The program was intended to help  eligible borrowers stay in their homes and avoid potential foreclosures  by reducing monthly mortgage payments to affordable levels. modification. Home Affordable Unemployment Program. Treasury Continues Its Efforts to Reach More Borrowers and Address Interest Rate Increases

		Treasury Has Disbursed More Than 40 Percent of Allocated TARP Housing Funds

Between February 2009 and May 2015, Treasury disbursed  approximately $16.3 billion (43 percent) of the $37.5 billion in TARP funds  allocated to support housing programs. 1). Treasury Has Not Fully Assessed the Benefits and Costs of Recent MHA Program Changes

Treasury had taken steps to assess the benefits and costs of the three  recent MHA program changes we reviewed but did not fully meet all of  the key elements of effective benefit-cost analyses. Treasury officials told us they do consider the benefits and costs of their  program changes. Further, program benefits  extend beyond individual borrowers to the larger community and are  difficult to quantify. 5). Further, according to Treasury officials it is difficult to estimate the  number of borrowers that will ultimately receive assistance under HAMP  Tier 2 or other programs, given borrowers’ unique situations, the dynamic  nature of the housing market, and broader economic forces including  changes in unemployment rates and rates of new mortgage defaults. Treasury officials said that the survey’s results confirmed that  borrowers responded to performance incentives. Treasury estimated the total cost of the additional incentives at between  $4 billion and $6 billion in additional TARP fund outlays, depending on  how many potentially eligible homeowners participate and remain current. Further, Treasury  does not have a plan for evaluating the effectiveness of the pay-for- performance incentive on HAMP Tier 2, RD-HAMP, FHA-HAMP, and  enterprise borrowers. As a result, Treasury will be limited in its ability to adequately  determine whether the incentive has helped prevent redefaults after the  interest rate increases. Recommendations for Executive Action

To bring greater rigor and efficiency to decisions about the use of federal  funds allocated for TARP housing programs, we recommend that the  Secretary of the Treasury develop and implement policies and  procedures that establish a standard process to better ensure that TARP- funded housing program changes are based on analyses that  comprehensively and consistently meet the key elements of benefit-cost  analysis. Appendix I: Objectives, Scope, and Methodology

In response to a provision in the Emergency Economic Stabilization Act of  2008 (EESA), this report examines (1) the status of TARP-funded  housing programs and (2) the extent to which Treasury’s analytic  framework for considering recent program changes was consistent with  federal guidance and best practices.
Why GAO Did This Study

Treasury has allocated $37.5 billion in TARP funds to help struggling homeowners avoid potential foreclosure since 2009. The Emergency Economic Stabilization Act of 2008 includes a provision for GAO to report every 60 days on TARP activities. This 60-day report examines (1) the status of TARP-funded housing programs and (2) the extent to which Treasury's analytic framework for considering recent program changes was consistent with federal guidance and best practices. To do this work, GAO analyzed borrower participation levels, reviewed program documentation, and interviewed Treasury officials.

What GAO Found

Between February 2009 and May 2015, the U.S. Department of the Treasury (Treasury) disbursed approximately $16.3 billion of the $37.5 billion in Troubled Asset Relief Program (TARP) funds allocated to support housing programs. The number of new borrowers with permanent modifications added to the Home Affordable Modification Program (HAMP), the key component of these programs, began to decline in late 2013 but has stabilized at between 9,000 and 15,000 additions per month. Activity under HAMP Tier 1, the original modification for qualified borrowers seeking to reduce their mortgage payments to affordable levels (rates periodically reset), has gradually declined. HAMP Tier 2, a broader fixed rate modification announced in 2012, has gradually grown to account for the majority of new entrants. Since October 2014, Treasury has expanded incentives in order to draw new entrants into the programs and further assist existing participants.
In making program changes, Treasury took steps to assess their benefits and costs but did not fully meet all of the key elements of federal benefit-cost analysis guidance, and thus has limited assurance that the additional expenditures are an effective and efficient use of taxpayer dollars (see figure below). For example, it is unclear whether the recent changes, such as extending performance incentives to borrowers in the sixth year of their HAMP modification (estimated to cost $4-6 billion), will reduce redefaults. Treasury officials told GAO that borrower surveys confirmed that borrowers responded to performance incentives. But Treasury does not have the estimates needed to fully assess the effectiveness of this or other recent changes. Treasury officials said that program benefits and costs depended on unknown factors and macroeconomic trends and that program benefits were difficult to quantify. Office of Management and Budget guidance and GAO's past work stress that analyzing benefits and costs can help decision makers choose among alternatives. Without full and comprehensive analyses, Treasury will be challenged to determine whether program changes are actually achieving desired goals and are an efficient use of taxpayer dollars.

What GAO Recommends

To bring greater rigor and efficiency to decisions about the use of federal funds, GAO recommends that Treasury develop and implement policies and procedures that establish a standard process to better ensure that TARP-funded housing program changes are based on benefit-cost analyses that meet key elements. Treasury agreed to consider applying GAO's recommendation going forward.