TARP Inspector Scrutinizes Federal Housing Program 10/29/2009 By: Carrie Bay
Neil Barofsky, Congress’ special inspector general for the Troubled Asset Relief Program (TARP), makes no bones about his dissatisfaction and frustration with the Treasury’s management of the $700 billion purse.
Barofsky said the Treasury Department has
misled the public and questioned the fairness of its payouts to the nation’s biggest banks in a report issued earlier this month.
In his most recent dissertation,
Barofsky threatened to subpoena documents from the Treasury and White House to get to the bottom of exactly how TARP funds are being used.
He also offered up a dissection of the administration’s Making Home Affordable (MHA) program, prefaced with a rebuke that the Treasury has not adopted previous recommendations his office has made for the program.
Barofsky zeroed in on three specific suggestions that he says would “answer some of the criticisms of the program,” which has been allotted $50 billion of TARP funds.
First, the inspector general says, Treasury should keep track of everyone who participates in a mortgage modification transaction and keep the information in a central database.
“Treasury has refused to adopt this significant anti-fraud measure designed to detect insiders who are committing large-scale fraud,” Barofsky complained. “This represents a material deficiency in the MHA anti-fraud regime.”
Secondly, as another measure to prevent fraud, he recommends that servicers be required to compare the income reported by borrowers’ on the mortgage modification application with the income they claimed when they applied for the original mortgage.
And third, Barofsky wants the Treasury to defer paying mortgage servicers the $1,000 bonus incentives for carrying out the federal modification until after homeowners have made a minimum number of payments following the three-month trial period.
All in all, Barofsky says he’s made 41 recommendations to the administration that would improve TARP and all its sub-programs, of which only 18 have been executed and seven have been partially implemented.
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