Struggling homeowners were supposed to receive $46 billion of federal aid under the 2009 Troubled Asset Relief Program, but a new auditor’s report shows that only 10 percent of funds from various federal housing programs under TARP have actually found their way to borrowers.

Federal dollars seem to reach big banks just fine, but spending on the Home Affordable Modification Program (HAMP) — the lynchpin of the Obama administration’s foreclosure prevention efforts — has been slow. Just $3 billion of the $22.7 billion obligated at the end of June has been spent, according to the report.

HAMP has been a remarkably lackluster program since its inception, with more borrowers getting booted out of it than receiving mortgage modification. Three years after its creation, fewer than one million homeowners have received a permanent loan modification. What’s more, many homeowners who enter the HAMP program end up owing back fees and late penalties to the bank if they fail to obtain a permanent modification.

According to Bloomberg News, HAMP is just the tip of the iceberg when it comes to federal aid failing to reach homeowners:

One program, which allocates $2.7 billion in TARP funds to encourage lenders to write down or eliminate second liens when refinancing properties insured by the Federal Housing Administration, has not resulted in any removals of second liens, the report said.

The Treasury Department has allocated $8.1 billion for a program to allow borrowers who owe more than their homes are worth to refinance into loans insured by the FHA. Of that, $6.6 million has gone for administrative expenses, and 1,437 borrowers have benefited, the report said.

The U.S. auditor’s report also criticized the Treasury Department’s bungling of an aid program meant to assist families in states with the largest home-price drops. Of the $7.6 billion allotted for the program, only $351 million had been spent by the end of June.

– Steven Perlberg

Rep. Tom Latham (R-WI)

U.S. Rep. Tom Latham has repeatedly criticized a federal program that bought stock to shore up banks during the financial crisis — yet he maintains an investment of more than $1 million in a bank holding company that benefited from the taxpayer assistance, a Des Moines Register review of public records shows. [...]

Green Circle Investments Inc., where Latham was once a director, is the holding company for Peoples Trust & Savings Bank of Clive. The investors of Green Circle are made up mostly of Latham’s family and friends, who also are on the boards of both businesses, the congressman’s brother, Bob Latham, confirmed.

In 2009, Green Circle Investments accepted $2.4 million in TARP funds. It was one of nine Iowa financial institutions that participated in the Capital Purchase Program of TARP, and is one of three that have not repaid any of the principal on the loan, federal records show.

And he’s not the only one. A few months ago, the AP reported that Wisconsin Senate candidate Eric Hovde’s (R) company was investing in a bank that took TARP funds even as Hovde was campaigning against the bailout.

TARP, for all its warts, helped save the financial system, yet has become an easy target for politicians railing against bailouts. But even while that is going on, the financial industry has managed to buy off the Tea Party and right-wing Republicans, turning them into a reliable vote for bank interests.

Last night’s GOP primary debate took place in Nevada, which has led the nation in foreclosures for 56 consecutive months. It should have been the ideal venue for discussing the housing crisis and the fact that 1 million people are projected to lose their homes next year.

One questioner from the audience did, indeed, ask about foreclosures, and the slew of non-answers that came from the GOP candidates is a strong indicator regarding the lack of ideas that they have for keeping people in their homes. In fact, the discussion almost instantly devolved into a spitting match over whether or not various candidates supported the Troubled Asset Relief Program (TARP), the much reviled bank bailout of 2008, which has nothing to do with the current foreclosure crisis. Watch it:

First off, for all of its undeniable warts, TARP has earned a profit for taxpayers and succeeded in bolstering the economy. Of the limited options available at the time, it was the right course, and the Dodd-Frank financial reform law that all the candidates want to repeal is aimed at preventing a repeat of that situation.

In the few moments they did spend on actual housing policy, former Sen. Rick Santorum said, “We need to let the market work and that’s what hasn’t happened so far.” Romney doubled down on his remark from earlier that there should be no attempt to help homeowners facing foreclosure. Rep. Michele Bachmann (R-MN) turned the question into an attack on President Obama, saying he hasn’t done enough to help “women who are at the end of their rope because they’re losing their homes,” but offering no solutions of her own.

It was an embarrassing display, all the more so because the administration’s foreclosure prevention plans have been incredibly underwhelming, seemingly giving the candidates a legitimate opening to criticize the president. Instead, in their zeal to appeal to the anti-TARP sentiments of their base, they ignored the very real crisis with which homeowners in Nevada (and all across the country) are continuing to struggle.

Today marks the third anniversary of Congress approving the Troubled Asset Relief Program (TARP), the $700 billion bank bailout passed at the height of the financial crisis in 2008. TARP, for all its warts, saved the financial system from collapse. However, similar efforts have not been undertaken to rescue those who lost their jobs, savings, and homes due to Wall Street’s malfeasance. The 2009 Recovery Act was not big enough for the task at hand, while federal anti-foreclosure programs have fallen flat.

