TROUBLED ASSET 

RELIEF PROGRAM

Further Actions 

Needed to Enhance 

Assessments and 

Transparency of 

Housing Programs

Report to Congressional Committees

July 2012

GAO-12-783

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-783, a report to 

congressional committees 

July 2012 

TROUBLED ASSET RELIEF PROGRAM

Further Actions Needed to Enhance Assessments 

and Transparency of Housing Programs 

Why GAO Did This Study

More than 3 years have passed since

Treasury made up to $50 billion 

available to help struggling 

homeowners through the MHA 

program, and foreclosure rates remain 

near historically high levels. Further, 

more than 2 years after Treasury set 

up the Hardest Hit Fund to help 

homeowners in high-unemployment 

states, much of the money remains 

unspent. The Emergency Economic 

Stabilization Act of 2008, which 

authorized Treasury to create TARP, 

requires GAO to report every 60 days 

on TARP activities. This 60-day report 

examines (1) the steps Treasury took 

to design and implement recent 

changes to MHA, and (2) Treasury’s

monitoring and oversight of states’ 

implementation of Hardest Hit Fund 

programs. To address these questions, 

GAO analyzed data and interviewed 

officials from Treasury, five selected 

Hardest Hit Fund states, and five large 

MHA servicers. 

What GAO Recommends

Treasury should (1) expeditiously 

assess the risks associated with the

recent changes to MHA and develop 

activity-level performance measures

for each program, and (2) consolidate 

the states’ Hardest Hit Fund

performance and financial data, 

including administrative expenses, into 

a single public report. Treasury neither

agreed nor disagreed with the 

recommendations but took exception 

to the finding that it did not conduct a 

comprehensive risk assessment prior 

to implementing the MHA program 

changes. In response, GAO provided 

examples of key components of a 

comprehensive risk assessment that 

Treasury had not addressed. 

What GAO Found

The Department of the Treasury announced changes in January 2012 to its 

Making Home Affordable (MHA) programs, which are funded by the Troubled 

Asset Relief Program (TARP), to address barriers to borrower participation. 

These changes include expanding eligibility criteria and extending application 

deadlines through 2013. Not enough time has passed to assess the extent to 

which these changes will increase participation. Several large servicers were not

able to fully implement the changes by the June 1, 2012, effective date, and 

servicers that GAO queried had mixed views about possible effects. Treasury 

consulted with servicers, investors, and federal banking regulators before 

implementing the changes but did not perform a comprehensive risk assessment

for the changes or develop meaningful performance measures in accordance 

with standards for internal control. As a result, Treasury may have difficulty 

mitigating potential risks, such as an increase in redefaults or the misuse of 

funds; effectively assessing program outcomes; or holding servicers accountable.

After a slow start, states increased their spending on borrower assistance under 

the Housing Finance Agency Innovation Fund for the Hardest Hit Housing 

Markets (Hardest Hit Fund). The assistance provided as of March 2012 totaled 

about 5 percent of the $7.6 billion allocation. All but one state that GAO spoke to 

anticipated spending their full allocations, and all noted that with Treasury’s help 

they had dealt with challenges related to staffing, infrastructure, servicer 

participation, borrower outreach, and program implementation. Treasury officials 

said that they expected initial administrative spending to be high as states 

established their programs, and as shown below, 27 percent of states’ total 

spending was for administrative expenses as of March 2012. Treasury officials 

stated that states would be required to report publicly on administrative costs 

beginning with the third quarter of 2012. Treasury has been monitoring states’ 

performance and compliance but has not reported consolidated performance and 

financial data (including administrative expenses) for the programs. The lack of 

consolidated reporting of performance and financial data limits transparency and 

efforts to ensure that resources are used effectively to achieve program goals.

Administrative Expenses as a Percent of Total Hardest Hit Fund Disbursements, by State, as 

of March 2012 

View GAO-12-783. For more information, 

contact Mathew Scirè at (202) 512-8678 or 

sciremj@gao.gov. 
Page i GAO-12-783 TARP Housing Programs 

Letter 1 

Background 3

Treasury Has Not Fully Assessed the Risks of or Developed 

Performance Measures for the Recent Changes to MHA 

Programs 10

Treasury Helped States Increase Hardest Hit Fund Spending but 

Could Improve Monitoring and Transparency 21

Conclusions 36

Recommendations for Executive Action 37

Agency Comments and Our Evaluation 38

Appendix I Objectives, Scope, and Methodology 42

Appendix II Treasury’s Actions in Response to GAO’s Recommendations for 

TARP-Funded Housing Programs Last Reported as Open or 

Partially Implemented in September 2011 44

Appendix III Comments from the Department of the Treasury 47

Appendix IV GAO Contact and Staff Acknowledgments 53

Figures

Figure 1: Monthly HAMP Trial and Permanent Modifications 

Started, January 2010 through April 2012 11

Figure 2: Percent of Permanent HAMP First-Lien Modifications 

That Use PRA, Cumulative Starts from May 2011 through 

April 2012 13

Figure 3: Hardest Hit Fund Allocations and Borrower Assistance 

Provided, as a Percentage of the Total Allocation, by 

State, as of March 2012 23

Figure 4: Hardest Hit Fund Allocations and Disbursements by 

Program, as of March 31, 2012 25

Contents
Page ii GAO-12-783 TARP Housing Programs 

Figure 5: Administrative Expenses as a Percent of Total Hardest 

Hit Fund Disbursements, by State, Cumulative through 

March 2012 26

Abbreviations

2MP Second Lien Modification Program

DTI debt-to-income ratio

EESA Emergency Economic Stabilization Act of 2008

the enterprises Fannie Mae and Freddie Mac

FHA Federal Housing Administration

FHA Short Refinance FHA Refinance of Borrowers in Negative Equity 

Positions

FHFA Federal Housing Finance Agency

HAMP Home Affordable Modification Program

Hardest Hit Fund Housing Finance Agency Innovation Fund for the 

Hardest Hit Housing Markets

HFA housing finance agency

HUD Department of Housing and Urban Development

LTV loan-to-value

MHA Making Home Affordable

NPV net present value

OFS Office of Financial Stability

PRA Principal Reduction Alternative

SIGTARP Office of the Special Inspector General for TARP

TARP Troubled Asset Relief Program

USDA Department of Agriculture

VA Department of Veterans Affairs

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Page 1 GAO-12-783 TARP Housing Programs 

United States Government Accountability Office 

Washington, DC 20548

July 19, 2012

Congressional Committees

Since the Home Affordable Modification Program (HAMP) was first 

announced in February 2009, concerns have been raised that the 

program has not reached the expected number of homeowners. HAMP 

was created after the Emergency Economic Stabilization Act of 2008 

(EESA) authorized the Department of the Treasury to establish the $700 

billion Troubled Asset Relief Program (TARP), which was intended to, 

among other things, preserve homeownership and protect home values.1

Under HAMP, Treasury initially indicated that up to $50 billion would be 

used to help 3 to 4 million struggling homeowners avoid potential 

foreclosure.2

In three prior reports, we looked at the implementation of the HAMP firstlien modification program and other MHA programs, noting that Treasury 

faced challenges in implementing them and making several 

HAMP is the key component of Treasury’s Making Home 

Affordable (MHA) program and provides servicers and mortgage 

holders/investors with incentive payments to offer modifications on firstlien mortgages to reduce borrowers’ monthly mortgage payments to 

affordable levels and thus help borrowers avoid foreclosure and keep 

their homes.

 

1

Pub. L. No. 110-343, 122 Stat. 3765 (2008), codified at 12 U.S.C. §§ 5201 et seq. The 

Helping Families Save Their Homes Act of 2009, Pub. L. No. 111-22, Div. A, 123 Stat. 

1632 (2009), amended the act to reduce the maximum allowable amount of outstanding 

troubled assets under the act by almost $1.3 billion, from $700 billion to $698.741 billion. 

The Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 

124 Stat. 1376 (2010) (1) reduced Treasury’s authority to purchase or insure troubled 

assets to a maximum of $475 billion and (2) prohibited Treasury, under the Emergency 

Economic Stabilization Act of 2008, from incurring any additional obligations for a program 

or initiative, unless it had already been introduced prior to June 25, 2010.

2

Treasury subsequently reduced the total support for housing programs from TARP to 

$45.6 billion, of which $29.9 billion was allocated to HAMP and other Making Home 

Affordable programs.

 
 

Page 2 GAO-12-783 TARP Housing Programs 

recommendations intended to address these challenges.3 In addition, the 

Special Inspector General for TARP (SIGTARP) and the Congressional 

Oversight Panel have issued several reports containing various 

recommendations to Treasury intended to improve the transparency, 

accountability, and effectiveness of MHA.4

Questions continue to be raised about the extent to which the HAMP firstlien program has effectively reached struggling homeowners and reduced 

avoidable foreclosures. In January 2012, Treasury announced several 

enhancements to its MHA program intended to help additional 

homeowners stay in their homes and strengthen hard-hit communities. It 

expanded HAMP to include mandatory assessments of borrowers for 

alternate modifications with relaxed eligibility requirements, extended 

MHA programs through 2013, and increased incentives for certain 

subprograms. Questions have also been raised about the Housing 

Finance Agency Innovation Fund for Hardest Hit Housing Markets 

(Hardest Hit Fund), a $7.6 billion TARP-funded initiative that provides 

funding to selected states to develop innovative solutions to housing 

market difficulties in their states.

As required by EESA, we have provided oversight of TARP activities 

since they began in 2008 through reports issued every 60 days. This 60-

day report examines (1) steps Treasury has taken to design and 

implement recent changes to the Making Home Affordable programs and 

 

3

GAO is required to report at least every 60 days on findings resulting from the oversight 

of, among other things, TARP’s performance in meeting the purposes of the act, the 

financial condition and internal controls of TARP, the characteristics of both asset 

purchases and the disposition of assets acquired, the efficiency of TARP’s operations in 

using appropriated funds, and TARP’s compliance with applicable laws and regulations. 

12 U.S.C. § 5226(a). Under this statutory mandate, we have reported on Treasury’s use of 

TARP funds to preserve homeownership and protect home values. See GAO, Troubled 

Asset Relief Program: Treasury Actions Needed to Make the Home Affordable 

Modification Program More Transparent and Accountable, GAO-09-837 (Washington, 

D.C.: July 23, 2009); Troubled Asset Relief Program: Further Actions Needed to Fully and 

Equitably Implement Foreclosure Mitigation Programs, GAO-10-634 (Washington, D.C.: 

June 24, 2010); and Troubled Asset Relief Program: Treasury Continues to Face 

Implementation Challenges and Data Weaknesses in Its Making Home Affordable 

Program, GAO-11-288 (Washington, D.C.: Mar. 17, 2011).

4

For example, see Office of the Special Inspector General for the Troubled Asset Relief 

Program (SIGTARP), Factors Affecting Implementation of the Home Affordable 

Modification Program, SIGTARP 10-005 (Washington, D.C.: Mar. 25, 2010) and 

Congressional Oversight Panel, April Oversight Report: Evaluating Progress on TARP 

Foreclosure Mitigation Programs (Washington, D.C.: Apr. 14, 2010).
 

Page 3 GAO-12-783 TARP Housing Programs 

(2) Treasury’s monitoring and oversight of state housing finance 

agencies’ (HFA) implementation of the Hardest Hit Fund. In addition, 

appendix II provides an update on the status of recommendations made 

to Treasury in previous reports related to TARP-funded housing 

programs.

To address these questions, we reviewed MHA and Hardest Hit Fund 

program documentation that Treasury issued, including supplemental 

directives for the recent MHA program changes, and interviewed officials 

from Treasury and the Federal Housing Finance Agency (FHFA). We 

obtained information from and spoke with five of the largest MHA 

servicers, which collectively represent about 68 percent of the TARP 

funds allocated to servicers participating in the program. We interviewed 

and obtained information from officials in five states that are administering 

Hardest Hit Fund programs. To select these states, we considered factors 

such as the size of the funding allocation and geographic location. 

Further, we spoke with various mortgage industry participants, including 

associations representing servicers, housing counselors, and legal 

services attorneys. We analyzed loan-level data from Treasury’s HAMP 

database, which included data reported by servicers on borrowers 

evaluated for HAMP participation through March 2012. This analysis 

allowed us to identify the characteristics of borrowers who received 

modifications under HAMP. We coordinated our work with SIGTARP. For 

additional information on our scope and methodology, see appendix I.

We conducted this performance audit from February 2012 through July 

2012 in accordance with generally accepted government auditing 

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

obtain sufficient, appropriate evidence to provide a reasonable basis for 

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

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on the audit objectives.

