The House Oversight Committee is holding its first hearing since Darrell Issa got the gavel today, and it’s on TARP and foreclosures. And that bifurcation is accurate – the Republicans on the panel, for the most part, are asking about TARP, and the Democrats are asking about foreclosures. Timothy Massad of the Treasury Department (filling in for Treasury Secretary Geithner, who declined to participate) and SIGTARP (Special Inspector General for TARP) Neil Barofsky are appearing before the committee.

The backdrop for this is a new SIGTARP quarterly report and some new statistics on HAMP from the Treasury Department, showing another 30,000 getting a permanent modification while 58,000 fall out of the program and have their modifications. In his quarterly report, Barofsky said that HAMP “continues to fall short of any standard of success” and highlighted that the program is now expected to spend only $12 billion out of the $50 billion allocated through TARP.

Today, HAMP appears to be under siege, with a chorus of criticisms from all points on the ideological spectrum growing more insistent and calls for termination or a dramatic restructuring gaining traction. The numbers are remarkably discouraging. According to RealtyTrac data, a record 2.9 million homes received foreclosure filings in 2010, up from 2.8 million in 2009, and 2.3 million in 2008. RealtyTrac predicts that filings will be 20% higher in 2011, crossing the 3 million threshold. Similarly, the firm’s data reveal that bank repossessions continue to increase, from just under 820,000 in 2008 to over 918,000 in 2009 to 1.05 million in 2010.

In contrast, the number of permanent mortgage modifications under HAMP remains anemic — there were just under 522,000 ongoing permanent modifications as of December 31, 2010, with approximately 238,000 of those funded by and attributable to TARP. The remaining were funded outside of TARP by the GSEs. A combined total of more than 792,000 trial and permanent modifications have been cancelled, with more than 152,000 trial modifications still in limbo. These permanent modification numbers pale in comparison not only to foreclosure filings, but also to Treasury’s initial prediction that HAMP would “help up to 3 to 4 million at-risk homeowners avoid foreclosure” “by reducing monthly payments to sustainable levels.”

That’s a key point – over half of the HAMP modifications aren’t even happening through TARP, but through the GSEs (which committed their own funds, outside of the $50 billion from TARP). And some of the other program failures are astonishing – “the FHA Short Refinance program, launched on September 7, 2010, had only resulted in 15 refinances as
of December 31, 2010.” Incredible.

While Republicans fulminated about the GSEs or small business lending, Democrats mostly focused on HAMP, and the terrible performance from the loan servicers. Stephen Lynch (D-MA) noted the multiple investigations and lawsuits against the servicers, actually daring to speak about foreclosure fraud, and put it to Treasury’s Massad, “What are we doing about the servicers? They seem to be the whole problem.” Massad referred to the inter-agency task force from the Financial Stability Oversight Council, which few people believe to be a serious effort.

Later, Massad defended HAMP from the criticism from Eleanor Holmes Norton (D-DC) that it has “failed so many homeowners” and that the servicers, through HAMP, have a financial incentive to foreclose and a “disincentive to work with borrowers.” Massad countered that the structure of the program has worked and been emulated by the industry at large, who are using HAMP’s net present value tests to judge eligibility for a modification.

“Why is the FHFA considering a new compensation structure” for the servicers, then, if their model works?

Massad said he agreed with the effort, “because the servicer model doesn’t work, it is broken, it doesn’t create the right incentives…. On under-performing loans they’re not set up to deal with people.” Yet despite this, he maintained to Norton and to Rep. David Price (D-NC) that the program has “come a long way… we’re making some progress.”

I don’t know what world Massad is living on to suggest that HAMP is making any progress, either on the foreclosure crisis or even on its own goals. Moreover, the crisis has metastasized, and HAMP hasn’t kept up with the foreclosures in the country. And of course, they have no idea how to deal with the plain fact that chain of title has been broken and it’s unclear whether the servicers own the loans and can collect payments on them. Servicers still have not been sanctioned by Treasury for their continued violations of HAMP. As Barofsky says in his report, “Treasury’s reaction to servicer non-compliance with the requirements of HAMP and its related programs appears to be driven largely by the fear that forcing servicers to comply with their contractual obligations will drive them away from HAMP.”

The hearing will soon continue on C-SPAN 3.

UPDATE: There was quite a dust-up early in the hearing, when Issa wouldn’t allow ranking member Elijah Cummings or anyone else to make an opening statement. It sounds like a magnanimous gesture not to waste the time of the witnesses, but in actuality Issa didn’t want it relayed in public that he blocked Cummings from calling a witness from JPMorgan to address their role in foreclosure fraud.