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Billions Meant for Struggling Homeowners May Pay Down Deficit Instead

Of the $45.6 billion in Trouble Asset Relief Program funds meant to aid homeowners, the most recent numbers available show that only about $2 billion has actually gone out the door.

By Toby Tobin
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Palm Coast, FL – August 25, 2011With housing prices dropping sharply, and foreclosure filings against more than 1 million properties in the first half of this year, the Obama administration is scrambling for ways to help homeowners.

One place they won't be looking: an estimated $30 billion from the bailout that was slated to help homeowners but is likely to remain unspent.

Instead, Congress has mandated that the leftover money be used to pay down the debt.

Of the $45.6 billion in Trouble Asset Relief Program funds meant to aid homeowners, the most recent numbers available show that only about $2 billion has actually gone out the door.

The low number reflects how little the government's home loan modification and other programs have actually helped homeowners deal with the foreclosure crisis.

The programs have been marked by poor oversight and consistent under-enrollment. Homeowners have been forced to navigate an often bewildering maze at banks marked by slow communication, lost documents and other mistakes.

The amount of money spent is also low because the government pays out its incentive over a number of years. As of July, according to a Treasury spokeswoman, the government is on track to eventually spend $7.2 billion helping homeowners enrolled in its main loan modification program. That number doesn't factor in other homeowners who may enter the program before it ends in December 2012, but it does assume that all homeowners currently in the program will be able to continue making payments.

In November, the Congressional Budget Office lowered their estimate of the total amount of money the government would spend on its foreclosure relief programs from $22 billion to $12 billion. (The New York Times reported today that the government has "spent or pledged" $22.9 billion of the TARP money so far, a figure that's dramatically higher than ours and that the Treasury spokeswoman said was the Times' own number.)

According to the original TARP legislation, unused funds should be returned to the Treasury and used to reduce the debt. While Congress has the power to re-route those funds into new programs, Republicans seem unlikely to endorse such a plan.

An Obama administration statement noted that they were continuing to look for ways to "ease the burden on struggling homeowners" through new proposals and reconsidering old ones.

The other ideas the administration is looking at have received mixed reviews. Among them: turning foreclosed homes into rental properties or allowing homeowners to refinance their mortgages at today's lower interest rates, an old idea that may not actually help a large new segment of homeowners.

"We have no plans to announce any major new initiatives at this time," the statement noted.

Source: ProPublica

reader comments
How do you figure it?
Posted by Alex
Aug 26, 2011, 9:24 am
"Billions Meant for Struggling Homeowners May Pay Down Deficit Instead"

We borrowed the billions and we are just returning it to the lender. That is not "paying down the deficit".
Fed can't even give money away?
Posted by Robert
Aug 26, 2011, 6:43 am
The plan all along may have been to make it too difficult to navigate so less money would be given away.
government incompetentince...
Posted by ron davis
Aug 25, 2011, 9:32 pm
the feds cannot even give money away...how can we expect them to administer health care...or anything else for that matter...

 
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Don "Toby" Tobin is a licensed real estate professional affiliated with Grand Living Realty. Toby is a member of the Flagler County Association of Realtors®, the Florida Association of Realtors, Enterprise Flagler, Flagler Home Builders Association, and the National Association of Realtors.

GoToby.com proivdes real estate news, commentary, and analysis for Palm Coast and Flagler Country Florida, as well as Realtor® referrals and consultation to buyers, sellers, and developers.