Treasury’s Office of Homeownership Preservation within the Office of 

Financial Stability (OFS), which administers TARP, addresses the issues 

of preventing avoidable foreclosures and preserving homeownership. 

Treasury established three initiatives funded under TARP to address 

these issues: MHA, the Hardest Hit Fund, and, in conjunction with the 

Department of Housing and Urban Development’s (HUD) Federal 

Background
 

Page 4 GAO-12-783 TARP Housing Programs 

Housing Administration (FHA), the FHA Refinance of Borrowers in 

Negative Equity Positions (FHA Short Refinance).5

Treasury allocated $29.9 billion in TARP funds to MHA to be used to 

encourage the modification of eligible mortgages that financial institutions 

owned and held in their portfolios (whole loans) or that they serviced for 

private-label securitization trusts, as well as to provide other relief to 

distressed borrowers.6 Only financial institutions that voluntarily signed a 

Commitment to Purchase Financial Instrument and Servicer Participation 

Agreement with respect to loans not owned or guaranteed by the 

government-sponsored enterprises Fannie Mae or Freddie Mac (the 

enterprises) on or before October 3, 2010, are eligible to receive TARP 

financial incentives under the MHA program.7 MHA was initially set to end 

December 31, 2012, but Treasury recently extended the MHA application 

deadline by 1 year to December 31, 2013. In addition to the original 

HAMP first-lien modifications, MHA TARP-funded efforts include the 

Principal Reduction Alternative (PRA), the Second Lien Modification 

Program (2MP), the Home Affordable Unemployment Program, the Home 

Affordable Foreclosure Alternatives program, Home Price Decline 

Protection incentives, and several other incentive programs.8

 

5

The FHA Short Refinance program took effect in September 2010 and provides 

underwater borrowers—those with properties worth less than the remaining principal they 

owe on their mortgage—whose loans are not insured by FHA to refinance into an FHAinsured mortgage. In order to qualify, the mortgage holder must write down at least 10 

percent of the outstanding principal and achieve a loan-to-value ratio on the first lien of no 

more than 97.75 percent. In the event of a default on the refinanced loan, Treasury pays 

up to a certain percentage of the claim after FHA has paid its part.

6

Loans held in private-label securitization trusts include loans not securitized by Fannie 

Mae or Freddie Mac and not insured by FHA or guaranteed by the Department of 

Veterans Affairs (VA) or the Department of Agriculture (USDA). 

7

Under HAMP, the enterprises provide additional funds from their own balance sheets to 

provide incentives to servicers and borrowers for modifying loans owned or guaranteed by 

them. The enterprises have directed all of their servicers to participate in the enterprises’ 

HAMP programs.

8

These incentive programs include servicer and borrower incentives for certain 

modifications completed in accordance with the HAMP companion programs implemented 

by FHA (FHA-HAMP) and USDA (Rural Development or RD-HAMP) and a second-lien 

modification program to facilitate refinances under the FHA Short Refinance program. 
 

Page 5 GAO-12-783 TARP Housing Programs 

The largest component of MHA is the HAMP first-lien modification 

program, which was intended to help eligible homeowners stay in their 

homes and avoid potential foreclosure. HAMP first-lien modifications are 

available to qualified borrowers who took out their loans on or before 

January 1, 2009. Only single-family properties (one to four units) with 

mortgages no greater than $729,750 for a one-unit property are eligible.9

HAMP uses a standardized net present value (NPV) model to compare 

expected cash flows from a modified loan to the same loan with no 

modification, using certain assumptions. If the NPV of the expected 

investor cash flow with a modification is greater than the NPV of the 

expected cash flow without a modification, the loan servicer is required to 

modify the loan. In addition, Treasury shares some of the costs of 

modifying mortgages with mortgage holders/investors and provides 

incentives of up to $1,600 to servicers for completing modifications.10

In early 2012, Treasury announced a second evaluation for a modification 

under HAMP, at which point the original HAMP first-lien modification 

structure was redesignated as HAMP Tier 1, and the new evaluation was 

named HAMP Tier 2. HAMP Tier 2 became available to borrowers June 

1, 2012. Generally, HAMP Tier 1 is available to qualified borrowers who 

occupy their properties as their primary residences and whose first-lien 

mortgage payment is more than 31 percent of their monthly gross 

income, calculated using the front-end debt-to-income (DTI) ratio.11

 

9

Unpaid principal balance limits (prior to modification) are $729,750 for a one-unit building; 

$934,200 for a two-unit building; $1,129,250 for a three-unit building; and $1,403,400 for a 

four-unit building.

In 

contrast, HAMP Tier 2 is available for either owner-occupied properties or 

rental properties, and borrowers’ monthly mortgage payments prior to 

modification do not have to exceed a specified threshold. Mortgages 

secured by owner-occupied properties must be in imminent default or be 

two or more payments delinquent to be considered for HAMP Tier 1 or 

HAMP Tier 2. For mortgages secured by rental properties, only those that 

are two or more payments delinquent are eligible.

10Additional incentive payments are available to servicers, borrowers, and mortgage 

holders/investors if certain conditions are met.

11The front-end DTI ratio used for the HAMP program is the percentage of a borrower’s 

gross monthly income required to pay the borrower’s monthly housing expense, which 

includes mortgage principal, interest, taxes, insurance, and if applicable, condominium or 

cooperative fees or homeowners’ association dues.

HAMP
 

Page 6 GAO-12-783 TARP Housing Programs 

The HAMP Tier 1 standard modification waterfall provides servicers with 

a sequential modification process to reduce mortgage payments to as 

close to 31 percent of gross monthly income as possible. Servicers must 

first capitalize accrued interest and certain expenses paid to third parties 

and add this amount to the loan balance (principal) amount. Next, the 

interest rate must be reduced in increments of one-eighth of 1 percent 

until the 31-percent DTI target is reached, but servicers are not required 

to reduce interest rates below 2 percent.12 If the interest rate reduction 

does not result in a DTI ratio of 31 percent, servicers must then extend 

the maturity and/or amortization period of the loan in 1-month increments 

up to 40 years. Finally, if the target DTI ratio is still not reached, the 

servicer must forbear, or defer, principal until the payment is reduced to

the 31-percent target. Servicers may also forgive mortgage principal at 

any step of the process to achieve the target monthly payment ratio of 31 

percent, provided that the investor allows principal reduction.13

In contrast, the HAMP Tier 2 modification provides servicers with a 

uniform set of actions that must result in a reduction in the principal and 

interest payments of at least 10 percent and a postmodification DTI that is 

greater than or equal to 25 percent but less than or equal to 42 percent in 

order for the modification to proceed. The NPV model applies the 

following steps, using information provided by the servicer to evaluate 

borrowers for HAMP Tier 2:

• accrued interest and certain expenses paid to third parties are 

capitalized (added to the principal amount);

• the interest rate is adjusted to the weekly Freddie Mac Primary 

Mortgage Market Survey Rate, rounded up to the nearest 0.125 

 

12The modified interest rate is fixed for 5 years and then is gradually adjusted up to the 

interest rate cap, which is the Freddie Mac Primary Mortgage Market Survey rate at the 

time of the evaluation for the modification.

13The principal forbearance amount is non-interest-bearing and nonamortizing—that is, it 

cannot accrue interest under the HAMP guidelines or be amortized over the loan term. 

Rather, the amount of principal forbearance will result in a balloon payment fully due and 

payable upon the borrower’s transfer of the property, payoff of the interest-bearing unpaid 

principal balance, or maturity of the mortgage loan. If, in order to reach the target DTI ratio, 

the investor is required to forbear more than 30 percent of the unpaid principal balance after 

capitalization or an amount of principal necessary to reach 100 percent of the mark-tomarket loan-to-value ratio (LTV), the servicer may, but is not required to, modify the loan. 
 

Page 7 GAO-12-783 TARP Housing Programs 

percent, plus a risk adjustment established by Treasury (initially 50 

basis points);

• the mortgage term is extended to 480 months and reamortized; and,

• if the premodification current loan-to-value (LTV) ratio is greater than 

115 percent, principal forbearance is applied in the amount of the 

lesser of 30 percent of the unpaid principal balance (including 

capitalized amounts) or the amount required to create a 

postmodification LTV ratio of 115 percent.

Borrowers must also demonstrate their ability to pay the modified amount 

by successfully completing a trial period of at least 3 months (or longer if 

necessary) before a loan is permanently modified and any government 

payments are made under both HAMP Tier 1 and HAMP Tier 2. 

According to Treasury data, about 880,000 trial modifications had been 

started under the TARP-supported (nonenterprise) portion of HAMP Tier 

1 through April 2012. Of these, approximately 493,000 were converted to 

permanent modifications, 347,000 had been canceled, and 40,000 

remained in active trial periods. Of the HAMP Tier 1 permanent 

modifications started, approximately 384,000 remained active, and 

109,000 had been canceled.14

Treasury has entered into agreements to have Fannie Mae and Freddie 

Mac act as its financial agents for MHA. Fannie Mae serves as the MHA 

program administrator and is responsible for developing and 

administering program operations, including registering servicers and 

executing participation agreements with and collecting data from them, as 

well as providing ongoing servicer training and support. Within Freddie 

Mac, the MHA-Compliance team is the MHA compliance agent and is 

responsible for assessing servicers’ compliance with nonenterprise 

program guidelines, including conducting onsite and remote servicer loan 

file reviews and audits.

 

14The enterprises had started about 969,000 trial modifications as of April 2012, of which 

516,000 were converted to permanent modifications, 421,000 had been canceled, and 

32,000 remained in active trial periods. Of the enterprises’ permanent HAMP 

modifications, approximately 417,000 remained active, and 99,000 had been canceled.
 

Page 8 GAO-12-783 TARP Housing Programs 

In October 2010, PRA took effect as a component of HAMP to give 

servicers more flexibility in offering relief to borrowers whose homes were 

worth significantly less than their mortgage balance. Under PRA, 

Treasury provides mortgage holders/investors with incentive payments in 

the form of a percentage of each dollar of principal reduction. Treasury 

tripled the PRA incentive amounts offered to mortgage holders/investors

for permanent modifications that had trial period effective dates on or 

after March 1, 2012.

15

Servicers participating in the nonenterprise portion of HAMP are required 

to evaluate for PRA borrowers who are being considered for HAMP and 

owe more than 115 percent of their home’s value. This evaluation 

involves running an NPV test using the standard HAMP Tier 1 waterfall of 

modification actions, as well as an alternative modification waterfall that 

includes reducing the borrower’s unpaid principal balance before reducing 

the interest rate.

16 For HAMP Tier 2, the NPV model automatically 

evaluates such borrowers for PRA by replacing principal forbearance with 

principal reduction.17

 

15Treasury also announced that it was offering PRA investor incentives to the enterprises, 

which had not been participating in PRA. According to FHFA officials, FHFA had not yet 

made a final decision at the time of our review about allowing the enterprises to participate 

in PRA. 

Servicers must follow their internal PRA policy but 

are not required to offer principal reductions in modifications even when 

the NPV result with a principal reduction is both positive and exceeds the 

NPV result for a modification without principal reduction. When servicers 

include principal reductions in modifications under PRA, the principal 

reduction amount is initially treated as non-interest-bearing principal 

forbearance. If the borrower is in good standing on the first, second, and 

third anniversaries of the effective date of the modification’s trial period, 

one-third of the principal reduction amount is forgiven on each 

anniversary. As of April 2012, about 55,000 of the active permanent 

HAMP modifications had received reductions in their principal balances 

under PRA, along with about 17,000 active trial modifications, and 

16At their own discretion, servicers may also offer modifications under PRA to borrowers 

with LTV ratios that are less than 115 percent. However, PRA incentives are provided only 

for the portion of the principal reduction that brings the LTV no lower than 105 percent. No 

PRA incentives are provided for the portion of the principal reduction that reduces the LTV 

below 105 percent.

17As described earlier, HAMP Tier 2 modifications involve servicers taking a uniform set of 

modification actions for all borrowers rather than following a waterfall of actions to achieve 

a target DTI, as they do with HAMP Tier 1.

Principal Reduction 

Alternative
 

Page 9 GAO-12-783 TARP Housing Programs 

Treasury had paid about $42 million in PRA incentives to participating 

mortgage holders/investors.

