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Neil Barofsky, special inspector general for the Troubled Asset Relief
Program (SIGTARP), has been highly critical of the government's foreclosure
prevention programs
inhttp://ping.fm/sVHI6 months.
On Tuesday, he released his quarterly report to Congress
, and put the administration's new initiatives to help
unemployed and underwater homeowners under the microscope.

He said to the Treasury's credit, the changes are an important step forward
in addressing the flaws of the Home Affordable Modification Program (HAMP) -
in particular expanding borrower participation and addressing re-defaults
driven by negative equity - but raise several issues that could impede the
program's effectiveness.

Barofsky said in the report, "Treasury's urgency in rolling out the new
initiatives, laudable as it is, risks significant costs in the form of
ill-defined goals, incomplete program guidelines, increased vulnerability to
fraud, incentives that may prove ineffective, and the potential for
arbitrary treatment of participating borrowers."

SIGTARP has put forth a laundry list of suggestions to address these issues.
First and foremost, he says Treasury needs to clearly identify participation
goals and expected costs for each HAMP subprogram.

To safeguard the program against fraud, Barofsky wants the Treasury to drop
its differing valuation requirements across the various HAMP programs and
adopt the Federal

Housing Administration's (FHA) appraisal standard for all principal
reduction and short sale programs.

He says because the program guidelines don't require appraisals prior to a
principal write-down, it is easier for servicers to deceptively meet the
criteria for incentive payments.

"No program of this type and scale can be considered well designed without
robust protections of taxpayer funds against the predation of criminals,"
the report said.

Barofsky also says that the voluntary nature of the principal write-down
effort undermines its effectiveness. He wants the Treasury to consider
mandating principal reduction under specific scenarios to ensure consistent
treatment of similarly situated borrowers and to address servicer conflicts
of interest.

He also suggests the Treasury lengthen the three-month minimum term of the
unemployment forbearance program.

Despite Treasury's efforts thus far, the inspector general said, HAMP has
made "very little progress" and the "foreclosure crisis has not abated." He
noted in his report that nearly 2.8 million foreclosures were initiated in
2009 and 2010 is on pace "to be even worse." There were more than 932,000
foreclosure filings in the first three months alone, with bank repossessions
up 35 percent compared to 2009 levels.

Juxtaposed next to these numbers, HAMP just doesn't measure up - only
230,000 permanent modifications made over the program's 12-month existence.
Barofsky says HAMP's progress represents only 8.2 percent of the
foreclosures initiated in 2009, and fewer than only the most recent
quarter's actual bank repossessions.

"Until Treasury fulfills its commitment to provide a thoughtfully designed,
consistently administered, and fully transparent program, HAMP risks being
remembered not for catalyzing a recovery from our current housing crisis,
but rather for bold announcements, modest goals, and meager results,"
Barofsky said in his report to Congress.

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