TARP watchdog blasts Obama housing program

The Obama administration's $75 billion program to help homeowners risks failure by, "merely spreading out the foreclosure crisis," a top government watchdog said Tuesday.

Neil Barofsky, the special inspector general over the $700 billion financial rescue package, slammed the administration's housing program for having ill-defined metrics and for helping far fewer homeowners than originally proposed.

"The program risks helping few, and for the rest, merely spreading out the foreclosure crisis," Barofsky said in a report. The program encourages companies to modify the terms of home loans so that borrowers can attempt to avoid foreclosure. Mounting foreclosures continue to weigh heavily on a weak housing market, which began declining more than three years ago.

The administration's program has produced 170,000 permanent home loan modifications, which represents roughly 13 percent of the total trial offers extended, according to the latest data.

Barofsky's report said it is possible the program only benefits half of the three or four million homeowners originally envisioned. Among other data, the program measures trial modifications, a metric Barofsky faulted for being, "essentially meaningless." The number of permanent modifications could wind up being a small share of the millions of foreclosures filed in this year and during the past two years.

Herbert Allison, assistant Treasury secretary, defended the program in a letter, and said the program's success, "should be measured by how many eligible homeowners are able to avoid the pain and stigma of foreclosure by reducing their mortgage payments to affordable levels while either remaining in their homes or transitioning with dignity to more suitable housing."

The housing program has come under heavy criticism from Democrats and Republicans on Capitol Hill, who say it has done too little to reduce foreclosures.