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next a look at how states spend and misspent federal funds intended for people with their housing loans and debt. this joint hearing of the house oversight and government reform subcommittees on intergovernmental affairs and government operations runs about one hour 45 minutes. [inaudible conversations] >> subcommittee on intergovernmental affairs and the subcommitte on gernment operations will come to order. without objection the presiding members authorized to declare recess at any time. today's hearing marks the tenth anniversary of the troubled asset relief program, also known

as tarp. since 2009 this committee has infected oversight of tarp programs and management. tarp was great in 2008 in the aftermath of the nation' w economic recession in modern or often referred to as the bank bailout program, , tarp was a $400 billion program intent to stilize u.s. financial stem and preserve homeownership. in torrington 20 the treasury t could the tarp program known as the hardest hit fund to mitigate the impact of the housing crisis and prevent foreclosures. the hardest hit fund allocates up to $9.6 billionn tarp funds for locally tailored made to 19 purchase 19 purchase many state housing finance agencies through 2020. early in the programs to become an account of the office for special inspector for tarp they should report on state implementation challens the programs i can establish merits and goals. in 2017 the office of the special investigator general of tarp or sigtarp issued reports

questioning $3 million of administrative expenses charged by state housing finance agency. such expenses included bonuses, our begins, gym memberships,, severance pments, trips to the zoo and other perks funded by federal tarp dollars. the treasury department determined proximally 70% of these expenses are allowable under the terms of its participation agreement with the states. in other words, less than 30% of $3 million question by sigtarp was deemed recoverable by treasury. it is the duty of federal and state partners to ensure that taxpayer dollars a federally funded state administered programs are usedorheir intended purposes. none of the payments identified by sigtarp report advance the main purpose of the program to prevent foreclosures and provide assistance homeowners most affected by the housing crisis. although many states have voluntarily refunded over $450,000 to the program since

sigtarp's report it's apparent the questions over appropriate expenses and efficiencies remain. acrding to sigtarp's 2017 s annual report to congress, it apedal of all homeowners who sought assistance were admitted to the program and nearly 30% of homeowners with good applications. with nearly 2 billion in remaining funds left to be dispersed by the treasury of the states, it is necessary to ensure proper safeguards are in place. i think the witnesses from the treasury department, sigtarp and representatives from three states including my state of alabama for being here today. i now recognize the ranking member of the inter-governmental affairs subcommittee mr. raskin for five minutes for his opening statement. >> chairman palmer, chairman meadows, thanks much for calling today's hearing and want to thank all the witnesses for coming. the hardest the program was set up to provide targeted aid to families i states that were

decimated by the downturn of the housing market funded by the fed and administered by state governments. hardest hit fund has finance mortgage modifications got unemployment assistance,, transition assistance, mortgage reinstatement and late elimination. since 2010, the fund has assisted over 350,000 families and remove 24,000 blighted proper stati isnd d.c i don't want to undertake the contributions it's made, but although it's helped many people avoid losing their homes, the diligent work of the special inspector general for tarp has provok a lot of bipartisan anxiety about how a state agens are administering the program. i have a number of profound cons that i look for to addressing today. the first is why my state, maryland, and of the state where people were hit very hard during the financial crisis were excluded completely from the hardest hit fund. it's very tough for me to read reports about scandalous abuses of the program, waste of mey

taking place, bated a budget while my state was completed uded from it. i would like someone to explain that to me, why did the treasury department exclude maryland? inddeb no analysis from treasurybout the success and potential expansion of the program now seven years into it? while states dates in need like received zero dollars and the program others received many millions here that ended up to fund excessive and egregious wasteful expenditures thatere w uncovered in the audit. i want to know along with the chairman, why did all of this money go and why is this money going to lavish cater to barbecued hearties, visa gift cards, employee bonuses, catered lunches with treasury employees,

?ancy cars, and employee trips kno a l of states did not break the rules in any way that the california hardest hit fund program seem to have the highest rate of homeowner approval with over 70,000 americans that have been assisted with apparently no wasteful expenditures reported. i look forward today into our dig into the work of the special inspector general and 13 at sigtarp who uncovered the fact that federal dollars meant to help people recovering from the greatest economic catastrophe since the depression were being wasted on things like a car allowance of $11,000 for a merc-benzor a coo. september sigtarp auto report found nevada forhe housing assistance appropriation misspent $8.2 million. in 2017 treasury reported to sigtarp that nevada's hhf did not meet its threshold and will

have its allocation reduced by $6.7 million. nevada was the only state participating in the program to have funds cut. the georgia department of community affairs provided hardest hit funds to only 9000 homeowners and rejected two-thirds of the applicants. mr. chairman, there's a lot of questions here that of what is to get to the bottom of today, and i thank you for calling this hearing. >> i now recognize the chairman of the subcommittee on government operations, mr. meadows, five minutes for his openi statement. >> thank you, mr. chairman. i'll be very brief. inspector general romero, think it's a much for being here. it was a pleasure to not only visit your workplace with so many dedicated individuals but see your leadership and just wanted to go on record to recognize that and thank for that. mr. farmer, welcome. this is aaleigh.

