The federal government hasn’t done nearly as much to assist homeowner victims of the housing crash that started in 2006 as the bankers who caused it, but in February 2010 the U.S. Department of the Treasury rolled out a program to help the 18 hardest hit states and the District of Columbia.
The Hardest Hit Fund doled out $7.6 billion and earmarked $2 billion for California. Although the money was a tad belated, Keep Your Home California, as the program was called in the state, was still desperately needed by underwater borrowers.
Five years later, California has spent less than half of its allocation.
According to figures as of September 30, 2014, the state has committed $876.3 million and dispersed $807.9 million, or 40.9%. D.C. and the rest of the states spent 46.1% of their allocation.
Rhode Island has done the best, spending 77.4% of its modest $79.3 million allocation followed by Oregon at 75.1% of $220 million. Indiana is the worst, spending 22% of $221.7 million, followed by Georgia 27.4% of $339.3 million, Michigan 36.9% of $498.6 million, Mississippi 37.7% of $101.9 million and Florida 39.5% of $1.06 billion.
E. Scott Reckard at the Los Angeles Times noted that although there were complaints by a special inspector general that the states weren’t given much of a heads up on the program by the federal government, they weren’t entirely responsible for the pokey disbursement rate.
“Officials have attributed California's shortcomings to a number of problems, including the early emphasis on mortgage principal reduction. Most banks, along with Fannie Mae and Freddie Mac, declined to accept the program until the state agreed to shoulder its entire cost. California had initially pushed the banks to pay for half of the cost of debt forgiveness. The goal of the program was to reduce homeowners’ debt to match the reduced value of their homes.”
That didn’t happen.
“I thought, honestly, when we said, ‘We’ll match you,’ that there would be takers. I thought they’d be jumping up and down, but the interest wasn’t there,” Diane Richardson, legislative director of California Housing Finance Agency (CHFA), told California Watch back in 2012.
Principal reduction was just one of four programs that Keep Your Home California developed, but only 15% of the money has been used for that. The biggest chunk, 58%, was used to make mortgage payments for people while they collected unemployment benefits and another 25% helped debtors catch up on missed payments.
It’s not like there aren’t a boatload of folks who could still use assistance. “There are still a lot of people in real trouble, and in some areas of the state there are still quite a few underwater homeowners,” Keep Your Home spokesman Steve Gallagher told the Times, citing loan servicers as a particularly large early stumbling block.
The program was funded by federal Troubled Asset Relief Program (TARP), which pledged $700 billion to bail out financial institutions within days of the economic meltdown. The $7.6 billion in the Hardest Hit Fund, the largest effort by the federal government to help homeowners, has not been as effectively distributed.
“The banks got the money that they needed, but homeowners haven't got what was promised,” TARP Special Inspector General Christy Romero told California Watch.
California must spend that last $1 billion by 2017.
–Ken Broder
To Learn More:
Funding for California Victims of Housing Crash Trickles Down (by E. Scott Reckard, Los Angeles Times)
Protesters Say California Too Slow in Spending $2 Billion to Aid Homeowners (by Hudson Sangree, Sacramento Bee)
State Program for Struggling Homeowners Has Helped Few (by Aaron Glantz, California Watch)
Hardest Hit Fund Third Quarter 2014 Performance Summary (U.S. Department of the Treasury) (pdf)