Foreclosure

The Hardest Hit Fund was created to keep homeowners out of foreclosure during a tough economic period. It hasn't always succeeded, a new federal audit suggests.

(Chuck Crow, The Plain Dealer)

WASHINGTON -- The foreclosure crisis hit Ohio and Michigan hard. So to help them and other states, the federal government created the Hardest Hit Fund, an offshoot of a recession-era pool of money dedicated to keeping banks, the auto industry and the nation's economy from crashing.

But a new report from a federal inspector general today says that Ohio and Michigan in particular failed to get that money to the homeowners most at risk of losing their homes -- people who earned less than $30,000 a year.

This was particularly true for struggling homeowners in communities where General Motors was closing or streamlining factories, including Cleveland, Dayton, Detroit and other cities in Michigan. A majority of the people rejected from the program there had incomes below $30,000.

Ohio officials dispute some of the report's assertions as well as a central premise. They say that of the General Motors employees who applied for help, 88 percent got it.

What this is about:

The Hardest Hit Fund, an offshoot of the banking-related Troubled Asset Relief Program, or TARP, was specifically aimed at people in cities affected by job losses and foreclosures. It was to provide short-term mortgage payments and other assistance until things turned around financially.

Two key findings from the Office of the Special Inspector General for TARP, a law enforcement agency that reports to Congress as a watchdog of taxpayer dollars:

53 percent of homeowners turned down in the 19 program states had incomes below $30,000. The denial rate was even greater in 12 states, with almost three out of every four denials going to homeowners earning less than $30,000.

Ohio was among the worst.

"When we see that nearly everyone turned down for TARP's Hardest Hit Fund unemployment assistance earned less than $30,000 in cities where GM or its suppliers laid off workers, we know that the program can do more to open up funding to these and other hard hit workers," Christy Goldsmith Romero, Special Inspector General for TARP, said in a statement.

Ohio's rebuttal:

The fund, as it existed at its creation and now, is administered by state housing agencies. In Ohio, that's the Ohio Housing Finance Agency. The state agency said in an interview this afternoon that the report's criticisms don't match what has actually happened in Ohio.

Jim Durham, the Ohio agency's director of home ownership, said federal guidelines for assisting homeowners focused on those with incomes of $50,000 or lower -- not $30,000, an income threshold that he said was news to him and the agency.

Regardless, he said, 82 percent of people who got homeowners' assistance had incomes of $50,000 or less.

Furthermore, he said, only 26 Ohio applicants who worked for General Motors applied for assistance -- and 23 of them got it. That's an 88 percent acceptance rate, said Ohio agency spokeswoman Molly Moses.

The Ohio agency said it wanted to promote stability, so the ability to keep a home was a consideration when approving applications.

Statistics and realities:

The inspector general's report is based on statistics of the number of people applying for assistance and their incomes, and the number accepted or turned down. It does not assess why people were turned down, such as extensive debt or other possible financial problems.

That information was sought, the report said, but auditors were told housing agencies in Ohio and elsewhere could not provide answers without going through each applicant's file. The report suggests that even if there were valid reasons for some denials, at least two problems can be fixed as the program continues in its latest iteration:

Ohio and other states can better track reasons for denials so the information be better accessed.