosure. 

WASHINGTON, D.C. 

HomeSaver Program 

Foreclosure prevention – The primary goal of the HomeSaver Program is to prevent 

foreclosures that will erode the base of homeowners in the city, which already lags 

behind the national average in the rate of homeownership. 

Synergistic interaction – The DCHFA will partner with other organizations (i.e. 

DOES and the Urban Institute) to define the universe of potential candidates for the 

HomeSaver Program, perform outreach and intake, and ultimately deliver timely 

assistance to prevent foreclosure. DOES is the District agency that administers the 

city’s UI and job training programs. The Urban Institute (the Institute) has conducted 

extensive research into housing issues in DC including mortgage delinquencies and 

foreclosures. The Urban Institute gathers data, conducts research, evaluates 

programs, offers technical assistance overseas, and educates Americans on social 

and economic issues – to foster sound public policy and effective government. 

Simplicity – The DCHFA will employ a HomeSaver Program design that seeks to 

minimize administrative costs thereby maximizing the amount of dollars available for 

assistance. 

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

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM

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FACTORS AFFECTING IMPLEMENTATION OF THE HARDEST HIT FUND PROGRAM 76

 April 12, 2012 

Appendix M – Audit Team Members 

This audit was conducted and the report was prepared under the direction of Kurt Hyde, Deputy Inspector 

General for Audit and Evaluation, and Kimberley A. Caprio, Assistant Deputy Special Inspector General for 

Audit and Evaluation, Office of the Special Inspector General for the Troubled Asset Relief Program. 

Staff members who conducted the audit and contributed to the report include Anita Visser, Brenda James, 

Clayton W. Boyce, Sarah Reed, Beth Preiss, Carol Placek, and Adam Tabaka. 
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