Gov’t Has Spent Small Fraction Of $50 Billion Pledged For Loan Mods

When the Obama administration launched its flagship foreclosure prevention program in early 2009, it pledged to spend up to $50 billion helping struggling homeowners. But the government has so far only spent a tiny fraction of that.

A recent Treasury Department report [1] summarizing TARP spending put the total at $600 million through October.

Although the Treasury Department posts the maximum amount that could go to each mortgage servicer on its website [2], it doesn’t report the details of the spending. So we filed a Freedom of Information request for the data, and can now show for the first time exactly how much money has gone to each servicer. (A Treasury Department spokeswoman said they’re considering regularly releasing the information going forward.)

The program, which uses TARP money, tries to prevent foreclosures by paying mortgages servicers incentives to make loan modifications. The largest payout, $79 million, has gone to JPMorgan Chase [3]. Next on the list is Bank of America with $45.1 million [4]. That’s a drop in the bucket for BofA, which reported [5] net servicing income of $780 million in the third quarter. (You can use our bailout tracker [6] to see how much money has gone to each mortgage servicer. The figures, which come from our FOIA request, only go through August.)

With the government’s program showing signs of slowing down [7], the small payout so far shows that Treasury won’t come close to using the full $50 billion, said Guy Cecala, publisher of Inside Mortgage Finance. “It’s a joke, because everyone’s asking ‘is [the program] really worth the $50 billion we’ve committed?’” he said. “We’ll never spend anywhere near that.”

There are two main reasons why so little money has been paid out. First, there have been few modifications done through the program [8]. The government only pays incentives for finalized modifications, not trials. For instance, even though $8.3 billion has been set aside for Bank of America [4], it won’t get that money unless it provides modifications.

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