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Hullabaloo


Monday, January 20, 2014

 
Devolving responsibility to the states for fun and profit

by digby

This piece by Dday about the Kafkaesque horror that has befallen homeowners caught up in bureaucratic hell is yet another cautionary tale about the efficacy of sending money "to the states" because they are so much closer to the problem and know how to effect policy changes better than the big bad federal government. Unfortunately, it's also a cautionary tale of a federal government so oblivious or delusional about how the real world works that it thinks it makes sense to create programs designed to help people and then put the money in the hands of people who don't believe that the government should help people.  That all of this ends up benefiting the wealthy interests who put these people in office is a coincidence, I'm sure.
The Treasury Department launched Hardest-Hit in 2010 by allocating $7.6bn from Tarp to 18 states where the foreclosure crisis had done the most damage. The states were granted a share of the total funds and designed their own foreclosure relief programs.

In Florida the idea behind the two core Hardest-Hit programs was to keep homeowners in their homes by intervening with their banks. If banks participated in Hardest Hit, the program would pay them $18,000 for the homeowner's mortgage arrears and up to $24,000 to make mortgage payments for another year. Lenders who agree to participate in the program are supposed to pause any foreclosure proceeding while the family receives Hardest-Hit assistance. Even a successful Hardest-Hit intervention does not dismiss the foreclosure case, but only pauses it, allowing the bank to restart proceedings after getting a year’s worth of payments from the fund. Banks often accept the mortgage payments from the Hardest-Hit Fund but then foreclose on homeowners later, undermining the program's goal of keeping people in their homes.

This is not the only problem. A minuscule portion of the money from Hardest-Hit has gone to help homeowners. An audit in 2012 found that states had delivered just $217.4m in assistance in the first two years, or 3% of the total. What is more, over a third of that figure went toward administrative expenses rather than homeowner relief.

As of this year, the Florida Hardest-Hit has devoted just 13% of the over $1bn in funds earmarked for the program to homeowners. The Treasury Department, the audit concluded, neglected Hardest-Hit early on, declining to use government power to force banks to participate. Some states have improved their programs since then, but others have given in to the inevitable and dramatically cut back on their initial performance goals.

“We see states continuing to drop and drop how many homeowners they will help,” said Romero. “It’s been very unfortunate for homeowners that have been struggling these last few years. Some people lost their homes because of that.”
That's just the dry outline of the program and its problems. Dday actually tells this story through the experience of one particular couple in Florida -- normal, average middle class Americans like most of us -- who had one tough break and the whole thing came crashing down around them. And when they turned to the program allegedly designed to help people in their situation, it got even worse. It's the story of how fragile our financial security is in this Galtian paradise and reveals just how obvious it is that our government, at all levels, is failing us. Highly recommended.



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