Of the TARP performance audit recommendations we have made, some have been program specific, while others have addressed crosscutting issues such as staffing and communications. Our program-specific recommendations have focused on the following TARP initiatives: CPP was designed to provide capital to financially viable financial institutions through the purchase of preferred shares and subordinated debentures. The Community Development Capital Initiative (CDCI) provided capital to Community Development Financial Institutions by purchasing preferred stock. Capital Assessment Program (CAP) was created to provide capital to institutions not able to raise it privately to meet Supervisory Capital Assessment Program—or “stress test”— requirements. This program was never used. Credit market programs: Term Asset-backed Securities Loan Facility (TALF) provided liquidity in securitization markets for various asset classes to improve access to credit for consumers and businesses. SBA 7(a) Securities Purchase Program provided liquidity to secondary markets for government-guaranteed small business loans in the Small Business Administration’s (SBA) 7(a) loan program. American International Group (AIG) Investment Program (formerly Systemically Significant Failing Institutions Program) provided support to AIG to avoid disruptions to financial markets from its possible failure. Automotive Industry Financing Program (AIFP) aimed to prevent a significant disruption of the American automotive industry through government investments in the major automakers. The Home Affordable Modification Program (HAMP) divides the cost of reducing monthly payments on first-lien mortgages between Treasury and mortgage holders/investors and provides financial incentives to servicers, borrowers, and mortgage holders/investors for loans modified under the program. Principal Reduction Alternative (PRA) pays financial incentives to mortgage holders/investors for principal reduction in conjunction with a HAMP loan modification for homeowners with a current loan-to-value ratio exceeding 115 percent. The Second-Lien Modification Program (2MP) provides incentives for second-lien holders to modify or extinguish a second-lien mortgage when a HAMP modification has been initiated on the first-lien mortgage for the same property. Home Affordable Foreclosure Alternatives (HAFA) provides incentives for short sales and deeds-in-lieu of foreclosure as alternatives to foreclosure for borrowers who are unable or unwilling to complete the HAMP first-lien modification process. Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (Hardest Hit Fund or HHF) supports innovative measures developed by state housing finance agencies and approved by Treasury to help borrowers in states hit hardest by the aftermath of the housing crisis. Federal Housing Administration’s (FHA) Short Refinance Program provides underwater borrowers—those with properties that are worth less than the principal remaining on their mortgage—whose loans are current and are not insured by FHA with the opportunity to refinance into an FHA-insured mortgage. As of August 2015, our performance audits of the TARP programs have resulted in 72 recommendations to Treasury. Of the 72 performance audit recommendations, Treasury has implemented 59, or approximately 82 percent; partially implemented 4—that is, taken some steps toward implementation but needs to take more actions; and not implemented 3— that is, Treasury has not taken steps to implement them (see fig.1). Among the 7 recommendations that Treasury has taken some or no steps to implement, 1 was directed at CPP and 6 directed at the MHA housing programs. Finally, 6 performance audit recommendations have been closed-not implemented. Due to Treasury’s inaction and the evolving nature of the programs, we considered 3 of them to be outdated and no longer applicable. Two of these 6 recommendations were related to CPP and 2 were related to the MHA programs. Treasury has taken action on the majority of our recommendations for CPP. Specifically, to date, Treasury has implemented six of our nine recommendations for CPP. For example, Treasury implemented our recommendation that it apply lessons learned from the implementation of CPP to similar programs, such as the Small Business Lending Fund (SBLF), by including a process for reviewing regulators’ viability determinations for all eligible applicants for SBLF. Specifically, Treasury included additional evaluation by a central application review committee for all eligible applicants who had not been approved by their federal regulator. Treasury also took steps to provide information from its evaluation to the regulator when their views differ. These steps should help ensure that applicants will receive consistent treatment in investment decisions across different regulators. However, Treasury has not implemented three of our CPP-related recommendations—one remains open and two have been closed. In 2012, we recommended that Treasury consider analyzing and reporting on remaining and former CPP participants separately. In particular, we noted that the remaining CPP institutions tended to be less profitable and hold riskier assets than other institutions of similar asset size. For example, the remaining CPP institutions had significantly lower returns on average assets and higher percentages of noncurrent loans than former CPP and non-CPP institutions. They also held less regulatory capital and reserves for covering losses. Although our analysis found differences