actually if we could operate d.c. as well as we do raleigh we might be in better position i want to just say welcome. i also want to acknowledge your oughulnsight on some of the issues that we maybe talking about today in terms of your proactive stance they become want to note that an thank you. and my good friend mr. ogles be who's in the audit, i want to thank him for some efficacy on this particular area. as a look at all of this, this although being accountable for the hard-working american taxpayer dollars, and making sure those priorities go and are invested in those areas that best help those that are in need. as weoo a that it's critically important we do that, mr. chairman, of want to thank you for your leadership on this particular area and i will yield back. >> i n rognize the ranking member of the government

operations subcommittee mr. connolly for five minutes for his opening statement. >> thank you, mr. chairman. thank you to mr. meadows for calling today's hearing to look to mismanagement and wasteful spending in the hardest hit program. d thanks to our witnesses for being here. the oversight and government reform committee has brought jurisdiction to look into fraud waste and abuse throughout the government, including when federal dollars go to state and local governments are other recipients. taxpayer dollars should not be viewed as a slush fund and a welcome the committee's oversight into this issue today. to ensure accountaby whatever taxpayer dollars are spent, it's also important that this committee look into wastefulpending elsewhere in the federal government. i would welcome a deeper look into wasteful spending at the environmental protection agency, for example. $43,000 on a soundproof booth for administrator scott pruitt

in violation of spending loss. when hundred $5000 on administrator privilege first-class flights in the first year on the job. $100,000 for f day trip to moscow. $120,000 on a four-day trip to italy. $45,000 for epa aides to fly to australi and paper yet another trip that had to be canceled because of hurricane harvey. i figure salary increases for preferred staff even after the white house office of personnel denied the request. is is not to mention administrator prove its ethical challenges clipping his close relationship lobbyists of industries greatly by the epa. this commission also look and how the departm of interior was able to spin $139,000 on new doors for secretary zinke which makes the $31,000 dining set at the department of housing and urban development look like

small potatoes here and this is just what we know from publicly reported expenditures. i'm sure that the committee took on a full-fledged and vigorous investigation in to the wasteful spending by the child cabinet we would be able to find other examples of the flagrant misuse of taxpayer dollars. ten years ago a financial crisis hit the american people, the likes of which were unseen since the greatepressn. housing prices plunged. 8.8 million jobs were lost. and the clearly crisis hit the financial sector and the unemployment rate hit 10%. the meltdown left hundreds of thousands of homeowns underwater in the mortgages, owing more than their houses were worth. in 2008, u.s. foreclosure filingspiked more than 81%, and over 860,000 families lost their homes in foreclosures that you alone.

ponse, , congress enacted the emergency economic stabilization act which among other things created the tarp,, troubled asset relief program. tarp is widely considered a bank bailout, authorizing the secretary of the treasury, to ensure up to $700 billion in troubled in troubled assets owned by financial firms. tao sought to provide assistance to homeowners facing foreclosure by stabilizing the housing markets and engaging in a closure medication through th, the federal housing administration refinance program and the hardest hit fund. the hardest hit fund made funding available to the state housing finance agencies that have experienced the greatest declines in home prices. the program has helped home understand the houses and not them blighted properties, raising property values surrounding homes. it's going to a 9. $6 billion

program funded funded by the federal government but administered by the states and is assisted more than 300,000 homeowners in 18 states and the district of columbia. i support the cooperative federalism embedded in this program with the states and the federal government working together to solve common problems. but today's hearing will highlight instances where that cooperative federalism has gone awry. a number of hardest hit funds and partner states severely mismanaged the programs and/or misspent federal funds. in september 2026 in the special, special inspector general for tarp found that in about housing division awaste ot hit fund dollars instead of helping homeowners who are facing foreclosure. this included a a car allowancf $500 a month for the ceo to drive a mercedes benz totaling $11,000. nearly same about the money was