According to Treasury, 2MP is designed to work in tandem with HAMP 

modifications to provide a comprehensive solution to help borrowers 

afford their total mortgage payments. A participating servicer of a second 

lien on a property with a first lien that receives a HAMP modification must 

offer to modify the borrower’s second lien, accept a lump sum payment 

from Treasury to fully extinguish it, or accept a lump sum payment from 

Treasury to partially extinguish it and modify the remaining portion. Under 

2MP, servicers are required to take modification actions in the following 

order: capitalize accrued interest and other past due amounts; reduce the 

interest rate to as low as 1 percent for 5 years (when the interest rate will 

reset at the rate of the HAMP-modified first lien); extend the term to at 

least match the HAMP-modified first lien; and forbear or forgive principal 

in at least the same proportion as the forbearance or forgiveness on the 

HAMP-modified first lien, although servicers may choose to forbear or 

forgive more than that amount. According to Treasury, nearly 60,000 2MP 

modifications were active as of April 2012, in addition to more than 

17,000 second liens that were fully extinguished. As it does with PRA, 

Treasury provides incentive payments to the second-lien mortgage 

holders in the form of a percentage of each dollar of principal reduction on 

the second lien. Treasury doubled the incentive payments offered to 

second-lien mortgage holders for 2MP permanent modifications that 

included principal reduction and had an effective date on or after June 1, 

2012. 

Treasury established the Hardest Hit Fund program in February 2010, 1 

year after announcing MHA. The goal of the program was to fund 

innovative measures developed by state HFAs and approved by Treasury 

to help borrowers in states hit hardest by the aftermath of the housing 

bubble. The Hardest Hit Fund program was originally announced as a 

$1.5 billion effort to reach borrowers in five states. Treasury subsequently 

provided three additional rounds of funding to bring the total allocation to 

$7.6 billion across 18 states and the District of Columbia. The 18 states 

are Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, 

Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, 

Ohio, Oregon, Rhode Island, South Carolina, and Tennessee. In a recent 

report examining the implementation of the Hardest Hit Fund program, 

SIGTARP found that Treasury consistently applied its criteria in selecting 

Second Lien Modification 

Program

Hardest Hit Fund
 

Page 10 GAO-12-783 TARP Housing Programs 

states to participate but that the selections in the second round of funding 

were not transparent.18

Treasury designed the recently announced changes to its MHA programs 

to address barriers to participation it identified in the existing programs, 

but the changes may have a limited impact on increasing MHA 

participation rates. Because most of the changes became effective on 

June 1, 2012, we could not determine the extent to which they would in 

fact increase MHA participation rates. The servicers that we queried had 

mixed views on the likely effectiveness of these changes on increasing 

MHA participation. Also, Treasury reported that several servicers were 

not able to fully implement the HAMP Tier 2 changes by the effective 

date, including two large servicers that Treasury indicated would need 

several additional months to fully implement them. Additionally, we found 

that Treasury had not fully assessed or estimated the number of 

borrowers who would receive assistance as a result of these changes or 

the costs that would be incurred. Lastly, Treasury has not completed 

program-specific risk assessments to mitigate potential risks or developed 

performance measures to hold itself and servicers accountable for the

MHA changes.

Treasury officials told us that the recent changes to MHA—expanding 

HAMP eligibility, extending the program deadline for all MHA programs, 

and increasing incentives for PRA and 2MP—were designed to address 

several issues identified in Treasury’s analyses of the existing MHA 

programs. However, the likely effect of these changes on participation is 

not yet known and could be limited, according to servicers that we

contacted.19

 

18Office of the Special Inspector General for the Troubled Asset Relief Program

(SIGTARP), Factors Affecting Implementation of the Hardest Hit Fund Program, SIGTARP 

12-002 (Washington, D.C.: Apr. 12, 2012).

The numbers of newly started trial and permanent 

modifications have generally been in decline since early 2010 and in April 

19Treasury typically releases MHA performance reports approximately 5 weeks after the 

end of the covered month. The first MHA performance report that will include data for the 

month following the HAMP Tier 2 and 2MP changes likely will not be released until early 

August 2012. The changes to PRA were effective on March 1, 2012, but there was little 

difference in the average percentage of trial modifications with PRA started in the months 

after the change (March and April 2012) compared with the months just before the change 

(October 2011 through February 2012). 

Treasury Has Not 

Fully Assessed the 

Risks of or Developed 

Performance 

Measures for the 

Recent Changes to 

MHA Programs

Recent Changes Designed 

to Boost Participation 

Rates Could Have a 

Limited Effect
 

Page 11 GAO-12-783 TARP Housing Programs 

2012 reached their lowest levels since the HAMP first-lien program began 

(see fig. 1). One factor contributing to the initial decline was that as of 

June 1, 2010, Treasury required servicers to verify borrowers’ income 

before offering them a trial modification. In addition, according to Treasury 

officials, the pool of borrowers potentially eligible for HAMP has been 

shrinking, falling from an estimated 1.4 million in December 2010 to less 

than 900,000 12 months later.

Figure 1: Monthly HAMP Trial and Permanent Modifications Started, January 2010 through April 2012

Note: According to the Financial Stability Oversight Board’s Quarterly Report to Congress for the 

quarter ending December 31, 2011, a technological enhancement to the HAMP reporting system 

resulted in a one-time boost in permanent modifications, which rose to more than 40,000 in 

September 2011 before falling again. These modifications had previously been reported as aged trial 

modifications under the Principal Reduction Alternative program. 

Treasury officials said that the changes in eligibility were made on the 

basis of an analysis of delinquent loans held by borrowers who had not 

been assisted by HAMP and might not receive assistance through nonMHA programs. Specifically, Treasury found that the 31-percent DTI 

threshold for HAMP Tier 1 was excluding a significant number of 

borrowers who could have experienced financial hardships. Other 

borrowers were being excluded because the modification steps required 
 

Page 12 GAO-12-783 TARP Housing Programs 

to bring their DTI down to 31 percent resulted in excessive forbearance or 

made the NPV result negative.20

Treasury officials said that their analysis suggested that increasing 

incentives for PRA and 2MP could also increase investor participation in 

these programs. The officials told us that they thought the rate of 

participation in PRA should be higher and that they wanted to encourage 

principal reduction for deeply underwater borrowers with a hardship 

because reducing principal would make for a more sustainable 

modification. Our analysis of Treasury’s HAMP data indicates that after

PRA went into effect in October 2010, about 32 percent of nonenterprise 

trial modifications included principal reduction under the program as of 

April 2012. On a cumulative basis, the proportion of HAMP permanent 

modifications that include principal reduction under PRA has increased 

from less than 1 percent in May 2011 to nearly 6 percent in April 2012 

(see fig. 2). Officials told us that PRA participation had also resulted in 

additional 2MP participation because servicers must make a 

corresponding principal reduction on any second-lien mortgage when the 

corresponding first-lien mortgage is reduced.

These factors contributed to Treasury’s 

adopting the flexible postmodification DTI under HAMP Tier 2. In addition, 

Treasury found that tenants were being displaced because the property 

owners could not obtain loan modifications for properties that were not 

the owners’ primary residence. The large number of non-owner-occupied 

properties with delinquent mortgages was another factor in Treasury’s 

decision to allow modifications on certain rental properties. Treasury 

officials told us that other borrowers could not be assisted under HAMP

for a variety of reasons—for example, because their servicers did not 

participate in the HAMP program or their loans fell within the jurisdiction 

of FHA or Department of Veterans Affairs (VA) loan assistance programs. 

Treasury decided to keep the maximum loan limit and the origination date 

cutoff because these exclusions did not affect the target population of 

borrowers Treasury was trying to reach.

 

20Servicers are not required to forbear more than the greater of (a) 30 percent of the 

unpaid principal balance at the time of modification (after capitalization) or (b) an amount 

that would result in an interest-bearing principal balance that would create a mark-tomarket LTV of 100 percent. 
 

Page 13 GAO-12-783 TARP Housing Programs 

Figure 2: Percent of Permanent HAMP First-Lien Modifications That Use PRA, Cumulative Starts from May 2011 through April 

2012

Treasury officials also told us that they had found that increasing investor 

incentive levels would change a number of NPV evaluation results from 

negative to positive.21

 

21Servicers may offer borrowers a HAMP modification even when the NPV results are 

negative. According to our analysis of Treasury HAMP data, about 4 percent of borrowers 

who received permanent HAMP modifications on nonenterprise mortgages had negative 

NPV results. In addition, since 2009 only about 4 percent of HAMP applicants have been 

denied trial modifications because of negative NPV results. The most common reasons for 

denial were a DTI of less than 31 percent or an incomplete request. Together, these two 

reasons accounted for almost half of all denied trial modifications.

Further, by increasing incentives officials hope to 

encourage greater participation among investors that already participate 

in PRA and those that do not but might be encouraged to participate. 

Treasury officials said that their discussions with servicers and investor 

groups indicated that the previous incentive levels were not high enough 

to entice all investors to participate in PRA. The expansion of HAMP 

eligibility to include HAMP Tier 2 also means that additional second-lien 

mortgages would be eligible for modification under 2MP. By increasing 

2MP incentives, officials stated that Treasury intended to encourage 

continued participation going forward for these loans and to give servicers 
 

Page 14 GAO-12-783 TARP Housing Programs 

an incentive to increase write-downs, including full extinguishments on 

second-lien mortgages.

Continued fragility in the housing market prompted Treasury to extend the 

MHA program application deadline another year. While there has been 

some improvement in the housing market, house prices remain near 

postbubble lows. In addition, default levels, which are associated with 

high unemployment and underemployment, have declined from their peak 

levels but remain high by historical standards. Further, Treasury projected 

that total spending for existing HAMP Tier 1 modifications and other MHA 

interventions would be approximately $9 billion of the $29.9 billion 

allocated by the time the program ended in December 2017. Treasury 

officials noted that this amount would increase as additional modifications 

were completed.

Treasury has not identified the number of modifications that may be made 

under HAMP Tier 2 or the potential costs of the changes to MHA. 

According to Treasury officials, a number of external factors that could 

have an impact on these calculations remain uncertain, including the 

implementation of the national mortgage settlement involving the federal 

government, state attorneys general, and the five largest servicers; the 

participation of Fannie Mae and Freddie Mac in some of the recent MHA 

program changes; and the ability of the participating servicers to 

implement HAMP Tier 2 changes. Before the final program guidance was 

issued, Treasury’s preliminary estimate was that the changes could result 

in an additional 1 million borrowers potentially becoming eligible for MHA 

programs. Treasury has not provided a revised estimate that reflects the 

final changes, although Treasury officials stated that it would be lower 

due to the impact of narrowing the DTI range from what had initially been 

considered and other factors.

When we asked five servicers how they thought the changes might affect 

their loan modification volumes, their responses varied. One servicer 

anticipated a 15- to 18-percent increase in HAMP modifications because 

of the expanded DTI range, and another servicer stated that 50 percent of 

the borrowers it had been unable to help under HAMP Tier 1 had not met 

the 31-percent DTI restriction, so the changes could potentially increase 

its HAMP modifications. However, some servicers also indicated that 

HAMP Tier 2 might not reach many additional borrowers because the 

HAMP modifications would likely offset proprietary modifications that 

would have otherwise been made to those borrowers’ loans. Of the two 

servicers that expected the number of their modifications on rental 

properties to increase, one servicer stated that it had a large population of 
 

Page 15 GAO-12-783 TARP Housing Programs 

delinquent loans on rental properties but did know how many would meet 

the other eligibility requirements for a HAMP modification. The other 

servicer expected the changes would increase its HAMP modification 

volume but had not projected the magnitude. Another servicer said that it 

did not have enough information to project the number of loans it might 

make under HAMP Tier 2. One servicer stated that increased PRA 

incentives should increase HAMP participation, and several also 

mentioned that the national mortgage settlement would have an impact, 

because part of the settlement required servicers to provide principal 

reduction. However, two of the servicers we contacted did not anticipate 

any increase in their HAMP participation levels from the increased 

incentives. One servicer indicated that its portfolio loans would not be 

affected by these new investor incentives but that more of the loans it 

serviced for other mortgage holders/investors might be modified. 

Specifically, about 15 percent of its mortgage holders/investors had opted 

out of PRA but had told this servicer that they might be willing to 

reconsider in response to the increased incentives, especially for loans 

that would qualify for the highest incentive on the principal reduction

(LTVs greater than or equal to 105 percent but less than 115 percent).22

Given the currently low participation rates and the reasons for them, as 

well as the mixed expectations of the servicers we interviewed, it is not 

yet possible to determine whether the changes will significantly increase 

the number of troubled borrowers assisted under MHA. Nevertheless, 

Treasury’s steps may further support the still-fragile housing market and 

help reduce the number of potential foreclosures.

