TARP watchdog to audit housing program

The Obama administration’s $2.1 billion program to help states with hard-hit housing markets is coming under new scrutiny.

Neil Barofsky, the special inspector general over the $700 billion financial bailout program, is starting an audit into the program in response to a request from Rep. Darrell Issa (R-Calif.), who has been critical of the administration’s programs to boost the weak housing markets.

The “Hardest-Hit Fund” directs money from the broader financial bailout program to states that have experienced housing slumps. When the program was first announced, the administration said it would direct $1.5 billion to five states: Nevada, California, Arizona, Florida and Michigan.

Lawmakers and interest groups in other states criticized the program for leaving them out. A second, $600 million round was announced to benefit Ohio, Rhode Island, North Carolina, South Carolina and Oregon.

The money goes towards state housing finance agencies to support mortgage modifications, short sale programs and other efforts.

Issa criticized the program and argued many of the state programs would not help housing markets. “Taxpayers are in the dark about how their money will be spent and whether the spending has been effective,” Issa said.

Barofsky in a letter this week said he will audit the program and look at why certain states were selected for aid. He will also examine whether there are safeguards in the program to guard against waste, fraud and abuse.

"We look forward to discussing the progress in the Administration’s efforts to assist those areas hardest hit by home price declines and concentrated foreclosures," a Treasury spokesman said.