ent on employee bonuses, gifts, outings and other perks, over 5800nt on holiday parties and gifts, 43,000 in bonuses almost all of which were paid to the ceo who was later terminated. the state agency at all but stopped homeowners from getting assistance to the hardest hit fund. admitting only 117 nevada homeowners in 2015, a year on year drop of 96%. the special inspector general for tarp also found the state agency charged more than 100,000 for barbecues, picnics, celebrations and other outings that included food and beverage instead of putting 14,001 and $24 toward assisting homeowners, and beverages. overall, . at t same time that's an

agency denied 18.8% of homeowners who applied for housing assistance. will eight years after passage f tarp, special inspector general for tarp continue to conduct audits of the hardest fund expenditures to ensuret money is spent probably. on august 2017 sigtarp found the states of misspent 3 million in tarp funds. we must remember, , that $3 million which could've been used to provide mortgage assistance to underwater homeowners or to rehabilitate igods. the only thing more disappointing that state agencies using money meant to help homeowners on unnecessary expenditures is the treasury department reluctance to recover those misspent taxpayer dollars. after receiving sigtarp's ait,

treasury decide to clawback only 29% of the improperly spent funds. so long as top programs exist, it's important that sigtarp keep a a watchful eye on those expenditures to ensure that the taxpayer dollars are spent judiciously and forurpose for which congress intended. i'm glad we are having to sing. i'm we're looking at the improper use of the funds but i believe the safety net that ought to be applied to the trump campaign and this committee ises that are just ason those important to the american public. i yield back. >> thank you. please introduce eyewitnesses, mr. kipp kranbuhl, deputy assistant deputy for small business committee velvet and affordable housing policy. in the opposite assistant secretary for financial institutions at u.s. department of treasury. does all that fit on one business card? the honorable christy goldsmith romero, special specter general for the troubled asset relief program at u.s. department of

treasury. ms. verise campbell, nevada for the housing corporation. ms. cathy james, this is still mad at the alabama housing finance authority, and mr. scott farmer, executive director north carolina housing finance agency. welcome to y all pursuant to committee rules all witness who will be sworn in before they testify. please stand and raise your right hand. [witnesses were sworn in] >> the record will reflect all witnesses answered in the affirmative. please be seated. in order to allow time for discussion pase limit your testimony to five minut. your entire written statement will be made part of theecord. as reminder the clock infinity shows remained in time if the light will turn yellow, kind of like a yellow light at the traffic stop. that means speed up. you have 30 seconds left and read when your time is up.

remember to press a button to turn the microphone on before speaking. we look forward to your testimony. >> chairman meadows, chairman palmer, ranking member connolly, ranking member raskin, members of the subcommittee, thank you for the opportunity to testify today about treasures efforts to mitigate the effects of the financial crisis on american homeowners for the hardest hit fund, or hhf. treasury established hhf in 2010 as part of the troubled asset relief program or tarp. in order to help prevent osure and stabilize housing markets states hit hardest by the housing crisis. state housing finance agencies in 18 18 states and the distrif columbia were selected to participate because these areas expect an opponent rates at above the natiol avege and a home price declines greater than 20%. hhf was designed to give the participating hs and the maxims exposed to design and administer eir own programs instead to local conditions and the

respective communities. the states have been able to adapt the programs and were to address the changing needs in their communities over time. as of december 31, 2017, states assisted roughly 30300 homeowners and funded the demolition of nearly 24,000 blighted properties. the flexibility afforded to hs eight by parsippany may treasures that oversight a critical aspect. treasury mains strong maintains a a strong commitment to ensure the program achieves its goals and federal taxpayer dollars are used for their intended purpose. treasury requires each hsa to set goals and demonstrate said progress toward meeting these goals. treasury maintains ongoing dialogue and works with each of the hsas i can find address barriers to keep the hsa from achieving its goal. treasury has conducted more than 0 on-site compliance reviews across this maiden hsa as well

as targeted reviews. these reviews if i were a number of critical functions which is s the homeowners by valid in accordance with theuidelines. program dispersant and administrative expenditures on appropriate. the information reported to treasu is accurate and the hsas intro controls or function as intended minimize the risk of noncompliance. treasury takes break of actual instance of noncompliance arise. this includes requiring the hsas to read i would homeowners that were improperly denied, to reimburse for improper expenditures and to strengthen internal controls and/or to prevent further noncompliance. treasury also shares this committee and sigtarp's meant to preventing fraud waste and abuse in and all tarp programs and we consider the recommendations in that regard. treasury response to recommendations inviting. they are made available to the public. we were card to address concerns raised by these recommendations in a manner that allows the

