Bailout watchdog to probe how states chosen for administration’s $2.2B housing aid program

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Bailout watchdog to audit housing program

WASHINGTON — The special inspector general for the financial bailout will examine how 10 states were selected for a $2.1 billion Obama administration plan to aid areas hit by the housing bust.

A letter obtained by The Associated Press indicates bailout watchdog Neil Barofsky is undertaking the audit in response to a request by Rep. Darrell Issa, R-Calif.

The Treasury Department has been running the government’s “Hardest-Hit” fund, which is stocked with financial rescue money.

Barofsky also plans to examine whether state-designed programs that are receiving assistance differ from existing government efforts, the letter indicates. He also plans to examine whether Treasury has established ways to prevent waste and fraud and whether the government has established goals and measurements for the programs.

President Barack Obama unveiled the state assistance effort in February. Since then, state agencies have designed their own approaches. They vary by state, but many provide aid to unemployed homeowners, or “under water” borrowers who owe more on their properties than their homes are worth or those.

Last month, the Treasury Department approved plans for half of the states getting funding through the program — Arizona, California, Florida, Michigan and Nevada. The states, which were picked because they experienced at least a 20 percent decline in home prices, estimate that their plans will help up to 93,000 homeowners.

Besides these states, the Obama administration is providing an additional $600 million in financial support to help homeowners in states with high rates of unemployment. Those states — Ohio, North Carolina, South Carolina, Oregon and Rhode Island — have submitted plans to the Treasury Department. They are still being reviewed.