Treasury has taken several steps to help servicers meet the program 

requirements for the recent changes to MHA programs, but challenges 

could affect some servicers’ capacity to effectively implement the new 

program changes beyond the June 1, 2012, effective date. Treasury 

officials stated that they had modeled the HAMP Tier 2 program after the 

enterprises’ existing standard modification, believing that servicers would 

 

22Under the recent changes, the highest incentive rate was increased from $0.21 to $0.63 

per dollar of principal reduction for LTVs greater than or equal to105 percent but less than 

115 percent. Principal reduction for the portion of the loan balance above 115 percent LTV 

is compensated at lower rates ($0.45 per dollar for LTVs greater than or equal to 115 

percent but less than or equal to 140 percent and $0.30 per dollar for LTVs greater than 

140 percent).

Some Servicers Were Not 

Ready to Implement the 

Changes
 

Page 16 GAO-12-783 TARP Housing Programs 

be better able to implement a new modification that was similar to a type 

of modification they already offered. Several servicers told us that 

Treasury had provided an early draft of the proposed HAMP Tier 2 

changes for their review, and Treasury officials told us that they had 

consulted with servicers to establish effective dates for some changes. In 

addition, the officials told us that as part of the process of implementing 

HAMP Tier 2, Treasury’s program administrator, Fannie Mae, had relied 

on existing servicer integration teams obtain implementation plans from 

the largest servicers, facilitate responses to servicers’ policy questions, 

and conduct onsite meeting with the largest servicers to address 

operational and reporting question. Treasury officials also stated that they 

responded to servicers’ questions on a weekly basis and had met with 

several of the largest servicers to discuss their implementation plans.

In spite of Treasury’s efforts to help ensure that servicers had the 

capacity to implement the recent changes and to facilitate implementation 

of the changes, some servicers did not have the necessary resources or 

infrastructure to effectively implement all the new program requirements 

at the announced start date of the program. While the similarities between 

the HAMP Tier 2 changes and the enterprises’ standard modification 

should ease implementation in areas such as staff training, some large 

servicers told us that there were some significant differences between 

HAMP Tier 2 and the enterprises’ standard modification programs, such 

as certain eligibility requirements and the use of an NPV model. Several 

servicers we spoke with thought that they might not be able to meet the 

effective date for the changes, and subsequently Treasury reported that 

ten servicers were unable to fully implement the changes by the effective 

date, including two large servicers that were not expected to fully 

implement them for several more months (mid-October 2012 for one large 

servicer). However, 17 of the 18 largest servicers were able to implement 

some aspects of HAMP Tier 2 as of the effective date, and 14 of the 18 

had fully implemented HAMP Tier 2 by June 30, according to Treasury. 

To help ensure that the delays would not impact borrowers, Treasury 

imposed additional requirements on all servicers that did not fully 

implement HAMP Tier 2 by the June 1 effective date. These servicers 

must develop a process to identify borrowers who are potentially eligible 

for HAMP Tier 2; halt foreclosure referrals and foreclosure sales for those 

borrowers; and ensure that each borrower has a single point of contact. 

Additionally, servicers that are unable to fully implement HAMP Tier 2 by 

mid-July will be required to evaluate and offer eligible borrowers 

proprietary modifications similar to HAMP Tier 2 and either automatically 

convert those borrowers to or reevaluate them for HAMP Tier 2 

modifications when the changes are fully implemented. Treasury will 
 

Page 17 GAO-12-783 TARP Housing Programs 

conduct compliance reviews to help ensure that all servicers appropriately 

implement HAMP Tier 2 and adhere to the applicable interim 

requirements.

Previously, Treasury officials had acknowledged that servicers might face 

some challenges, as they did when they implemented the enterprises’ 

standard modification. For example, according to the officials the larger 

servicers do not process proprietary loan modifications and modifications 

for the enterprises in the same geographic location. Servicers may also 

use different servicing platforms at each location, so that processing and 

personnel can be completely separate. Other federal housing officials 

also noted that the enterprises’ standard modification was more 

streamlined than the HAMP Tier 2 modification, in that it did not require 

an NPV test and allowed a broader DTI range. Treasury officials also 

acknowledged several other major operational issues that could affect 

implementation of the HAMP Tier 2 changes. For example, the five 

largest servicers need to implement operational changes in response to 

the recent mortgage settlement with the federal government and state 

attorneys general. Fourteen servicers must comply with consent orders 

issued by federal banking regulators in April 2011, and others have been 

involved in mergers or acquisitions.

Treasury officials told us that they had identified certain risks associated 

with the recent changes based on internal analyses and discussions with 

stakeholders, but Treasury has not conducted a comprehensive risk 

assessment. Treasury officials said that they had incorporated ways to 

mitigate risks as part of their deliberations when designing the program 

changes and provided us with a summary document showing examples 

of actions they had taken to mitigate certain risks and challenges. For 

example, Treasury officials stated that they had lowered the allowable 

DTI ceiling for HAMP Tier 2 modifications to 42 percent (below the 

allowable DTI ceiling of 55 percent for the enterprises’ standard 

modification) to mitigate redefault risks after discussing the proposed 

changes with servicers, investors, and federal banking regulators. In 

addition, Treasury raised the allowable DTI floor to 25 percent (above the 

allowable DTI floor of 10 percent for the enterprises’ standard 

modification) to help ensure that borrowers who received HAMP Tier 2 

modifications were really in need of assistance. Further, Treasury noted 

that it had taken several steps to mitigate the risk that servicers would not 

be able to implement HAMP Tier 2 in a timely or effective manner due to 

lack of capacity—efforts that we discussed earlier in the report. 

Treasury Has Not 

Conducted a 

Comprehensive Risk 

Assessment of HAMP Tier 

2 Changes
 

Page 18 GAO-12-783 TARP Housing Programs 

However, based on our review of available documentation and 

discussions with Treasury officials, Treasury did not appear to have 

performed key components of a risk assessment that are outlined in 

standards for internal control in the federal government prior to 

implementing HAMP Tier 2.

23 Although Treasury took the first step of 

identifying risks, it did not analyze the significance and likelihood of 

occurrence of the identified risks. As we previously reported, agencies 

must identify the risks that could impede the success of new programs 

and determine appropriate methods of mitigating these risks.24 In 

particular, we highlighted the need for Treasury to develop appropriate 

controls to mitigate risks before the programs’ implementation dates.25

Our internal control guidance further states that risks should be 

extensively analyzed whenever agencies begin the production or 

provision of new outputs or services and that agencies should give 

special attention to risks that can have more dramatic and pervasive 

effects.26

• Allowing borrowers to receive loan modifications that result in front-end 

DTIs of up to 42 percent under HAMP Tier 2, rather than the 31-percent 

target required under HAMP Tier 1, could increase redefault risk. 

Borrowers with high front-end DTIs may also have higher back-end 

DTIs (which include mortgage debt from subordinate liens in addition to 

the first-lien mortgage debt used to calculate the front-end DTI) that 

could affect their ability to make the modified mortgage payments. 

Although the back-end DTIs are not restricted under either the HAMP 

Officials told us that they had nearly completed a systematic risk 

assessment of the existing MHA programs and that they planned to 

conduct a formal risk assessment of HAMP Tier 2 once it was up and 

running and the servicers had been given the time to put their internal 

controls in place. In the meantime, several potential risks identified in the 

course of our review remain.

 

23GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).

24GAO-09-837, GAO-10-634, and GAO-11-288. 

25GAO-11-288. 

26GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G (Washington, 

D.C.: August 2001).
 

Page 19 GAO-12-783 TARP Housing Programs 

Tier 1 or HAMP Tier 2 program, they may be higher under HAMP Tier 

2, potentially posing a greater risk.27

• Permitting borrowers to obtain modifications for rental properties 

without sufficient controls and enforcement mechanisms could 

increase both default risk and the risk that the program will be 

misused for ineligible properties—for example, investment properties 

that are never rented. In order to receive a modification under HAMP 

Tier 2 for a rental property, borrowers must self-certify under penalty 

of perjury that they intend to rent the property if it is or becomes 

vacant and that they do not own more than five single-family 

properties (in addition to their principal residence). However, these 

borrowers may encounter significant delays renting one or more 

properties for a variety of reasons, such as adverse housing market 

conditions and poor property condition, or the properties may 

eventually rent for less than expected. In either case, the borrower’s 

ability to remain current in either the trial modification or, more 

importantly, the permanent modification, could be compromised, 

risking redefault. Further, self-certifications do little to help ensure that 

borrowers are in compliance with program requirements unless 

extensive controls are in place to ensure that borrowers are telling the 

truth. SIGTARP’s April 2012 Quarterly Report to Congress made 

several recommendations related to the need for Treasury to protect 

against the possible misuse of HAMP Tier 2 funds to modify loans on 

vacation homes or investment properties that were never rented.28

• Further, some servicers expressed concern that extending the 

deadline to December 31, 2013, and opening up HAMP Tier 2 to 

mortgages on rental properties might jeopardize the safe harbor 

protection provided under the Helping Families Save Their Homes Act 

of 2009.29

 

27Treasury officials said that some of the risks associated with high back-end DTIs may be 

addressed through 2MP since borrowers who are newly eligible for HAMP Tier 2 will also 

be potentially eligible for 2MP. However, not all servicers participate in 2MP, and therefore 

not all borrowers with high back-end DTIs will receive modifications of their second liens 

under that program. 

The act provides a safe harbor for servicers that modify 

28SIGTARP, Quarterly Report to Congress (Washington, D.C.: Apr. 25, 2012).

29Pub. L. 111-22, Div. A., § 203, 123 Stat. 1632, 1638 (2009), amending section 129A of 

the Truth in Lending Act, 15 U.S.C. § 1639a. The safe harbor limits the liability of the 

servicer to investors and others if the servicer implements a qualified loss mitigation plan 

that meets the statutory criteria.
 

Page 20 GAO-12-783 TARP Housing Programs 

mortgages and engage in other loss mitigation activities consistent 

with guidelines issued by Treasury and that satisfy specific 

requirements, including implementing a loss mitigation plan prior to 

December 31, 2012. Although Treasury officials stated that the 

significance of this issue was unclear, two servicers we spoke to 

noted that it could affect the reach of the program. Treasury officials 

noted that servicers would face potential liability only if mortgage 

holders or investors were to take legal action against them.

As we reported previously, Treasury must establish specific and relevant 

performance measures that will enable it to evaluate a program’s success 

against stated goals in order to hold itself and servicers accountable for 

these TARP-funded programs.30 We recommended that Treasury finalize 

and implement benchmarks for performance measures under the first-lien 

modification program, as well as develop measures and benchmarks for 

other TARP-funded homeowner assistance programs. As discussed in 

appendix II, Treasury has estimated the expected funding levels for the 

MHA component programs (except for HAMP Tier 2) and established 

performance measures to assess servicer compliance and 

implementation of MHA programs. But it has not fully developed specific 

and quantifiable outcome measures or benchmarks to determine the 

success of these programs, including goals for the number of 

homeowners these programs are expected to help.31

Similarly, Treasury has not identified outcome measures that will be used 

to evaluate the overall success of HAMP Tier 2 in achieving the goals of 

preventing foreclosures and preserving homeownership. The measures of 

servicer performance used in the quarterly servicer assessments are 

valuable indicators for monitoring how MHA programs are being 

implemented, but they do not provide a way to assess the extent to which 

each program is achieving the objectives spelled out in EESA. Treasury 

officials said that they would assess redefault rates for different MHA 

programs. Treasury officials believe that HAMP redefault rates compare 

favorably with the rates of other types of modifications, but Treasury has 

 

30GAO-11-288. 

31SIGTARP also recommended that Treasury set meaningful and measurable goals, 

including at a minimum the number of borrowers Treasury estimates will be helped by 

HAMP Tier 2, in its recent quarterly report to Congress (SIGTARP, Quarterly Report, April 

2012).

Treasury Has Not 

Developed Meaningful 

Performance Measures to 

Assess Program Changes
 

Page 21 GAO-12-783 TARP Housing Programs 

not yet established redefault rate benchmarks or goals. Also, Treasury 

has noted that it may not be possible to gauge the unique contribution of 

any one program among the array of activities aimed at supporting 

housing markets and homeowners. Treasury officials told us that they 

wanted to avoid creating unrealistic expectations when setting goals for

participation, given that external factors that affect participation are 

difficult to predict. Instead, Treasury officials said that they were focusing 

their efforts on working closely with servicers to encourage them to reach 

out to homeowners and on encouraging homeowners to get help.

Treasury has established performance measures to assess servicers’ 

compliance with MHA program requirements and their performance that 

are published in quarterly servicer assessments. The compliance 

measures include quantitative measures with explicit benchmarks, such 

as the percentage of servicers’ eligibility determinations and borrower 

income calculations that are accurate. However, the servicer performance 

measures, which include the servicer’s rate of converting trials to 

permanent modifications, the number of trials lasting 6 months or longer, 

response time to resolve inquiries that have been escalated to the HAMP 

Solution Center, and the percentage of missing modification status 

reports, do not have such benchmarks or goals. Instead, these measures 

look at relative performance by comparing a servicer’s current 

performance to either its past performance or to the best and worst 

performance among the 9 largest MHA servicers.