programs to function as intended and in the context of the windup. for example, treasury thoroughly reviewed $2.2 million and bastions in sigtarp's august 2017 report. this involved involved analyzing thousands of individual transactions incurred by all 19 agency didn't back to the programs inception in 2010. treasury determine $656,441,000 did not comply. the hsas were required to reimburse. i copy has been provided to the committee and it is an honor website. try to jump through any cost question by sigtarp were allowable under federal cost principles. as is the case with all tarp programs, hhf is one damper congress authorize additional funding in 2015, the program remains a temporary one. as of the end of april 2010 treasury dispersed 8.8 billion

or 92% of 92% of the 9.6 billion obligated under hhs. although they may continue fishing new approvals for december 31, 120, most states have begun close down the programs or will do so this year as exhaust their available funds. these include california and florida, the two largest ste in the program. treasury's outstanding commitments under top represents just 1% of 475 billion authorized by congress. as tarp one centroids remains committed to robust oversight and monitoring of all its tarp programs. i thank you again for the opportunity to testify today and will come the questions. >> thank the gentleman force testimony. the chair recognizes ms. romero for her tesny >> chairman palmer, chairman meadows, ranking member raskin, ranking member connolly and members of the committee i really thank you for the support you've given to sigtarp. sigtarp is a law enforcement agency as well as a watchdog auditor.

415 defendants have been investigative investigated been charged with crimes including 100 bankers, 349349 have already been convicted, 247 sentence to present with a covered $10 billion from our investigation. that's many going back to the company, the victims come to homeowners. that's a 355 times return on investment on our budget. sigtarp auditors identified hundreds of millions of dollars in cost savings. i'm grateful you're examining the hardest hit fund because i've been there for the full eight years of the program. from the very beginning of the program, phyllis caldwell agreed the program said toigtarp that what accounted you treasury was developed locally tailored strategies she explained this to us at state agencies choose the type of programs, the amount of funding, the number of homeowners that they want to help. the white house announced the program would be under strict transparency and accountability

rules and treasury promised they would measure performance. phyllis caldwell told us that meant are we reaching the right number of people, , are the stas meeting the targets? if not we will learn and we will adjust. by 2012 2012 we found treasuryd moved away from that. they seem to treasury officials in charge charge of defending the program told sigtarp this is this is their program. after two years at the height of the recession, only 3% of the money had gone out to only 7% of the homeowners who the program assessment tool. treasury never took ownership of this program or product accountability. we made bread and butter ig practices, recommendations for best practices that were often dismiss. some state agencies perfo well. and as for low performing state agencies we did data analytics. we talk to homeowners, to whistleblowers, the housing counselors and others. we identified obstacles that could be removed. for example, in florida seems

the trouble with online applications. that's not surprising. or trouble getting documents such as tax assessments. in georgia, homeowners have trouble because they the it goe irs and get a tax transcript within 30 days which you can't do and which of the state agencies don't require. after our report, some of these obstacles were rude and the performance improved. we found waste and misuse dollars which you talked about. parties, picnics, cater to barbecues, steak and seafood dunes, $500 a month for month for an executive to drive a mercedes? -one receipt inelegant iphoto $49 at a pizza restaurant and it said to celebrate hhs funds officially given from u.s. treasury and to celebrate the name of eyees upcoming wedding. in comparison, arizona and california which has the most dollars spent zero dollars on foodnd parties.

we apply treasury's contract criteria. in 2010 treasury's top top lawyer said under appropriation law and expense must be necessary to a congress authorize. the federal cost principles that event talked about today start with necessary,easonable, allocable to t program. and that top lawyer and treasury warned if you open this up father, it's going to authorize an almost unlimited number and variety of expenditures, wintering that tarp law meaningless, , and that's what e found days at the zoo and gym memberships and lawyer sees and discrimination claims and visa gift cards, custom shirts, holding the cosmos and were most of the customers are not hardest hit fund moving to electric billy, $20,000 severance package. every misuse dollar is one is one less dollars homeowners. we found there were no federal competition requirements that could save money and prevent

fraud. we found like demolition rose 90% ms. shaheen come sigtarp us and in all ohio, 70% in uganda. army corps of engineers found miss manners pick what are the top threats today in the program? ways, anticompetitive conduct, into the light program, corruption, fraud, antitrust, asbestos exposure. these of the types of areas we are investigating and auditing so we have a vested interest in prevention. greater accountabilities and controls are needed. there are billions of dollars at stake, more than 100,000 people applied people applied for this program this year. demolitions are just starting or haven't even started in some cities so it's not too late. thank you. >> their recognizes ms. campbell for her testimony for five minutes. >> thank you, mr. chairman. chairman palmer, chairman meadows and members of the committee, thank you for the opportunity to participate in today's hearing and appear before you regarding

