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TARP Report: Homeowner-Aid Efforts Are Falling Short

WASHINGTON—Several new Obama administration programs to aid troubled homeowners are already posting disappointing results, a federal bailout watchdog said Tuesday.

The report by Neil Barofsky, the special inspector general for the Troubled Asset Relief Program launched in 2008, highlighted the continuing woes of the administration's housing programs, which receive funding from the broader financial rescue program.

Though a goal of TARP was to prevent foreclosures, the administration's effort "has been beset by problems from the outset and, despite frequent retooling, continues to fall dramatically short of any meaningful standard of success," the report said.

Not only is the nearly two-year-old Home Affordable Modification Program still struggling, the report said, but several newer programs are also yielding meager results in their early stages.

The Treasury Department's acting assistant secretary for financial stability, Tim Massad, defended the administration's housing rescues in a conference call with reporters. While the administration hasn't achieved as many home loan modifications as originally expected, he said, the government has reached a "large percentage" of eligible homeowners.

The government's newer programs, he said, are just getting started. "It's a little too early to reach a conclusion," Mr. Massad said, noting that the Treasury has two more years before its housing programs end.

But Mr. Barofsky's report noted that newer mortgage assistance initiatives are off to a slow start. For example, a program launched by the Federal Housing Administration last September to assist borrowers who owe more on their home loans than their properties are worth has landed with a thud, the report said. As of the end of last year, only 15 homeowners had refinanced their mortgages through the FHA's "short refinance" program, it said.

One reason for the disappointing results is that federally controlled mortgage finance companies Fannie Mae and Freddie Mac haven't signed up, despite the Obama administration pressing the two companies to participate by writing down underwater loans.

Several other new programs are also posting relatively small numbers, the report said.

• About 5,300 homeowners were enrolled in a program giving unemployed homeowners temporary assistance for three months or longer.

• About 3,100 borrowers have received assistance to complete modifications of second liens such as home-equity loans through December.

• An additional 2,200 have received federal assistance to hand over the deed to their properties or complete short sales under a program where homeowners get permission from their banks to sell their homes for less than the outstanding mortgage debt.

The report also said the government's 2008 bailout of the financial system helped head off a catastrophe, but may fuel another round of risky investments and another potential taxpayer-funded rescue.

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