Loan Modification Program Is a 'Terrible Failure,' Says TARP Watchdog

The departing special inspector general for the Troubled Asset Relief Program, or TARP, said the government's efforts to modify loans and keep people in their homes was a "terrible failure." 

Speaking to WNYC's Brian Lehrer on Tuesday, Neil Barofsky says the program, originally created in 2009 to help 3 to 4 million homeowners by 2012, has only reached 540,000 homeowners thus far.

"It's a failure because there are all those people who were promised to get help, who could've gotten help, who could stay in their homes will never be reached because of a program that was frankly poorly designed, poorly managed and poorly executed," said Barofsky, who assumed the role of TARP's watchdog in December of 2008.

And some members in the House of Representatives agree. The House is scheduled to vote tonight to eliminate funding for HAMP.

The Obama Administration has defended the program.

"Ending this program would be very unfortunate," said Timothy Massad, the Treasury Department's Acting Assistant Secretary for Financial Stability. "This program is continuing to help tens of thousands of families each month. And those who want to terminate it would basically just throw the problem back to the mortgage servicing companies, which in large part have been responsible for this problem."

When asked why the program hasn’t reached the intended 3 to 4 million homeowners, Massad said: "We overestimated how many people would be eligible originally [for the program], but no one can predict that sort of thing. The fact is we still have two years to run and so if we can continue this program, we can continue to help lots of people."

Barofsky, who leaves his TARP watchdog role March 30 and will be teaching at New York University Law School this fall, said that given the projections of 10 to 13 million foreclosure filings over the life of HAMP, the federal government's efforts are a "drop in the ocean."