After a slow start, states have increased their spending on borrower 

assistance under the Hardest Hit Fund in recent months, but it is not clear 

that all the states will meet their spending and borrower assistance goals. 

Nonetheless, most of the state officials we spoke to said that they 

anticipated being able to spend their full allocation. State officials told us 

that, with some help from Treasury, they had confronted challenges 

related to staffing and infrastructure, servicer participation, borrower 

outreach, and program implementation. In particular, they noted that 

Treasury’s efforts to facilitate communication among the states and with 

servicers through regular conference calls and two national summits had 

been key to addressing a variety of challenges through the sharing of 

best practices and solving problems together. These officials told us that 

Treasury continued to work with them to address some of the remaining 

barriers. In addition to assisting states in implementing their programs, 

Treasury oversees the states’ activities, including reviewing and 

approving all proposed changes to program eligibility requirements and 

funding allocations. In addition, Treasury’s Hardest Hit Fund program staff 

Treasury Helped 

States Increase 

Hardest Hit Fund 

Spending but Could 

Improve Monitoring 

and Transparency
 

Page 22 GAO-12-783 TARP Housing Programs 

and compliance teams conduct oversight and monitoring of states’ 

Hardest Hit Fund activity monthly, quarterly, and annually. However, 

Treasury has not required states to report data on administrative 

expenses in a consistent format and does not report any data on these 

expenses publicly. Treasury also has not consolidated states’ 

performance and financial data, including administrative expenses, into a 

single public report.

Treasury made the full Hardest Hit Fund allocations available to HFAs in 

18 states and the District of Columbia in September 2010. However, of 

the $7.6 billion allocated, states had provided combined assistance of 

$359 million (5 percent) as of March 2012. More than two-thirds of the 

amount spent ($246 million) was disbursed during the fourth quarter of 

2011 and first quarter of 2012, representing a substantial increase relative 

to previous quarters. The states also reported that they had provided 

assistance to 43,580 borrowers as of March 31, 2012, more than half of 

whom were approved during the most recent two quarters. The states 

varied widely in the proportion of the funds they had disbursed, from less 

than 1 percent of their total allocation to more than 20 percent (see fig. 3). 

The two states with the largest Hardest Hit Fund allocations—California 

and Florida—had spent about 3 percent of their allocated funds (less than 

$80 million out of more than $3 billion) as of March 31, 2012. Despite the 

recent increases in disbursements, Treasury estimated that most states 

would need to further increase the rate of spending in order to fully spend 

their allocation and reach their borrower assistance goals by the time the 

program terminated on December 31, 2017. Using the first quarter 2012 

disbursement rates, Treasury’s analysis showed that 14 of the 19 HFAs 

would not meet their disbursement targets by the time the program 

ended. In addition, although the states had estimated that they would 

assist more than 450,000 borrowers by the end of the program, 

Treasury’s projections indicated that, using the monthly rate of borrowers 

approved during the first quarter of 2012, the states would assist fewer 

than 350,000. Nonetheless, officials in four of the states we spoke to said 

that they anticipated being able to spend their full allocation as they 

continued to ramp up their programs. Officials in the fifth state said they 

were actively exploring ways to increase participation in order to be able 

to spend their full allocation.

Disbursements Began 

Slowly and Have Focused 

on Payment Assistance 

and Reinstating Loans
 

Page 23 GAO-12-783 TARP Housing Programs 

Figure 3: Hardest Hit Fund Allocations and Borrower Assistance Provided, as a Percentage of the Total Allocation, by State, 

as of March 2012
 

Page 24 GAO-12-783 TARP Housing Programs 

As shown in figure 4, most of the funds allocated and spent as of March 

31, 2012, have gone to helping unemployed homeowners make mortgage 

payments (66 percent of allocations and 76 percent of expenditures) or to 

reinstating delinquent mortgages (12 percent of allocations and 20 

percent of expenditures). All 18 states and the District of Columbia have 

implemented programs to provide partial or full mortgage payments to 

borrowers who are unemployed. Some states, such as North Carolina 

and Indiana, have incorporated reinstatement components into their 

payment assistance programs. In addition, seven states have 

implemented separate reinstatement programs. However, the eligibility 

requirements for and terms of these programs vary across states. In 

some states, the borrower’s household income must be below a certain 

ceiling (for example, 120 percent of the area median income in 

California). Another state (New Jersey) has no maximum household 

income level, but the borrower’s monthly mortgage payment must be at 

least 31 percent of household income. Some states have expanded the 

eligibility requirements to reach more borrowers—for example, by adding 

a definition of underemployment and allowing underemployed borrowers 

to qualify for the program. Further, across states the length of time that 

borrowers can receive assistance can be as short as 9 months and as 

long as 36 months, while the maximum payment assistance an 

unemployed or underemployed borrower can receive ranges from $9,000 

to $48,000. Several states we spoke with were considering or had already 

made changes to their program requirements in order to allow borrowers 

to receive more assistance than initially planned in an effort to disburse 

Hardest Hit Fund money more quickly. According to servicers we spoke 

with, these types of programs complement other foreclosure mitigation 

programs available to borrowers through federal and proprietary 

programs.
 

Page 25 GAO-12-783 TARP Housing Programs 

Figure 4: Hardest Hit Fund Allocations and Disbursements by Program, as of March 

31, 2012

Note: Some states’ unemployment programs include reinstatement components. The “Reinstatement” 

category in the figure represents the allocations and spending of states with separate reinstatement 

programs. 

States have also implemented other types of programs using Hardest Hit 

Fund funds, including principal reduction, second-lien reduction, and 

transition assistance. Through the first quarter of 2012, these programs 

represented 22 percent of funds allocated to borrower assistance but less 

than 5 percent of the states’ spending on such assistance. According to 

states and servicers we spoke with, these programs have been more 

difficult to implement widely because they generally require a greater 

level of involvement and decision making from servicers than other 

Hardest Hit Fund programs, such as payment assistance and loan 

reinstatement. In addition, the enterprises do not participate in Hardest Hit 

Fund principal reduction programs that require matching funds from 

investors or servicers. Because most of the states with principal reduction 

programs require matching funds, the pool of borrowers who are 

potentially eligible for these programs is limited.32

 

32In May 2012, California dropped the requirement for a funding match from the servicer 

or investor for its principal reduction program under the Hardest Hit Fund in an effort to 

enable the enterprises to participate. 
 

Page 26 GAO-12-783 TARP Housing Programs 

As of March 31, 2012, the states had spent $132 million on administrative 

costs for implementing the programs, representing more than a quarter of 

their total spending (see fig. 5). Treasury approves allocations for 

administrative expenses as part of the program agreements it makes with 

the states. As of March 2012, states had allocated about $864 million, or 

11 percent of their funds, to administrative expenses. Two states (Nevada 

and New Jersey) spent more on administrative expenses than they did on 

borrower assistance (that is, administrative expenses were more than 50 

percent of their total disbursements). Hardest Hit Fund officials in one 

state pointed out that their program faced large initial costs because they 

did not have the necessary infrastructure in place to implement it and 

therefore had to spend time and resources at the outset developing 

policies and procedures, leasing office space, and purchasing equipment. 

Officials from another state said that their high initial administrative costs 

were driven in part by up-front investments in technology they needed to 

make in order to implement the program.

Figure 5: Administrative Expenses as a Percent of Total Hardest Hit Fund Disbursements, by State, Cumulative through 

March 2012

Treasury officials said that states had budgeted for initially high 

administrative expenses to cover start-up costs. State officials and 

Treasury staff told us that they expected administrative costs to fall after 

the programs were established. However, it is not yet clear whether 
 

Page 27 GAO-12-783 TARP Housing Programs 

states have spent all their budgeted start-up funds and transitioned to 

using ongoing administrative expenditures to cover program activities. For 

example, four states increased their cumulative administrative spending 

by more than 50 percent in the first quarter of 2012. In addition, several 

states have requested increases in their administrative budgets—for 

example, to hire additional staff to implement their programs. Although 

most states have spent less than 20 percent of their allocated 

administrative expenses and are not at risk of running out of 

administrative funds, efficient use of these resources will be important in 

order for the states to achieve their goal of assisting borrowers. In 

addition, Treasury’s rigorous oversight of spending decisions throughout 

the life of the program will be critical to helping ensure that funds are 

spent as intended.

The states were slow to start disbursing funds for borrower assistance, in 

part because of challenges they faced in getting their programs up and 

running. In many cases, the state HFAs did not have direct experience 

administering the types of programs they were putting in place and had to 

learn as they went. Over time, they have been able to overcome some of 

the challenges they face, although others remain.

In some cases, administering Hardest Hit Fund programs involved 

unexpected activities. For example, officials in Ohio said that they did not 

initially realize that they would need a call center or a closing unit to work 

with servicers to finalize agreements to provide borrower assistance. 

State officials had to identify the positions and skill sets that would be 

needed to administer their programs and decide whether to use existing 

HFA staff, hire new staff, or contract out certain functions. Florida officials 

stated that they were using both new and existing HFA staff to administer 

the Hardest Hit Fund programs, although not all of them were working on 

these programs fulltime. Nevada and Ohio officials told us they had hired 

new staff to perform functions specific to Hardest Hit Fund activities, while 

California officials told us they had outsourced most of the operational 

work to a third-party service provider. This company provides staff for a 

call center and for processing, underwriting, and fulfillment on behalf of 

the HFA. All of the states we spoke with were using local housing 

counselors to help with borrower intake. States are also challenged to 

make sure they have the right number of personnel to administer the 

program. Officials in one state noted that it was a challenge to determine 

how to scale up staffing (as well as systems, processes, facility needs, 

and technology infrastructure) that had been put in place for the initial 

Hardest Hit Fund allocation to accommodate the unexpected increase 

Treasury Helped States 

Overcome Some 

Challenges, Although 

Other Challenges Remain

Staffing and Infrastructure
 

Page 28 GAO-12-783 TARP Housing Programs 

after Treasury nearly doubled all the states’ allocations in the final round 

of funding. Treasury officials told us that they monitored state staffing and 

capacity to help ensure that states were able to administer Hardest Hit 

Fund programs effectively.

State officials we spoke to also faced challenges related to getting the 

needed infrastructure—office space, equipment, and information 

technology—in place to implement the program quickly. One concern of 

the states was getting a software and technology system in place to 

facilitate the application process. Some states developed their own 

systems, while others sought to identify existing products that could be 

used. According to one state official we spoke with, Treasury facilitated 

the sharing of best practices among the states, leading this state to adopt 

a system that other states had tried and found to work for their Hardest 

Hit Fund programs, which were similar in structure. This system, 

Counselor Direct, has been adopted by 11 of the 19 states, according to 

Treasury. While there have been some problems with the system, state 

officials told us that they had found Counselor Direct to be responsive to 

their needs.

In general, the states we spoke to said that servicer participation had 

been a significant issue initially but that most servicers were now 

participating in the mortgage payment assistance and reinstatement 

programs. SIGTARP recently reported that states had some initial 

difficulty getting servicers—particularly large servicers—to agree to 

participate in their programs.33

 

33SIGTARP 12-002.

These large servicers cited the 

administrative burden of implementing more than 50 programs in 19 

different states. Further, Fannie Mae and Freddie Mac did not initially 

issue specific guidance to servicers about participating in the Hardest Hit 

Fund programs. However, Treasury later took action to facilitate 

participation by holding a national summit in September 2010 with the 

states, servicers, and the enterprises that resulted in some 

standardization of programs and communication methods. After the 

summit, the enterprises issued guidance in October 2010 directing 

servicers to participate in Hardest Hit Fund programs providing mortgage 

payment assistance or reinstating delinquent loans, and subsequently

large servicer participation greatly increased.

