On way out, TARP watchdog takes a few more jabs at Timothy Geithner

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Neil Barofsky, leaving his job as watchdog of the Treasury Department’s $700-billion Troubled Asset Relief Program, is taking a few shots at Treasury Secretary Timothy F. Geithner on his way out the door.

Barofsky, the special inspector general for the financial bailout program, aimed his barbs at Treasury’s effort to avert foreclosures -- the Home Affordable Modification Program -- which House Republicans are trying to kill.

In prepared testimony Wednesday before a House subcommittee on housing, Barofsky said the unpleasant truth about most HAMP loan modifications was not just that they failed but that, after trials stretching for many months, they left participants in worse financial shape than when they began.

It’s a problem Geithner has refused to face, although the Treasury secretary has acknowledged that the incentives paid to loan servicers under HAMP ‘have not been powerful enough,’ Barofsky said in the testimony, which was posted online by the House Financial Services Committee.

Citing ‘near universal agreement’ that HAMP has failed to meet its goals, Barofsky noted that current debate centers ‘on whether the program should be terminated, replaced or revamped.’

‘Treasury, it seems, stands alone in defending the status quo,’ he said.

Geithner argued for the continuation of HAMP on Tuesday at an appearance before the committee.

Ending the program, he said, “would cause a huge amount of damage to a very fragile housing market and leave hundreds and hundreds of thousands, if not millions, of Americans without the chance to take advantage of a mortgage modification that would allow them to stay in a home they can afford.”

Barofsky’s testimony notes that Geithner recently acknowledged that HAMP won’t come close to helping 3 million to 4 million at risk homeowners to avoid foreclosure, its original goal. He faulted the Treasury secretary for setting no meaningful benchmarks for the program. Geithner has said that abandoning HAMP would leave loan mods entirely in the hands of the very mortgage servicers criticized widely for mishandling loan modifications and foreclosures.

But Barofsky said the voluntary HAMP program left all discretion to the servicers anyway. He said the government, despite threats to impose monetary penalties, has never levied a single fine on a servicer except for failure to turn over data.

Barofsky, a former federal prosecutor in Manhattan, has resigned from government service as of the end of this month and will join New York University School of Law as a senior fellow.

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--E. Scott Reckard