A state-run program to save struggling homeowners from foreclosure was so mismanaged that it has awarded only a portion of the $370 million that it was supposed to give to Georgia residents, according to an audit released Friday by a federal watchdog agency.
The Department of Community Affairs (DCA) was warned by federal watchdogs 25 times in five years that its HomeSafe Georgia program failed to help residents quickly enough. Even so, the department “slow walked” the aid, paying itself $32 million in administrative fees as it turned down worthy applicants, the report by the Office of the Inspector General for the Troubled Asset Relief Program states.
This inaction helped slow the state’s housing market recovery after the Great Recession, it said. Other states have already spent all of their assistance funds. The report singled out problems in the Atlanta area, where DCA turned down 6,200 Clayton, DeKalb and Fulton county applicants.
U.S. Rep. John Lewis, who requested the audit, called the results “a shame and a disgrace.”
“We have all of these dollars that have not been spent in metro Atlanta, in DeKalb and Clayton and Fulton counties,” Lewis said. “We can do better.”
Department of Community Affairs spokeswoman MaryBrown Sandys defended HomeSafe, saying it spent taxpayer funds responsibly and improved its services over time. Clayton, DeKalb and Fulton counties comprised nearly 39 percent of the funds even though they comprise only 20 percent of the state’s population, she said.
“At the end of the day, we have met the program’s goal of preserving home ownership while also being responsible stewards of taxpayer dollars,” Sandys said.
The audit states that the program has spent less than half of its funds. Figures provided by DCA show the program has spent or committed three fourths of its funding as of Thursday.
Hank Johnson, D-Lithonia, also requested the audit. Overall, HomeSafe tuned away two thirds of its applicants, one of the highest rejection rates among state programs nationwide, the audit said.
Georgians fell through the cracks
The U.S. Department of the Treasury’s Hardest Hit Fund, which funds the HomeSafe program, was created in 2010 to help homeowners during the deep real estate downturn of the Great Recession.
Metro Atlanta experienced some of the worst of the nationwide mortgage meltdown. Some 30 percent of the mortgages in Clayton County remain underwater, eight years after the recession officially ended, according to a July report by online real estate data firm Zillow.
The state program in Georgia originally estimated it would assist more some 9,000 homeowners in its first year. Instead, it took six years for HomeSafe to reach that number, the report states.
At first, HomeSafe would only accept homeowners who were unemployed or underemployed and not more than six months behind on their payments, said Atlanta Legal Aid Society Senior Attorney Kristen Tullos. This let many Georgians fall through the cracks who would have been eligible for assistance had they lived in other states, the report said.
Elected officials and homeowner advocates have raised concerns for years. Lewis expressed concerns that the requirements were too restrictive in 2011, the report states. The Treasury Department asked DCA to revise its requirements in 2012, while Legal Aid and other groups wrote formal letters suggesting improvements.
The program required applicants to obtain special documentation from the U.S. Internal Revenue Service and their mortgage companies within 30 days, which was too little time for those bureaucracies to respond, the report said. It also gave homeowners little guidance on how to complete its confusing application process.
“The alarm was sounded, analyses were done,” said former State Sen. Vincent Fort, who pushed for program reforms. “There are so many Georgians out here who needed help, and for them to be put in this position is just an outrage.”
The Department has since extended the six-month limit to twelve months and broadened other eligibility requirements, Tullos said, but serious problems continue.
The website contained inaccurate information that could lead an eligible applicant to believe they’d be rejected, Tullos said, and Special Inspector General Christy Goldsmith Romero said she recently had trouble getting it to work.
The HomeSafe’s customer service line sometimes hangs up on callers, Tullos said.
“The improvements fall under the category of ‘too little, too late’,” Tullos said.
Goldsmith Romero said there’s still time for DCA officials to improve the program and help thousands of Georgians. Some $164 million in funds have yet to be distributed by the 2021 deadline, the report states.
“I would hope they would not look at it defensively, but instead say, ‘Now’s the time, things have to change’,” Goldsmith Romero said. The report singled out problems in the Atlanta area, where DCA turned down 6,200 Clayton, DeKalb and Fulton county applicants, the report states.
Staff Writer Tamar Hallerman contributed to this report.