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Report: Housing aid boosts total U.S. financial-system support to $3.7 trillion

July 21, 2010 | 11:41 am

Despite the winding-down of most of the government’s aid programs for the financial system this year, total federal support for the system now is 23% greater than it was a year ago, the Treasury’s watchdog for bailout plans said in a report to Congress on Wednesday.

Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, said the government was on the hook for $3.7 trillion in support as of June 30, up from $3 trillion a year earlier.

Even as banks have been repaying the money the Treasury invested in them under one of the main TARP programs approved in 2008, U.S. aid to the housing market has ballooned, Barofsky’s report said. The increase has mainly come in the form of more capital for Fannie Mae and Freddie Mac and loan guarantees for various federal mortgage programs such as those of the Federal Housing Administration.

Barofsky "Notwithstanding [the] scaling back of TARP, an examination of the broader context demonstrates that the overall governmental efforts to stabilize the economy have not diminished," the report said.

Barofsky also leveled more criticism at the Obama administration’s efforts to prevent home foreclosures via its Home Affordable Modification Program, or HAMP, which pays mortgage servicers to modify struggling borrowers’ loan terms.

"Unfortunately, HAMP continues to struggle to achieve its original stated objective, to help millions of homeowners avoid foreclosure by 'reducing monthly payments to sustainable levels,'" the report said.

"Despite a seemingly ever-increasing array of HAMP-related initiatives designed to encourage participation in the program, the number of homeowners being helped through permanent modifications remains anemic, with fewer than 400,000 ongoing permanent modifications," it said.

"One continuing source of frustration is that Treasury has rejected calls to announce publicly any goals or performance benchmarks for HAMP or its related initiatives concerning how many homeowners it actually expects to help stay in their homes,"  the report said.

That is fueling “growing public suspicion that the program is an outright failure,” it said.

Barofsky's mission is to force accountability, and he doesn't believe taxpayers are getting much of that under HAMP.

CalculatedRisk blog has more on recent HAMP data in this post.

-- Tom Petruno

Photo: Neil Barofsky. Credit: Matthew Cavanaugh / EPA