TARP’s anniversary coincides with the third week of protests on Wall Street (which have since expanded to several other cities). It’s perhaps fitting then that several economists are calling for “massive debt relief” as a way to help lift the economy, as ballooning debt (student and otherwise) is one of the issues galvanizing those who have occupied Wall Street:

Some economists are calling for a radical step: massive debt relief.

Federal policy makers, they suggest, should broker what amounts to an out-of-court settlement between institutional bond investors, banks and consumer advocates – essentially, a “great haircut” to jumpstart the economy.

What some are envisioning is a negotiated process in which cash-strapped homeowners get real mortgage relief, even if it means forcing banks to incur severe write-downs and bond investors to absorb haircuts, or losses, in some of the securities sold by those institutions.

“We’ve put this off for too long,” said L. Randall Wray, a professor of economics at the University of Missouri-Kansas City. “We need debt relief and jobs and until we get these two things, I think recovery is impossible.”

As Reuters reported, economist Stephen Roach has called for “Wall Street to get behind what others have called a ‘Debt Jubilee’ to forgive excess mortgage and credit card debt for some borrowers.” Roach said debt forgiveness would help the economy get through “the pain of deleveraging sooner rather than later.” “For their part, bondholders need to understand that we’re not earning our way out of this mess and should eat losses now before they get nothing,” added economic analyst and financial blogger Barry Ritholz.

As the American Independent put it, “debt forgiveness ideas have been swirling since the recession began.” It’s worth taking a moment to bring those ideas back up, three years after the banks received a bailout of their own.

When the nation’s biggest banks were bailed out in 2008 via the $700 billion Troubled Asset Relief Program, the money came with a few (very loose) strings, including restrictions on executive compensation and some requirements for the amount of capital the banks would have to raise in order to escape from TARP.

But as a new report from the Special Inspector General for TARP shows, even these restrictions were too much for some of the nation’s biggest banks — including Bank of America, Wells Fargo, and PNC — who lobbied for easier payback requirements so that they could be freed from restrictions on paying bonuses. And Treasury obliged their requests:

Federal banking regulators relaxed the November 2009 repayment criteria only weeks after they were established, bowing at least in part to a desire to ramp back the Government’s stake in financial institutions and to pressure by institutions seeking a swift TARP exit to avoid executive compensation restrictions and the stigma associated with TARP participation. The large financial institutions seeking to exit TARP were notably persistent in their efforts to resist regulatory demands to issue common stock, seeking instead morecreative, cheaper, and less sturdy alternatives that provide less short- or long-term loss protection than new common stock. Bank of America, Wells Fargo, and PNC, for example, requested expedited repayment, but each institution balked at issuing the amount of common stock required by regulators.

The practical upshot of weakening standards and letting banks repay their bailout funds early is that several of them were likely too weak to confidently stand on their own. As CNN Money put it, “this report is the first in many months to raise new questions about the health of some of the biggest banks after they were allowed to stand on their own two feet.”

Not all regulators were on board with allowing the biggest banks to leave TARP. Federal Deposit Insurance Corp. Chairman Shelia Bair, for instance, said that the banks’ repayment plans were based on a “gimmick.” “That just mystified me. The point was if they’re not strong enough, they shouldn’t have been exiting TARP,” Bair said. But Treasury still saw fit to let banks repay TARP and get back to paying outsized bonuses. But hey, at least they’re cutting down on office foliage!

A new report by the investigative website Pro Publica has revealed that Congress diverted $30 billion in bailout money allocated to help struggling homeowners prevent foreclosure in order to pay down the national debt instead.

There were more than 1 million foreclosure filings in the first half of 2011 alone, yet only a fraction of the government aid that was supposed to reach homeowners has been spent:

Instead, Congress has mandated that the leftover money be used to pay down the debt.

Of the $45.6 billion in Trouble Asset Relief Program funds meant to aid homeowners, the most recent numbers available show that only about $2 billion has actually gone out the door.

The low number reflects how little the government’s home loan modification and other programs have actually helped homeowners deal with the foreclosure crisis.

Pro Publica notes that in November, the CBO lowered their estimate of the total amount of money the government would spend on its foreclosure relief programs from $22 billion to $12 billion.

The original TARP legislation stipulated that unused bailout money should be returned to the Treasury to reduce the debt. However, Congress has the power to “re-route” these funds so that they fulfill their original purpose of helping homeowners through loan modification programs and other plans. But it’s unthinkable that Republicans will take such action, even to help struggling families stay in their homes.

GOP lawmakers have consistently prioritized reducing the deficit over the more pressing concerns of chronically high unemployment and foreclosure. Their willingness to let billions that could be used to aid homeowners go to paying down the debt instead is perhaps the clearest illustration to date of their skewed priorities.