Taxpayer funds that were intended to support distressed borrowers in areas that suffered the most from the housing crisis have, in some cases, been used for frivolous purposes by state housing agencies.
The Hardest Hit Fund was established
in 2010 by the Obama administration to assist distressed borrowers on loans secured by properties in communities suffering the most from the housing crisis.
The program, initially funded with
$1.5 billion in capital, was paid for through the Troubled Asset Relief Program, which was created through the Emergency Economic Stabilization Act of 2008.
A report in 2015 indicated that funding for the Hardest Hit Funds had reached nearly $5 billion.
Funds from the program were intended
to reduce mortgage principal on negative-equity properties, provide assistance for unemployed or under-employed borrowers and help eliminate second liens. It will also intended to make up delinquent payments and facilitate short sales and deeds-in-lieu of foreclosure.
But some of the funds were instead used by state housing agencies for frivolous spending.
According to a report from TARP’s
Office of the Special Inspector General, state housing agencies used the funds for things like steak-and-seafood dinners, gift cards and flowers. Also funded by the program were gym memberships, employee bonuses and litigation as well as celebrations and cars.
The report said that more than $100,000 was spent on barbecues with Treasury Department employees — including events held by the Alabama Housing Finance Authority and the Kentucky Housing Corp.
Another $106,774 went to bonuses for the terminated executive director of the Florida Housing Finance Corp., and $43,000 or so went to the terminated chief executive of the Nevada Housing Division.
SIGTARP discovered the program abuses through a forensic analysis.
“SIGTARP previously reported on scores of people who earn under $30,000 a year, but were turned down for the Hardest Hit Fund,” Special Inspector General for the Troubled Asset Relief Program Christy Goldsmith Romero said in a statement. “Now we find that some state housing agencies are more willing to keep TARP dollars for themselves than distribute it to low-earning homeowners, a violation of TARP contracts and inconsistent with TARP law.”
Romero noted that administrative expenses for the the Hardest Hit Fund have exceeded $1 billion for the distribution of $8.5 billion in assistance.
In all, SIGTARP has identified $3 million in unnecessary expenses.
Among the frivolous expenses was a customer center built in 2010 in Rhode Island that is also used for purposes other than the Hardest Hit Funds.
More than $342,000 was spent on employee bonuses at state housing agencies from the funds. A similar amount was spent on settlements, severance and other former employee legal expenses.
The report indicated that $258,333 was used to pay for
five years of avoidable online storage access and data to the District of Columbia’s housing finance agency two years after the program was closed to homeowner applications.
SIGTARP noted that the Illinois Housing Development used some of the more than $98,000 to pay for lunch at a pizza restaurant to “to celebrate getting new HHF funds and an employee’s upcoming wedding.”
In South Carolina, the funds were used to pay for an executive’s use of a car for more than four years.
Other spending abuses include holiday parties, luxury office rent, employee gift cards and even a car allowance for a Mercedes Benz.
“For TARP and taxpayers to be made whole, these state agencies must pay back their ill-gotten gains,” the report stated.