Servicer Participation
 

Page 29 GAO-12-783 TARP Housing Programs 

The lack of servicer participation in other types of programs, such as 

principal reduction and second-lien reduction, remains a challenge for 

states that offer those programs. Nevada officials said that they were 

having more success working with servicers on a case-by-case basis to 

reduce or eliminate second liens than they had trying to require servicers 

to sign formal agreements committing them to broad participation in their 

second-lien program. As we noted earlier, the enterprises do not permit 

servicers to participate in principal reduction programs that require 

matching funds from the investor or the servicer, as most Hardest Hit 

Fund principal reduction programs do. Without these loans, the number of 

borrowers these programs can assist is limited. In addition, Treasury 

officials and servicers we spoke with pointed out that the principal 

reduction programs required greater involvement from servicers to 

evaluate borrowers, something that servicers may not see as worthwhile 

given the relatively small scale of the Hardest Hit Fund programs. Further, 

given the requirements under the national mortgage settlement with the 

federal government and state attorneys general, the large servicers are 

more likely to focus on putting programs in place to meet those 

obligations. According to one servicer, it is easier to develop one solution 

that will satisfy the principal reduction requirements under the settlement 

than to try to incorporate the various Hardest Hit Fund principal reduction 

efforts. However, two states—Illinois and Oregon—are piloting different 

types of principal reduction programs that bypass the servicers. These 

programs involve buying the loans from the investor and then modifying 

or refinancing them to reduce the principal. State officials credited the 

regular conference calls that Treasury facilitated with spreading 

information about these programs. Several states, including Ohio and 

Florida, are waiting to see the outcomes of these pilot programs in order 

to determine whether to pursue them.

Several states mentioned ongoing implementation challenges, in 

particular in the area of exchanging information with servicers. One of the 

barriers to servicer participation at the outset of the programs was the 

lack of standardization across state programs. One of the solutions that 

came out of the September 2010 national summit was the development of 

a common data file that all states and servicers would use to exchange 

information about borrowers and the assistance being provided. After the 

summit, Treasury and several servicers and states jointly developed the 

common data file. Initially, Treasury hosted a weekly teleconference with 

the states and servicers that has since changed to a monthly schedule, 

and any servicer or state can participate. Treasury has also overseen the 

formation of a committee to discuss problems with and proposed changes 

to the common data file. However, state officials told us that some 

Program Implementation
 

Page 30 GAO-12-783 TARP Housing Programs 

problems continued to come up related to the common data file and the 

exchange of information. For example, they told us that servicers had 

differing interpretations of how certain fields should be completed. One 

state said that it had over 200 servicers participating in its Hardest Hit 

Fund program and that each one had its own idea of how to complete the 

fields. Servicers we spoke with said that states did not always provide 

complete or accurate information in a timely manner—for example, 

instructions for applying a payment to a borrower’s account were not 

always clear or complete. Treasury officials said that although these 

issues came up from time to time, the reduced frequency of the calls 

reflected the decreasing number of issues raised related to the common 

data file. Treasury officials told us that the data dictionary Treasury 

helped to create clarified much of the confusion relating to interpreting 

data fields. According to Treasury officials, several states have developed 

their own training materials for using the common data file, including 

Ohio, which has posted a tutorial on its website.

Reaching the targeted population of eligible borrowers is another 

challenge states continue to face. Although broad marketing efforts help 

to raise awareness of the programs states offer, they also result in a large 

number of ineligible borrowers seeking assistance. For example, 

California officials said they had received many inquiries from borrowers 

about the state’s principal reduction program. However, a substantial 

proportion of these borrowers were not eligible because their servicer was 

not participating or they did not have a financial hardship but were merely 

seeking a way to reduce their principal balance. In contrast, targeted 

solicitations of distressed borrowers may not result in a high response 

rate. Part of the problem in those cases, according to Nevada officials, is 

that borrowers have been repeatedly warned about scams and are 

therefore skeptical about the solicitation and unwilling to respond. In 

some cases, borrowers may have made the decision not to seek 

assistance and instead live rent-free until the foreclosure process runs its 

course, which in Nevada can take 2 or 3 years. Florida officials said that 

they relied on housing counselors to help steer borrowers to the most 

appropriate program for their circumstances, including Hardest Hit Fund 

programs. The officials said that they had developed marketing materials 

that they distributed at events and to housing counselors. These materials 

have different codes that can be used to track referrals. This technique 

helps to identify the marketing channels that are most effective at 

reaching eligible borrowers.

Treasury has incorporated the Hardest Hit Fund into its existing marketing 

and outreach activities. Treasury officials told us that they had invited the 

Outreach to Borrowers
 

Page 31 GAO-12-783 TARP Housing Programs 

state HFAs to Treasury events in Hardest Hit Fund states, allowing the 

HFAs to make presentations about their programs and network with 

servicers and counselors. At some events, the states may even take 

applications for assistance. Treasury’s website managers have also 

exchanged information with HFAs on methods to improve their sites. 

Treasury officials said that Hardest Hit Fund marketing must be done 

locally because the programs differ from state to state and that these 

differences had prevented Treasury from developing a national campaign.

Officials in the District of Columbia said that they had been successful in 

partnering with the department that administers unemployment benefits to 

obtain a list of those receiving unemployment benefits. By comparing the 

addresses of individuals who appear on that list with a list of properties 

receiving delinquency or foreclosure notices, they have been able to 

effectively target their efforts to a relatively small population of borrowers 

who are potentially eligible. According to Treasury officials, other states 

have had similar success working across departments in their state 

governments. Hardest Hit Fund officials in California told us they were 

able to partner with the state office administering unemployment benefits 

to mail out information on the Hardest Hit Fund unemployment program. 

As a result, nearly 10,000 homeowners were identified as eligible for the 

program.

Finally, state officials told us that they tracked the reasons borrowers who 

were reached did not qualify for Hardest Hit Fund programs, an effort that 

helped them identify borrowers in need of assistance who were ineligible 

for it because they did not meet certain requirements. Officials in 

California and Ohio said that the state uses these efforts to evaluate the 

Hardest Hit Fund program requirements. As a result, they have been able 

to propose changes to their programs to better reach borrowers who need 

assistance.

Treasury has established procedures to oversee the implementation and 

performance of states’ Hardest Hit Fund programs but has opportunities 

to improve both its monitoring and program transparency. Treasury 

officials approve state Hardest Hit Fund programs and review and 

approve all proposed changes to help ensure that the programs address 

the goals laid out in EESA. When states propose changes to their 

programs—for example, changing eligibility requirements, reallocating 

funds, or adding or subtracting programs—they must submit amendments 

to their agreements with Treasury for its approval. Treasury’s Hardest Hit 

Fund program staff review the changes and supporting rationale to 

Treasury Monitors 

Performance and 

Compliance but Has Not 

Standardized or Publicly 

Reported Administrative 

Expense Data
 

Page 32 GAO-12-783 TARP Housing Programs 

ensure that the changes are consistent with the principles laid out in 

EESA. Although some state officials we spoke with did not have concerns 

about Treasury’s process for reviewing proposed amendments, they also 

told us that they were not aware of specific criteria beyond consistency 

with EESA that Treasury used to determine whether to approve the 

proposals or request changes.

Treasury officials told us that they did not have prescriptive guidelines 

(other than EESA), because the intent of the program was to let states 

develop innovative solutions to the problems they faced. When the 

amendment involves an increase in the amount allocated to 

administrative expenses, state officials must state how the additional 

funds will be spent. A committee of officials representing various parts of 

OFS reviews and approves the proposed amendment, which the state 

and Treasury often discuss in detail. The magnitude of the changes, as 

well as whether another state has proposed something similar, can affect 

how long it takes Treasury to review and approve them. Generally, state 

officials told us that Treasury had been very responsive to requests for 

program changes, often getting changes approved in a matter of weeks 

or even days.

Treasury has established several layers of review and reporting to 

monitor the states’ Hardest Hit Fund activity: annual compliance reviews 

conducted by OFS compliance staff; required annual financial and 

internal controls audits performed by independent third parties; quarterly 

performance and financial reporting to Treasury, with the performance 

reports posted on the HFAs’ websites; and monthly progress reports 

submitted directly to Treasury.

• Annual compliance reviews. The compliance team from OFS spends 

one week on site at each HFA. These reviews examine the HFAs’ 

internal controls, eligibility determinations, program expenses, 

administrative expenses, and reporting. The first round of compliance 

reviews was scheduled to be completed by September 2012, with the 

second round to be completed in 2013. Treasury has developed a 

database to track items identified in the first round of compliance 

reviews, and officials told us they were working to populate the 

database with information from the compliance review reports that 

had already been completed. Officials in one state who had recently 

completed an initial compliance review said that they found the 

process to be transparent and helpful. Treasury staff provided them 

with a list of documents they needed and a schedule of interviews 

with HFA staff. One other state told us that the compliance review and 
 

Page 33 GAO-12-783 TARP Housing Programs 

findings were very helpful and that it had taken steps to implement 

Treasury’s recommendations. Treasury stated that the compliance 

reviews discovered issues that were largely one-time problems—for 

example, control failures involving undocumented fee schedules or 

unrecorded approvals. States generally correct these types of issues 

on the spot, according to Treasury officials.

• Annual financial and internal controls audits. As outlined in the 

agreements with Treasury, states must submit annual audited 

financial statements. Treasury has directed the states to post these 

publicly on their websites. In addition, the states must certify that they 

have an effective internal control program and must have a third party 

independently verify the effectiveness of their internal control 

programs on an annual basis. According to Treasury officials, 

although states certified that their internal control programs were 

effective during the first year, many of them did not get the 

independent third-party verification. Treasury officials told us that they 

had been addressing this issue by emphasizing the need for states to 

have their internal control systems verified in the first round of 

compliance reviews.

• Quarterly performance and financial reports. Under the agreements 

they signed with Treasury, the states are required to submit quarterly 

performance and financial reports to Treasury and post the 

performance reports on their websites. These performance reports 

follow a standardized format specified by Treasury and detail 

borrower characteristics and program outcomes. Treasury’s Hardest 

Hit Fund program staff review states’ performance relative to the 

goals they have established and discuss any challenges the states 

are facing in reaching their goals. According to Treasury officials and 

state officials we spoke with, the performance measures that they 

focus on include denial rates and the percentage of completed 

applications that receive assistance. State officials also look at the 

percentage of applications started that are completed. As more 

borrowers transition out of the program, states will focus more on 

outcome measures, such as the percentage of borrowers that are 

able to retain their homes 6, 12, and 24 months after receiving 

assistance. The financial reports are submitted directly to Treasury, 

but there is no standardized format for them. Treasury officials said 

that states are required to submit responses to seven standard 

questions, including requests for the total administrative expenses for 

the quarter and cumulative administrative expenses, and must 

reconcile the financial reports to the quarterly performance reports. 
 

Page 34 GAO-12-783 TARP Housing Programs 

• Monthly progress reports. The monthly reports outline the activities 

each state undertook that month and the amounts spent on borrower 

assistance and administrative expenses. According to Treasury 

officials, the monthly reports are less formalized than the quarterly 

performance reports and allow the states to provide qualitative 

information about their programs. Treasury’s Hardest Hit Fund staff 

discusses the contents of the progress reports with each state at least 

quarterly (monthly if there are any performance concerns).

Even with these efforts, Treasury’s monitoring of administrative expenses 

incurred by the states is limited by the lack of consistency in states’ 

reporting. Treasury has built controls into the system that states use to 

draw down funds that prevent states from requesting draws for 

administrative expenses that exceed the approved amount. Similarly, 

Treasury has developed analytical tools to track administrative expenses 

and the rate of spending overall. Treasury officials told us that they had 

compared the rate of spending against state administrative expense 

budgets that detailed expected spending over time. However, Treasury 

has not standardized the format in which states are to provide 

administrative expense data, limiting Treasury’s ability to compare 

spending patterns across states and identify areas requiring greater 

oversight. In addition, Treasury does not require states to submit detailed 

reports of administrative expenses by category that would allow for a 

comparison of actual expenses and the administrative budgets the states 

submitted as part of their agreements with Treasury.34 According to 

Treasury, administrative expenses are not easily comparable across 

states because of differences in programs and their structures. However, 

having states report this information to Treasury in a consistent format 

could provide greater insight into states’ progress in implementing the 

Hardest Hit Fund and inform Treasury’s oversight and monitoring 

decisions. Standards for internal control state that operational and 

financial data are necessary for program managers to determine whether 

the programs are meeting goals and effectively and efficiently using 

resources.35

 

34Treasury officials said that the compliance reviews include an examination of individual 

transactions to determine whether they are appropriate under the states’ participation 

agreement with Treasury and in accordance with OMB Circular No. A-87, which sets out 

cost principles for state, local, and Indian tribal governments.

Further, effective internal control systems provide 

reasonable assurance to taxpayers that federal funds are used as 

35GAO/AIMD-00-21.3.1. 
 

Page 35 GAO-12-783 TARP Housing Programs 

intended and in accordance with applicable laws and regulations. Without 

detailed and consistent information on the types of administrative 

expenses states have incurred relative to their plans for the program, 

Treasury may be constrained in its ability to monitor (1) whether program 

funds are being used effectively to achieve program goals and (2) the 

relationships among program expenses, activities, outputs, and 

outcomes.

