It’s fairly impossible to follow Administration math on the HAMP program, which is part of the TARP authorization. I’ve seen HAMP alternately described as a $75 billion, $50 billion, $45.6 billion and $29 billion program. And the White House has carved money out of HAMP for other housing programs like the Hardest Hit Fund. So accounting is a problem. But the Administration is really stretching the bounds of logic with their claim in the FY 2013 budget that they will spend all $46 billion in HAMP by the end of 2013.
The budget, as expected includes a call for broadening the availability of refinancing options for borrowers who are current on their mortgages but owe more than their homes are worth. The administration said it plans to finish doling out unspent funds for housing assistance, which is likely to increase the costs of the emergency financial bailout by $20 billion — something that is likely to generate criticism from Republicans for increasing taxpayer costs […]
But the administration’s goal of spending all of the $45.6 billion set aside for housing initiatives under TARP will likely drive up the ultimate cost to taxpayers of the TARP program to $68 billion from last year’s projected $48 billion.
This bait-and-switch from a $50 billion to a $45.6 billion program continues. But understand that there’s no way, unless millions of new people suddenly start participating in HAMP, that they will raise spending up to $45.6. CBO doesn’t believe so. Treasury has cited the CBO’s numbers in its own reports when they want to make the cost of TARP look smaller. But now that we’re out of deficit mode and into “we’re here to help” mode they pretend that they will fix housing by spending the whole $45.6 billion (even though it should be the whole $50 billion, as $4.4 billion has just gotten lost along the way).
Here’s the most recent CBO report on HAMP. Go to page 5. The actual disbursements from mortgage programs under TARP, which have been operative since April 2009, is $3 billion (CBO anticipates $13 billion in spending before it’s all said and done). So the Administration wants us to believe that they plan to spend $43 billion in the next two years on a program they’ve spent $3 billion on in nearly three years. That defies logic. And I know that some analysts believe that more homeowners will be attracted to HAMP because of the tweaks just made to the program, but I’m dubious to say the least. And even if the analysis is correct, they couldn’t get a whole lot more spent than the $13 billion anticipated by CBO.
I’d be thrilled to be wrong here, and say that the Administration has now made a commitment to spend $43 billion over the next two years to reduce mortgage balances. Considering that HAMP spends money on incentive payments that leverage up reductions in mortgage debt (the $3 billion has supported $22 billion in equity according to the latest HUD scorecard), that would be close to a $200 billion program. Add that to the $25-$40 billion in the foreclosure fraud settlement and we’re starting to make a dent.
But it’s just not all that likely.