Florida's Hardest Hit Fund program blistered in report

The owner of this mobile home at 5232 79th St. N in St. Petersburg got $42,000 in Hardest Hit Fund mortgage assistance. It has been abandoned and now is in foreclosure.
The owner of this mobile home at 5232 79th St. N in St. Petersburg got $42,000 in Hardest Hit Fund mortgage assistance. It has been abandoned and now is in foreclosure.
Published Oct. 6, 2015

In a blistering report released today, federal investigators say Florida has consistently "under-performed'' other states in using federal mortgage assistance money to help desperate homeowners facing foreclosure.

Of the 18 states participating in the Treasury Department's Hardest Hit Fund, Florida has the lowest rate of approving homeowners for assistance, one of the highest rates of denying assistance and an overall "slowness'' in processing thousands of applications.

Five years into the program, only 22,400 Floridians had been helped as of March — just 20 percent of all who applied and the lowest percentage of any state. Estimates of the total number to receive assistance by the program's end in December 2017 have plunged from the original 106,000 to just 39,000.

"After five years, Hardest Hit Fund Florida still has half of their HHF funds despite Florida homeowners experiencing critical need,'' according to the Special Inspector General for the Troubled Asset Relief Program, or TARP.

The Treasury Department must adopt a "sense of urgency'' to ramp up the effectiveness of Florida's assistance in the remaining two years, the report added.

Florida Sen. Bill Nelson asked Inspector General Christy Romero to investigate the Florida program after a 2013 Tampa Bay Times story revealed that the state had spent some of its $1 billion in Hardest Hit funds on felons and tax cheats while denying aid to thousands of people.

The story also reported that partly due to pressure from the office of Gov. Rick Scott — an opponent of federal bailout programs — the amount of time that homeowners could receive help was temporarily cut to just six months. That was not long enough to help many unemployed homeowners get back on their feet financially, experts said.

"My chief concern has always been that the money wasn't getting into the hands of needy homeowners,'' Nelson said of Florida's Hardest Hit program on Monday. "This report confirms that and, to the extent that a federal agency is at fault, I will stay on top of them until they get it fixed."

The Treasury Department launched the $7.6 billion Hardest Hit Fund in 2010 to help Florida and other states that were pummeled by the foreclosure crisis. Despite what the White House called "urgent problems'' facing homeowners, the Treasury Department has been too "deferential'' to Florida officials and hasn't pressed them to set or adhere to any goals except for spending all of the money by the end 2017.

"As a result,'' the report said, "HHF Florida has not been as effective in reaching homeowners as other states.''

Both the Treasury Department and Florida Housing Finance Corp., the state-run agency that administers Florida's Hardest Hit Fund, took issue with the inspector general's report, saying it failed to note significant recent improvements.

"Since 2010, when the HHF program began, $520.6 million has been disbursed to 23,224 homeowners,'' the housing agency said in a statement. "The amount of this disbursement is second only to California, and the number of homeowners served is the fourth highest number of homeowners among HHF states.''

The report cited several factors that caused Florida to lag in providing mortgage assistance, especially during "the height of the crisis when homeowners needed it most.''

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• The Treasury Department initially relied on Florida officials to persuade, with little success, banks and loan servicing companies to participate in the Hardest Hit Fund. Not until Treasury itself began pressuring the banks was Florida able to fully roll out a program that made up past-due payments for unemployed homeowners. But that caused a year's delay and was too late for many people to avoid foreclosure.

• The Treasury Department allowed Florida to cut from 18 to 6 the number of months that unemployed homeowners could get Hardest Hit help even though nearly 43 percent of unemployed workers were jobless for more than six months. In 2012, Florida extended the time to a year, making the change retroactive in a move that "totally froze up their operations'' for a time, one Treasury official said.

• During its first two years, Florida's Hardest Hit program was "plagued'' by the fact that nearly half of all homeowners were deemed ineligible, including those who were more than 180 days late on their payments. As the Times reported, the program also excluded all Florida condo owners whose condo associations did not meet certain federal requirements. The state eventually loosened its eligibility rules but not before thousands of homeowners had been denied assistance.

• Although Florida was chosen for the Hardest Hit Fund because 37 percent of its homes lost value after the crash, the Treasury Department did not press the state to provide assistance when home prices were at their lowest in 2010-11. By the time Florida started a principal reduction program for underwater homeowners in September 2013, home values already had increased by more than 22 percent.

The report was especially critical of the way Florida implemented the program, which reduces loans balances by up to $50,000 for homeowners who are current on their mortgage payments but owe more than their houses are worth. The state had to shut off new applications after 25,000 people applied in just a few days.

"Treasury and Florida (officials) could have engaged in critical thinking to anticipate a flood of applications and determine any obstacles . . . to being able address them,'' the report said. "These obstacles could have been mitigated with additional staff.''

By the time the program reopened eight months later, in May 2014, it had helped only 1,756 homeowners. Though that number has increased by about 4,000, the report noted that it is taking longer to get assistance — nearly seven months as of March — and that the Treasury Department had set no goals for the program "other than to spend $350 million in TARP funds.''

"Given that it took so long for HHF Florida to have a program that targeted underwater home­owners,'' the report said, "there is no time for Treasury to wait to ensure that this assistance is effective.''

The report also criticized the decision to allocate $50 million in Hardest Hit funds to a lesser-known principal reduction program that the Times reported on last year. In that program, Florida uses the federal money to help modify delinquent mortgages that a New Jersey non-profit organization buys at federal auctions.

However, the nonprofit didn't buy as many mortgages as expected, and as of March, only 92 homeowners had been helped. "In the meantime, the $50 million is not being used for other programs effectively reaching homeowners," the inspector general said.

The report made 20 recommendations for improving Florida's Hardest Hit program, among them stepping up efforts to determine whether applicants and program employees have criminal records for fraud or other money-related crimes.

It also said Florida needs to make it easier for senior citizens with reverse mortgages to apply for help in paying insurance and property taxes. Although $25 million has been set aside for the Elderly Mortgage Assistance Program, fewer than 700 seniors have received help to date.

Above all, the report said, the Treasury Department needs to be less deferential to state officials and instead should "push and pressure'' them to make Florida's program "the most effective it can be.''

"To change a future outcome for the under-performing Florida Hardest Hit Fund, the report said, "it is time for Treasury to change the game.''

Contact Susan Taylor Martin at or (727) 893-8642. Follow @susanskate.