Further, the transparency of the status of the Hardest Hit Fund and states’ 

performance could be enhanced. Although the quarterly performance 

reports that detail the number of borrowers assisted and the total amount 

of assistance the states provide are publicly available, Treasury does not 

require states to publicly disclose the administrative expenses they incur 

to implement the Hardest Hit Fund as part of the reporting. Treasury 

officials told us that they informed the states in a recent teleconference 

that this information would be required to be reported in the quarterly 

performance report for the third quarter of 2012. In addition, Treasury 

does not aggregate the quarterly performance and financial data it 

receives to provide policymakers and the public with a snapshot of the 

Hardest Hit Fund’s status. Treasury also has not made available to the 

public consolidated reports on the states’ relative performance when 

activities and performance measures are comparable across states—for 

example, under the payment assistance or reinstatement programs—

although Treasury officials said that they provided consolidated reports to 

the states on a quarterly basis and to policymakers on request. As we 

have previously reported, transparency remains a critical element in the 

context of TARP and the unprecedented government assistance it has 

provided to the financial sector.36 Such transparency could help clarify for 

policymakers and the public the costs of Hardest Hit Fund assistance and 

increase understanding of Hardest Hit Fund results. Improving the clarity 

of communications about the costs and performance of Hardest Hit Fund 

would help to inform decisions about how best to target remaining funds 

to achieve program goals.

 

36GAO, Troubled Asset Relief Program: As Treasury Continues to Exit Programs, 

Opportunities to Enhance Communication on Costs Exist, GAO-12-229 (Washington, 

D.C.: Jan. 9, 2012).
 

Page 36 GAO-12-783 TARP Housing Programs 

HAMP, the Hardest Hit Fund, and the newer MHA programs were part of 

an unprecedented response to a particularly difficult time for our nation’s 

mortgage markets. But 3 years after Treasury first announced that it 

would use up to $50 billion in TARP funds for various programs intended 

to preserve homeownership and protect home values, the number of 

borrowers who received permanent HAMP first-lien modifications is far 

below Treasury’s original estimates of the number of people who would 

be helped by this program. The number of borrowers starting HAMP trial 

modifications has continued to decline. In an effort to boost participation, 

Treasury recently rolled out HAMP Tier 2 to extend and expand the 

program. However, Treasury has made no definitive projections of the 

number of borrowers who might be helped. The program has not been 

fully implemented, and servicers have mixed opinions on its possible 

effect. The recent changes are a positive step in the effort to reach 

borrowers who have previously been denied HAMP assistance, but the 

pool of eligible borrowers is diminishing over time.

Further, Treasury has taken steps to assess and facilitate servicers’ 

readiness, but several of the large servicers did not have the system 

changes in place to process all aspects of HAMP Tier 2 modifications by 

June 1, 2012. As we have noted in past reports, swift action on the part of 

Treasury is imperative to help ensure that servicers have the ability to 

implement new initiatives. As demonstrated by the initially slow rollout of 

the HAMP first-lien modification program, the success of these TARPfunded initiatives will be largely driven by the capacity and willingness of 

servicers to implement them expeditiously and effectively. Servicers could 

be hampered by the myriad programs they currently must deal with, 

including the settlement reached with the state attorneys general.

Treasury has established performance measures to assess servicers’ 

compliance with MHA program requirements and identified certain risks 

associated with the recent changes, but it has not provided meaningful 

performance goals or comprehensive risk assessments for HAMP Tier 2. 

As we previously reported, agencies must identify the risks that could 

impede the success of new programs and determine meaningful methods 

of mitigating these risks. We have highlighted the need for Treasury to 

develop necessary controls to mitigate those risks before a program is 

implemented. Without the more meaningful risk assessments, Treasury 

will not be able to fully and effectively use the nearly $46 billion in TARP 

funds that it has obligated to meet the statutory goals of protecting 

homeownership because of the possibility of increased redefaults or other 

risks that could impede the success of the new program changes. In 

addition, Treasury has not developed program-specific performance 

Conclusions
 

Page 37 GAO-12-783 TARP Housing Programs 

measures for HAMP Tier 2. Without specific program measures, Treasury 

will not be able to effectively assess the outcomes of these programs and 

hold servicers accountable for performance goals.

Treasury has established several layers of review and reporting to 

monitor the states’ Hardest Hit Fund activity, but its oversight and 

monitoring of state administrative expenses for the Hardest Hit Fund are 

limited, and the administrative expenses associated with these programs 

are not transparent. Further, Treasury has not published consolidated 

state performance reports and financial reports, including administrative 

expenses incurred, limiting the ability of policymakers and the public to 

assess the status of the program and each state’s performance relative to 

other states. Without this information, policymakers and the public will 

have difficulty evaluating whether the Hardest Hit Fund program is 

achieving its goals in an effective manner.

In order to continue improving the transparency and accountability of 

MHA and the Hardest Hit Fund programs, we recommend that the 

Secretary of the Treasury take the following three actions:

• expeditiously conduct a comprehensive risk assessment of HAMP 

Tier 2, using the standards for internal control in the federal 

government as a guide; 

• develop activity-level performance measures and benchmarks related 

to the HAMP Tier 2 program; and

• consolidate the state performance reports and financial reports, 

including administrative expenses, into a single Hardest Hit Fund 

report to provide policymakers and the public with the overall status of 

the program as well as the relative status and performance of the 

states’ efforts.

Recommendations for 

Executive Action
 

Page 38 GAO-12-783 TARP Housing Programs 

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

comment. FHFA provided the draft report to Fannie Mae and Freddie 

Mac. We received written comments from Treasury’s Assistant Secretary 

for Financial Stability that are reprinted in appendix III. We also received 

technical comments from Treasury, FHFA, and Fannie Mae that we 

incorporated as appropriate. In its written comments, Treasury did not 

state whether it agreed or disagreed with our recommendations but noted 

that it would respond in detail in its 60-day response letter to Congress.37

However, during our review Treasury was unable to provide 

documentation of any risk assessments that had been performed during

the development of HAMP Tier 2. After receiving a draft of this report, 

Treasury prepared a summary table that outlined examples of risks it had 

identified and actions it had taken to mitigate them. We used this 

information to incorporate additional examples into the report. However, 

neither this summary nor Treasury’s description of its analysis indicated 

that it had conducted a comprehensive analysis of these risks, including 

an assessment of their significance and likelihood of occurrence, as 

outlined in our standards for internal control. Without this type of detailed 

information, determining whether the mitigating actions outlined by 

Treasury are sufficient or comprehensive is difficult. In its comment letter, 

Treasury stated that a more formal assessment might be more 

appropriate for programs that were fully operational and had established 

However, Treasury stated that it took exception to our finding that it did 

not conduct appropriate risk assessments prior to the implementation of 

HAMP Tier 2. Specifically, Treasury noted that at the outset of the 

development of HAMP Tier 2, it performed a baseline assessment of the 

potential programmatic, technical, fraud, and other risks involved and 

listed several activities it undertook during this assessment. In the draft 

report, we acknowledged that Treasury identified various risks while 

designing the program—such as the redefault risk associated with 

modifications that would result in DTIs of up to 55 percent—and 

described the actions Treasury cited as mitigating those risks. We also 

described many of the activities Treasury outlined in its comment letter 

related to the design and implementation of the program. 

 

37By statute, agency heads must submit a written statement of the actions taken by the 

agency on our recommendations to the Senate Committee on Homeland Security and 

Governmental Affairs and the House Committee on Oversight and Government Reform 

not later than 60 days after the date of the report that includes the recommendations. 

31 U.S.C. § 720.

Agency Comments 

and Our Evaluation
 

Page 39 GAO-12-783 TARP Housing Programs 

processes that were reasonably mature. As we have previously reported 

and reiterate in this report, agencies must identify the risks that could 

impede the success of new programs, determine appropriate methods of 

mitigating these risks, and develop appropriate controls before the 

programs’ implementation dates. As a result, our position remains that

Treasury must complete a comprehensive risk assessment that analyzes 

the significance and likelihood of occurrence of the risks it has identified 

in order to provide reasonable assurance that appropriate and meaningful 

steps have been taken to mitigate risks associated with HAMP Tier 2. We 

have clarified our recommendation to reference federal standards for 

internal control as guidance regarding key aspects of a comprehensive 

risk assessment.

We are sending copies of this report to interested congressional 

committees and members of the Financial Stability Oversight Board, 

Special Inspector General for TARP, Treasury, FHFA, the federal banking 

regulators, and others. We also will make this report available at no 

charge on the GAO website at http://www.gao.gov. 

If you or your staffs have any questions about this report, please contact 

me at (202) 512-8678 or sciremj@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. Key contributors to this report are listed in appendix IV.

Mathew J. Scirè

Director

Financial Markets and

Community Investment
 

Page 40 GAO-12-783 TARP Housing Programs 

List of Addressees

The Honorable Daniel K. Inouye

Chairman

The Honorable Thad Cochran

Vice Chairman

Committee on Appropriations

United States Senate

The Honorable Tim Johnson

Chairman

The Honorable Richard C. Shelby

Ranking Member

Committee on Banking, Housing, 

and Urban Affairs

United States Senate

The Honorable Kent Conrad

Chairman

The Honorable Jeff Sessions

Ranking Member

Committee on the Budget

United States Senate

The Honorable Max Baucus

Chairman

The Honorable Orrin G. Hatch

Ranking Member

Committee on Finance

United States Senate

The Honorable Hal Rogers

Chairman

The Honorable Norm Dicks

Ranking Member

Committee on Appropriations

House of Representatives
 

Page 41 GAO-12-783 TARP Housing Programs 

The Honorable Paul Ryan

Chairman

The Honorable Chris Van Hollen 

Ranking Member

Committee on the Budget

House of Representatives

The Honorable Spencer Bachus

Chairman

The Honorable Barney Frank

Ranking Member

Committee on Financial Services

House of Representatives

The Honorable Dave Camp

Chairman

The Honorable Sander Levin

Ranking Member

Committee on Ways and Means

House of Representatives 
Appendix I: Objectives, Scope, and 

Methodology

Page 42 GAO-12-783 TARP Housing Programs 

In response to a mandate in the Emergency Economic Stabilization Act of 

2008, this report examines (1) steps the Department of the Treasury has 

taken to design and implement recent changes to the Making Home 

Affordable (MHA) programs and (2) Treasury’s monitoring and oversight 

of state housing finance agencies’ (HFA) implementation of the Housing 

Finance Agency Innovation Fund for the Hardest Hit Housing Markets 

(Hardest Hit Fund).

To examine Treasury’s implementation of recent changes to MHA 

programs, we reviewed internal documentation related to the decisionmaking process. We also obtained and analyzed Treasury’s Home 

Affordable Modification Program (HAMP) data in its system of record, 

Investor Reporting/2 (IR/2), through March 2012, to identify patterns in 

program participation, and we determined that these data were 

sufficiently reliable for the purposes used in the report. We also reviewed 

MHA documentation issued by Treasury, including the supplemental 

directives related to the recent changes related to HAMP Tier 2 as well as 

the Principal Reduction Alternative and Second Lien Modification 

Program incentives; the MHA handbook for servicers; and monthly 

performance reports. We reviewed and analyzed MHA program and 

expense information in the quarterly reports to Congress issued by the 

Special Inspector General for the Troubled Asset Relief Program 

(SIGTARP). We also spoke with officials at Treasury to understand the 

challenges faced in implementing these programs and the steps taken by 

Treasury to assess the capacity needed for and risks of these programs, 

as well as steps taken to measure the programs’ success. Further, we 

spoke with management staff from five large MHA servicers about the 

challenges and potential impact of implementing these program changes. 

These five servicers were Bank of America; CitiMortgage; JP Morgan 

Chase Bank; Ocwen Loan Servicing; and Wells Fargo Bank. We

identified them as large MHA servicers based on the amount of Troubled 

Asset Relief Program (TARP) funds they were allocated for loan 

modification programs. These five servicers collectively represented 

about 68 percent of the TARP funds allocated to participating servicers as 

of March 31, 2012. We also spoke with an organization representing 

homeowners and community advocates about the potential impact of 

implementing these program changes. Finally, we reviewed (1) the 

Standards for Internal Control in the Federal Government to determine 

the key elements needed to ensure program stability and adequate 

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology

Page 43 GAO-12-783 TARP Housing Programs 

program management;1 (2) Treasury’s strategic plan, monthly reports, 

and quarterly servicer assessments to determine the goals, strategies, 

and performance measures for the MHA program; and (3) leading 

practices for program management under the Government Performance 

and Results Act of 1993 (GPRA) and the requirements of the GPRA 

Modernization Act of 2010.2

To examine Treasury’s oversight and monitoring of the states’ 

implementation of the Hardest Hit Fund, we reviewed Treasury’s funding 

announcements for the Hardest Hit Fund as well as program participation 

agreements between the states and Treasury and subsequent 

amendments to those agreements; quarterly performance reports 

submitted by the states; analytical tools developed by Treasury to track 

program spending for borrower assistance and administrative costs; and 

examples of compliance reviews completed by Treasury and the states’ 

responses. We also spoke with officials at Treasury to understand the 

challenges faced in implementing these programs and the steps taken by 

Treasury to assess the capacity needed for and risks of these programs, 

as well as steps taken to measure the programs’ success. Further, we 

spoke with management staff from four states that received allocations 

through the Hardest Hit Fund—California, Florida, Nevada, and Ohio—

and the District of Columbia. To select states to interview, we considered 

the size of the state’s allocation, the number of Hardest Hit Fund 

programs administered by the state, the percentage of the allocation that 

had been drawn as of December 2011, the borrower approval rate, and 

the geographic location. We also spoke with mortgage industry 

participants and observers, including servicers and associations 

representing housing counselors and legal services attorneys.