in the financial health of remaining and former CPP institutions, we noted that Treasury’s quarterly financial analysis of CPP institutions did not distinguish between them. By not distinguishing between remaining and former CPP participants, Treasury misses an opportunity to provide greater transparency about the financial health of institutions remaining in CPP. Treasury stated that it would carefully consider our recommendation and emphasized its ongoing commitment to keeping the public informed of its progress in winding down CPP. While Treasury reported generally on the results of its CPP auctions and the status of institutions remaining in the program, as of August 2015, it had not yet considered analyzing and reporting on remaining and former CPP participants separately and it is not likely to do so, according to Treasury. Treasury believes that providing information about the financial position of institutions remaining in CPP is unnecessary because it is publicly available to interested parties through regulatory filings or other sources. We closed two recommendations for Treasury to periodically collect and review certain information from the bank regulators on the analysis and conclusions supporting their decisions on CPP repayment requests to help ensure consistency of the CPP repayment process. Treasury did not take actions that would address the recommendations because it believed these recommendations raised questions about how to balance the goals of consistency with the need to respect the independence of regulators. Although we disagreed with Treasury’s position, we closed these two recommendations as not implemented because Treasury officials stated that since it is winding down the program, only a few remaining CPP participants are likely to make full repayments. Thus we determined that implementation of these recommendations is not as critical as it was at the time we made them. Since 2009, we have made 27 recommendations aimed at improving MHA’s TARP-funded housing programs. As of August 2015, Treasury had implemented 19 of them. Examples of more recent actions Treasury has taken to implement these recommendations include the following: In June 2010, we recommended that Treasury expeditiously finalize and implement benchmarks for performance measures under the first- lien modification program, as well as develop measures and benchmarks for the recently announced HAMP-funded homeowner assistance programs. Since June 2011, Treasury has been reporting in its MHA program performance reports on the performance of the largest MHA servicers in three categories: (1) identifying and contacting homeowners, (2) homeowner evaluation and assistance, and (3) program management and reporting. Treasury established quantitative and qualitative benchmarks for each of the three performance categories for HAMP first-lien modifications and other TARP-funded MHA programs. In the same report, we recommended that Treasury expeditiously implement a prudent design for the remaining TARP-funded housing programs. In July 2013, Treasury’s MHA risk assessment included measuring internal control activities for 2MP, PRA, and HAFA. In June 2012, we recommended that Treasury and FHA update their estimates of participation in the FHA Short Refinance Program and use the updated estimates to reassess the terms of the letter of credit facility to help ensure that the program is cost-effective. After FHA provided Treasury with updated participation estimates, Treasury amended the letter of credit facility in March 2013, reducing the authorized amount by $7 billion to $1 billion. Treasury also reduced the cap on administrative fees that could be charged by $92 million (from $117 million to $25 million). In March 2015, Treasury amended the purchase agreement for the letter of credit facility for a second time, reducing the amount by an additional $900 million ($1 billion to $100 million). As a result of these two actions, Treasury deobligated approximately $7.9 billion in total, disallowing its use for future obligations. In July 2012, we recommended that Treasury expeditiously conduct a comprehensive risk assessment of HAMP Tier 2, using the standards for internal control in the federal government as a guide. In April 2013, Treasury conducted a risk assessment of MHA programs, including HAMP Tier 2, based on internal control standards. The risk assessment included identifying the types and potential impacts of risks on the MHA program and appropriate mitigating steps taken to address those risks. In February 2014, we recommended that Treasury issue clarifying guidance to servicers on providing effective relationship management to borrowers with limited English proficiency (LEP). Treasury had previously issued guidance to servicers requiring them to develop and implement a policy to identify the requirements and appropriate caseload for the relationship manager position, including a provision for providing effective relationship management to borrowers whose primary language is a language other than English. In April 2014, Treasury issued guidance requiring servicers to ensure that staff are able to effectively communicate with all borrowers, including LEP borrowers, by either employing multilingual individuals or engaging an outside vendor to provide interpretation services. Treasury has not implemented 8 of the 27 recommendations related to MHA’s TARP-funded programs. Six of these recommendations remain open, including 4 of which Treasury has taken some action.