The Obama administration's program to help struggling homeowners avoid foreclosure has posted "disappointing results" in part because its definition of success is "essentially meaningless," a watchdog said today in a new report obtained by ABC News.
In his audit on the administration's $75 billion Home Affordable Modification Program (HAMP), bailout watchdog Neil Barofsky blasted the Treasury Department for he said were the shortcomings of the program.
Specifically, Barofsky criticized the administration for focusing on the number of homeowners who receive temporary help.
When the program was unveiled last year, the administration said by the end of 2012 it would help 3 million to 4 million homeowners "avoid foreclosure" by "reducing monthly payments to sustainable levels." Treasury has stated that homeowners who have received offers for temporary mortgage modifications count towards this goal, a decision ripped by Barofsky.
"Defining success by how many offers are given can reasonably be received as essentially meaningless," Barofsky said in his report. "It is simply not a useful measure."
Under the program, Treasury provides incentives for banks to modify the mortgages of struggling homeowners. After an offer for a trial loan modification is extended to a borrower, the borrower can then move towards a permanent mortgage modification by continuing to make payments for three months.
To date, more than 1.3 million homeowners have received trial modification offers, but only 170,000 homeowners have received permanent modifications.
"To be meaningful, Treasury's goal for HAMP must relate to how many people are helped to avoid foreclosure," Barofsky said. "Plainly, the goal that should be developed and tracked is how many permanent modifications HAMP generates that help homeowners avoid foreclosure and stay in their homes."
On Thursday morning Barofsky, the Special Inspector General for the Troubled Asset Relief Program, will testify before the House Oversight Committee. The panel's ranking member today accused Treasury of focusing on temporary help for homeowners -- not permanent help -- in order to create "a false image of success."
"There's a real problem with Treasury officials running this program who appear more concerned about creating a false image of success than actually helping troubled homeowners," said Rep. Darrell Issa, R-Calif. "The left, right and non-partisan watchdogs are all sounding the alarm that the administration's efforts to help troubled homeowners are misguided and ineffective. Sadly, most Americans seeking long-term help through HAMP to keep them in their homes will never qualify for permanent modifications and will actually be harmed for trying."
As ABC News reported last week, Issa and fellow GOP lawmaker Jim Jordan of Ohio have dubbed the program "a failure" and the administration dishonest.
Around 2.8 million homeowners received foreclosure filings last year and some estimates predict that this year's numbers could be even worse. One chief issue for the program's shortcomings has been the lackluster performance of banks, which have been accused of giving struggling homeowners the run-around in an attempt to avoid modifying loans.