We conducted this performance audit from February 2012 through July 

2012 in accordance with generally accepted government auditing 

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

obtain sufficient, appropriate evidence to provide a reasonable basis for 

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

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on the audit objectives.

 

1

GAO/AIMD-00-21.3.1. 

2

Pub. L. No. 103-62, 107 Stat. 285 (1993) and Pub. L. No. 111-352, 124 Stat. 3866 

(2011). 
Appendix II: Treasury’s Actions in Response to 

GAO’s Recommendations for TARP-Funded 

Housing Programs Last Reported as Open or 

Partially Implemented in September 2011 

Page 44 GAO-12-783 TARP Housing Programs 

Troubled Asset Relief Program: Treasury Actions Needed to Make the Home Affordable Modification Program More 

Transparent and Accountable: GAO-09-837, July 23, 2009

Recommendation Actions taken Status 

As part of its efforts to continue 

improving the transparency and 

accountability of HAMP, the Secretary of 

the Treasury should place a high priority 

on fully staffing vacant positions in the 

Homeownership Preservation Office 

(HPO)—including filling the position of 

Chief Homeownership Preservation 

Officer with a permanent placement—

and evaluate HPO’s staffing levels and 

competencies to determine whether they 

are sufficient and appropriate to 

effectively fulfill its HAMP governance 

responsibilities.

Treasury hired a permanent Chief Homeownership Preservation Officer 

on November 9, 2009. Based upon input from HPO senior staff, the 

Chief Homeownership Preservation Officer subsequently reduced the 

staffing levels for HPO. In June 2012, Treasury officials stated that a 

comprehensive staffing assessment was ongoing for all of the Office of 

Financial Stability, including HPO. 

Partially 

Implemented

Troubled Asset Relief Program: Further Actions Needed to Fully and Equitably Implement Foreclosure Mitigation Programs: 

GAO-10-634, June 24, 2010

Recommendation Actions taken Status 

As part of its efforts to continue 

improving the transparency and 

accountability of HAMP, the Secretary of 

the Treasury should expeditiously 

implement a prudent design for 

remaining HAMP-funded programs.

Our March 2011 report identified areas in which Treasury had made 

changes to the original design and requirements of the more newly 

announced HAMP-funded programs (i.e., Second Lien Modification 

(2MP), Home Affordable Foreclosure Alternatives (HAFA), and 

Principal Reduction Alternative (PRA) programs) and made 

recommendations to continue improving the transparency and 

accountability of Making Home Affordable (MHA) related to these 

newer programs. Those recommendations remain open.

Open

As part of its efforts to continue 

improving the transparency and 

accountability of HAMP, the Secretary of 

the Treasury should expeditiously finalize 

and implement benchmarks for 

performance measures under the firstlien modification program, as well as 

develop measures and benchmarks for 

the recently announced HAMP-funded 

homeowner assistance programs.

Starting with the MHA program performance report through April 2011, 

Treasury has publicly reported on the performance of the top 10 

participating servicers in three categories—identifying and contacting 

homeowners, homeowner evaluation and assistance, and program 

management, reporting, and governance. Treasury has established 

benchmarks for each of these three categories that consist of both 

quantitative and qualitative (incorporating the results of its compliance 

reviews) criteria. However, the performance metrics are based on the 

HAMP first-lien modification program and do not contain measures or 

benchmarks for the more recently announced TARP-funded 

homeowner assistance programs.

Partially 

Implemented

Appendix II: Treasury’s Actions in Response to GAO’s 

Recommendations for TARP-Funded Housing Programs 

Last Reported as Open or Partially Implemented in 

September 2011
Appendix II: Treasury’s Actions in Response to 

GAO’s Recommendations for TARP-Funded 

Housing Programs Last Reported as Open or 

Partially Implemented in September 2011 

Page 45 GAO-12-783 TARP Housing Programs 

Recommendation Actions taken Status 

As part of its efforts to continue 

improving the transparency and 

accountability of HAMP, the Secretary of 

the Treasury should expeditiously report 

activity under the principal reduction 

program, including the extent to which 

servicers determined that principal 

reduction was beneficial to investors but 

did not offer it, to ensure transparency in 

the implementation of this program 

feature across servicers.

Starting with its monthly MHA performance report for activity through 

May 2011, Treasury began reporting summary data on the PRA 

program. Specifically, Treasury provides information on PRA trial 

modification activity (started, cumulative, and permanent), as well as 

the median principal amounts reduced for active permanent 

modifications. In addition, beginning with its MHA performance report 

for activity through October 2011 and quarterly thereafter, Treasury 

reported more detailed data on the characteristics of loans that 

received PRA modifications. In June 2012, Treasury officials stated that 

they had been working with servicers to improve the quality of the data 

provided on PRA and were undertaking additional research to look at 

the effectiveness. However, no data are reported on the extent to which 

servicers determined that principal reduction was beneficial to the 

investor but was not offered. 

Partially 

Implemented

As part of its efforts to continue 

improving the transparency and 

accountability of HAMP, the Secretary of 

the Treasury should expeditiously and 

more clearly inform borrowers that the 

HOPE Hotline may also be used if they 

are having difficulty with their HAMP 

application or servicer or feel that they 

have been incorrectly denied HAMP; 

monitor the effectiveness of the HOPE 

Hotline as an escalation process for 

handling borrower concerns about 

potentially incorrect HAMP denials; and 

develop an improved escalation 

mechanism if the HOPE Hotline is not 

sufficiently effective.

According to Treasury, it has promoted the HOPE Hotline through a 

number of channels to the public as a resource for borrowers with 

questions and problems about their HAMP application, trial period plan 

or permanent modification. For example, the hotline number is 

published on Treasury’s MHA website, featured in media campaigns, 

and used in talking points for borrower/counselor events and media 

interviews. Treasury’s MHA program guidelines require that servicers 

include in their notices to borrowers regarding the status of requests for 

a HAMP loan modification the telephone number for the HOPE Hotline, 

with an explanation that the borrower can seek assistance at no charge 

from HUD-approved housing counselors and can request assistance in 

understanding the Borrower Notice by asking for MHA Help. In MHA 

program guidance issued on November 3, 2010, Treasury standardized 

the process required for handling certain borrower inquiries and 

disputes related to the MHA Program. The guidance also outlines the 

servicer’s obligations for tracking borrower inquiries and disputes and 

conducting reviews in a timely fashion, whether received directly from a 

borrower or indirectly from the HOPE Hotline, through MHA Help, or 

the HAMP Solution Center. However, Treasury has not yet indicated 

how it will monitor the effectiveness of the HOPE Hotline as an 

escalation process for handling borrower complaints about potentially 

incorrect HAMP denials. 

Partially 

Implemented
Appendix II: Treasury’s Actions in Response to 

GAO’s Recommendations for TARP-Funded 

Housing Programs Last Reported as Open or 

Partially Implemented in September 2011 

Page 46 GAO-12-783 TARP Housing Programs 

Troubled Asset Relief Program: Treasury Continues to Face Implementation Challenges and Data Weaknesses in Its Making 

Home Affordable Program: GAO-11-288, March 17, 2011

Recommendation Actions taken Status 

As part of its efforts to continue 

improving the transparency and 

accountability of MHA, the Secretary of 

the Treasury should require servicers to 

advise borrowers to notify their secondlien servicers once a first lien has been 

modified under HAMP to reduce the risk 

that borrowers with modified first liens 

are not captured in the Lender 

Processing Services (LPS) matching 

database and, therefore, are not offered 

second-lien modifications.

In Supplemental Directive 11-10 issued on September 29, 2011, 

Treasury announced that servicers must inform each borrower who 

receives a HAMP permanent modification of the borrower’s potential 

eligibility for a second-lien modification under 2MP. Treasury updated 

the Home Affordable Modification Agreement Cover Letter form to 

include model clauses that could be used to notify borrowers, including 

a link to the MHA website to determine whether the second-lien 

servicer was participating in 2MP and a statement encouraging the 

borrower to contact the second-lien servicer if the servicer did not 

contact the borrower within 60 days. 

Closed—

Implemented

As part of its efforts to continue 

improving the transparency and 

accountability of MHA, the Secretary of 

the Treasury should ensure that 

servicers demonstrate that they have the 

operational capacity and infrastructure in 

place to successfully implement the 

requirements of the 2MP, HAFA, and 

PRA programs.

Treasury stated that Freddie Mac’s MHA-Compliance unit, the 

compliance agent for the Making Home Affordable program, uses 

information received from Fannie Mae, in its capacity as the MHA 

program administrator, regarding servicer readiness for various 

program elements as part of the compliance review scheduling and 

planning process. Treasury noted that during the normal course of a 

servicer review, part of the review is focused on the evaluation of new 

programs such as HAFA, 2MP, and PRA as they are implemented by a 

servicer. According to Treasury, the specifics of these evaluations are 

designed to ensure adherence with the program guidelines, as well as 

with the servicer’s ability to meet those guidelines. Treasury stated that 

in instances in which a servicer had implementation challenges and 

was unable to meet implementation timelines or specific elements of 

the program, these matters would be raised to OFS management and 

tracked to resolution by MHA-Compliance to ensure that 

implementation occurred as soon as practicable.

Open

As part of its efforts to continue 

improving the transparency and 

accountability of MHA, the Secretary of 

the Treasury should consider methods 

for better capturing outcomes for 

borrowers who are denied or canceled or 

have redefaulted from HAMP, including 

more accurately reflecting what actions 

are completed or pending and allowing 

for the reporting of multiple concurrent 

outcomes, in order to determine whether 

borrowers are receiving effective 

assistance outside of HAMP and whether 

additional actions may be needed to 

assist them.

Treasury stated that it had revised the survey it conducted of the 10 

largest MHA servicers regarding the disposition of borrowers who had

been denied HAMP modifications or were cancelled from trials to ask 

about dispositions of borrowers who were “in process” and “completed” 

to clarify their status. Treasury stated that it was important to note that 

survey data were generally collected for at least 3 months prior to 

publication to ensure the integrity of the data. Therefore, the changes 

made to the survey are not currently reflected in the data contained in 

the monthly MHA program performance reports. Treasury stated that it 

anticipated that it would be able to begin reporting using the revised 

survey data in fall 2011. However, Treasury stated that it did not intend 

to revise its survey to collect data on borrowers that were being 

considered for multiple outcomes. Treasury stated that while borrowers 

could be under evaluation for an alternative modification while in 

foreclosure, the greatest impact would be the final determination (e.g., 

whether the borrower received an alternative modification or was in the 

foreclosure path). 

Open
Appendix III: Comments from the Department 

of the Treasury

Page 47 GAO-12-783 TARP Housing Programs 

Appendix III: Comments from the 

Department of the Treasury 
Appendix III: Comments from the Department 

of the Treasury

Page 48 GAO-12-783 TARP Housing Programs 
Appendix III: Comments from the Department 

of the Treasury

Page 49 GAO-12-783 TARP Housing Programs 
Appendix III: Comments from the Department 

of the Treasury

Page 50 GAO-12-783 TARP Housing Programs 
Appendix III: Comments from the Department 

of the Treasury

Page 51 GAO-12-783 TARP Housing Programs 
Appendix III: Comments from the Department 

of the Treasury

Page 52 GAO-12-783 TARP Housing Programs 
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 53 GAO-12-783 TARP Housing Programs 

Mathew J. Scirè, (202) 512-8678 or sciremj@gao.gov

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

Director), Dan Alspaugh, Don Brown, Emily Chalmers, John Karikari, 

Marc Molino, Jill Naamane, Andrew Stavisky, Eva Yikui Su, James 

Vitarello, and Henry Wray made key contributions to this report.

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments

(250643)
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