Congress also provided  Treasury with the authority to extend its authority under EESA with  respect to the Housing Finance Agency Innovation Fund for the Hardest  Hit Housing Markets (Hardest Hit Fund) to December 31, 2017 for current  program participants and to obligate up to $2 billion of TARP funds to that  program. Treasury  officials previously indicated that they cannot reliably estimate future  borrower participation and likely program expenditures due to inherent  limitations of the available data. While no estimate of future participation  and expenditures can be made with complete certainty, our own analysis  of data from Treasury and a private vendor resulted in estimates of  borrower participation and cost projections that ranged from Treasury  using all available MHA funds to an estimated surplus of $2.5 billion. Without Periodic Reviews of Unexpended Balances, Treasury May Miss Opportunities to Achieve Budgetary Benefits

			Agencies Can Identify Opportunities for Budgetary Benefits by Reviewing Unexpended Balances

Prior GAO work has concluded that conducting reviews of unexpended  balances can help agencies identify opportunities to achieve budgetary  benefits. In our July 2009 report, which reviewed  these estimates, we found that Treasury’s estimate may have been  overstated, reflecting uncertainty resulting from data gaps and the  numerous assumptions that had to be made. Treasury officials previously told us that Treasury’s  mandate is to help as many struggling homeowners as possible. The President’s fiscal year 2017  budget submission indicates that Treasury is now estimating a $4.7 billion  reduction in total outlays for the MHA program. We  compared these estimates of future cost with available, but unused, funds  as of October 16, 2015, to produce estimates of potential excess funds. Additionally, if Treasury were to deobligate  MHA funds that it determines were likely to not be expended, this may  provide Congress with the opportunity to use those funds for other  priorities. Congress recently enacted  legislation that effectively terminates entry into the MHA programs after  December 31, 2016, and authorized Treasury to move up to $2 billion in  TARP funds to the Hardest Hit Fund. In February 2016, Treasury  deobligated $2 billion and announced plans to move these funds to the  Hardest Hit Fund. By taking action to estimate likely MHA expenditures  and potential excess funds, Treasury could identify additional  opportunities to deobligate those funds. Matter for Congressional Consideration

To better ensure that taxpayer funds are being used effectively, Congress  should consider permanently rescinding any Treasury-deobligated excess  MHA balances that Treasury does not move into the Hardest Hit Fund. Recommendations for Executive Action

To provide Congress and others with accurate assessments of the  funding that has been and will likely be used to help troubled borrowers  and to identify any potential obligations not likely to be used, the  Secretary of the Treasury should (1) review potential unexpended  balances by estimating future expenditures of the MHA program; and (2)  deobligate funds that its review shows will likely not be expended and  obligate up to $2 billion of such funds to the TARP-funded Hardest Hit  Fund as authorized by the Consolidated Appropriations Act, 2016. In its comment letter, Treasury agreed with our recommendations and  stated that it had updated its cost estimates for MHA and planned to  deobligate $2 billion from the program, which it did on February 25, 2016. Specifically,  Treasury noted that its updated cost estimates had identified an additional  $2.7 billion in potential excess MHA funds but that deobligating all MHA  funds in excess of the current cost estimate would unduly increase the  risk of insufficient funding for future program expenditures. Appendix I: Objectives, Scope, and Methodology

In response to a provision in the Emergency Economic Stabilization Act of  2008 that requires GAO to issue a report on TARP every 60 days, this  report examines to what extent the Department of the Treasury  (Treasury) is reviewing unexpended balances and cost projections for the  Troubled Asset Relief Program (TARP)-funded Making Home Affordable  (MHA) program.
Why GAO Did This Study

Since 2009 Treasury has obligated $27.8 billion in TARP funds through its MHA program to help struggling homeowners avoid foreclosure. The Emergency Economic Stabilization Act of 2008 includes a provision for GAO to report every 60 days on TARP activities. This report examines the extent to which Treasury is reviewing unexpended balances and cost projections for the MHA programs. To do this work, GAO used 2015 mortgage and other data from a private vendor and Treasury to help illustrate potential future costs of MHA/HAMP, reviewed internal Treasury documents, and interviewed relevant federal agency officials.

What GAO Found

The U.S. Department of the Treasury (Treasury) monitors activity and aggregate expenditures under its Troubled Asset Relief Program (TARP)-funded Making Home Affordable (MHA) program, but it has not instituted a system to review the extent that it will use the full available program balance ($7.7 billion as of October 16, 2015). In a July 2009 report, GAO found that Treasury's estimates of program participation may have been overstated, reflecting uncertainty caused by data gaps and assumptions that had to be made, and recommended that Treasury periodically review and update its estimates.
In response, Treasury started performing periodic estimates of the eligible HAMP population. Treasury officials previously told GAO that they could not reliably estimate future participation levels due to data limitations and that they assumed that all available MHA funds would be spent. GAO recognizes that no estimate of future participation and expenditures can be made with certainty. But prior GAO work has concluded that reviewing unexpended balances, including those that have been obligated, can help agencies identify possible budgetary savings. Moreover, Congress's recent action to limit entry into the MHA programs after December 31, 2016, and to allow Treasury to obligate up to $2 billion in TARP funds, including MHA funds, to the Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (Hardest Hit Fund), provides Treasury with greater certainty and opportunity with respect to estimating and reprogramming excess MHA fund balances. Since then, the President's 2017 Budget identified $4.7 billion in potential excess funds, and Treasury has announced its intention to transfer $2 billion of these funds to the Hardest Hit Fund. Officials said that deobligating additional amounts would present undue risk of having insufficient funds, and that further estimates of excess funds should await the completion of all new activity.
GAO performed its own analysis of September 2015 mortgage data to estimate potential future HAMP participation and costs. This analysis resulted in estimates of MHA program balances as of October 16, 2015, that ranged from using all available funds to a surplus of $2.5 billion. In preparing these estimates, GAO attempted to provide a wide range of possible outcomes and generally used inclusive assumptions. Thus the actual number of eligible loans is likely to be lower and the unexpended balances higher than GAO's estimates. Taking action to estimate likely MHA expenditures allows Treasury to deobligate excess funds and, as appropriate, move funds to the Hardest Hit Fund. To the extent that additional funds may be deobligated, Congress may then have the opportunity to use those funds on other priorities.

What GAO Recommends

GAO is making two recommendations to Treasury and has one matter for congressional consideration. Treasury should (1) estimate future expenditures for the MHA program and any unexpended balances and (2) deobligate funds that its review shows will likely not be expended and move up to $2 billion of such funds to the TARP-funded Hardest Hit Fund as authorized. Congress should consider permanently rescinding any deobligated MHA funds that are not moved to the Hardest Hit Fund and make them available for other priorities. Treasury agreed with our recommendations and indicated that it has updated its cost estimates and subsequently deobligated $2 billion of MHA funds on February 25, 2016.