Treasury's HHF Blight Elimination Program Lacks Important Federal Protections Against Fraud, Waste, and Abuse

Since 2010, the Troubled Asset Relief Program’s (“TARP”) Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (“Hardest Hit Fund” or “HHF”) has provided funds through housing finance agencies in 18 states and the District of Columbia (“HFAs” or the “state HFAs”) to homeowners in states hit hardest by the housing bubble. The Hardest Hit Fund has largely been a program to provide Federal funds to unemployed and underemployed homeowners to help pay their mortgage. Starting in mid-2013, Treasury began allowing seven state HFAs to use existing HHF dollars to demolish vacant and abandoned homes to help neighboring homeowners under a new Blight Elimination Program. At that time, the Department of Housing and Urban Development’s (“HUD”) Neighborhood Stabilization Program (“NSP”) provided $300 million for blight elimination. Treasury’s Blight Elimination Program allocates nearly $622 million among seven state agencies, who work with local partners to use contractors and subcontractors to perform the demolition and other work. These local partners pay the contractors or subcontractors and seek reimbursement from the housing agencies for the work performed. The Office of the Special Inspector General for the Troubled Asset Relief Program performed a review of risks that could impact the effectiveness of this program. This work led to a December 14, 2015 SIGTARP Alert Letter to Treasury Secretary Lew advising him that in Evansville, Indiana, this program was being abused to demolish lived-in (rather than abandoned) homes, resulting in people having to leave their homes, so that a car dealership could be relocated. SIGTARP found that Treasury’s HHF Blight Elimination Program is significantly vulnerable to the substantial risks of unfair competitive practices and overcharging than HUD’s program. These risks could lead to fraud, waste, and abuse.