implementation and oversight of hardest hit fund. for the record my name is verise campbell and since june of 2016 i've been the chief executive officer for the nevada affordable assistance corporation, also known as -- i was selected by the state of nevada to restructure after the organization experienced a series of operational issues and decrease in production. no state was hit harder than i've added and the great subsequent housing crisis and the net that hardest hit fund has been instrumental in helping people save their homes and get back on their feet. these are actual quotes from some of our homeowners. this program saved my life to get save my children's life. i feel like the weight of the world has been lifted off of my shoulders. we were uero much pressure we did know what to do. with opera going to lose our home until we spoke to the hardest hit. providing benefits to nevada homeowners has not been without challenges. nahac acknowledges the urban

issues with its performance. specifically the most critical report was a sigtarp report that actually indicated that there was fraud waste and abuse in nevada in the amount of $8.2 million. however, subsequent treasury audits for the same time found significantly reded amount of unallowable expenses. $136,000, not $8.2 million. nahac reimbursed the $136,000 to treasury. nevertheless, it was without a doubt changes had to be made if nahac is going to effectively serve it nevada homeowners. major changes were, in fact, made to naha's organizational structure, systems and programs. in fact, our news program of the down payment assistance program entitled hope bngs you home which was launched on may 1, 2018. $36 was allocated to this program to assist 1800 homeowners.

to date the down payment assistance program has over 200 reservations with over $3.8 million committed in its short time. the nevada affordable housing assistance corporation has helped over, almost 6000 neva households to date and that never continues to grow. programs have been instituted to solve nevada's housing crisis with the assistance of treasury, nevada's business and industry and the nevada housing division. nahac initially, but they were issues with the operation of nahac initially but trifle has improved its organizational structure and its operations resulting in better oversight, transparency and controls, and increased capacity to more vaamilies. new management is committed to efficiently and effectively utilize the remaining allocation of government funds to help more

citizens of one of the hardest hit states stay in their homes and stabilize nevada's housing markets. thank you. >> the cherry of recognizes ms. james or her testimony, five minutes. >> good morning. chairman palmer, chairman meadows and members of the subcommittees, thank you for the invition to discuss withou alabams hard h program. my name is cathy james, andhis is to build and manage for alabama housing finance authority. i also serve as a manager of hardest hit funds program in alabama which we call the hardest hit alabama program. alabama's introduction to the hardest hit funds begin with the notification 2010. hardest hit funds had already undergone two rounds of funding when ages it was invited participate in round three make. we quickly began creating a program and program guidelines. begin by reviewing templates that were furnished to us by department of treasury what you been adopted by o states. during the development of our

process, close attention was paid to the respective allocations of program funds and administrative expenses. in total alabama's allocation is $162.5 milliallocated to adminie expenses. during the seven years of hardest hit assistance, the department of treasury has approved 12 term sheet changes for the state of alabama. our current folio programs include a mortgage payment assistance program, and loan modification program, a short sale program and a light elimination pilot program. more than 6500 homeowners have been approved and receivedor than $63.8 million in program dollars. we have an average of $9828 per household for assistance. 85% of household who received assistance in a mortgage payment assistance program at an annual

income of $50,000 or less. 45% of 45% of homeowners who received assistance were 90+ days delinquent on the first mortgage at the time of application. and hardest hit funds have been dispersed and all 67 counties. we undertake the administration of the hardest hit funds program with great seriousness to ensure regulatory and program compliance, alabama's hardest hit programs is reviewed on a monthly basis or internal audit team an annual basis by independent audit firm, and since the programs inception alabama has completed five complaints reduced with the department of treasury. the 2017 sigtarp report asserted that $705 of expenses charged to parse it fun was unreasonable and, therefore, unallowable. all noted expenses related to hardest hit activities, such as in-house lunches are working conferences. in one instance, lunch

purchasing hardest hit programs and promotional items that you homeowners who volunteered for radio and television ads. alabama contested allegation and defended the charges, even so egreed reimburse18 compliance treasury $397. the balance of expenses were found to be reasonable. since notification of alabama's allocation of hardest hit funds, we have worked to ensure that the program is programmatically sound and funds were not spent unnecessarily. our commitment to the proper use of hardest hit funds is unchanged. we will continue to provide hardest hit assistance to homeowners across the state of alabama and compliance with agreed-upon terms and the term sheets and in compliance with federal guidelines. thank you. >> the chair now recognizes farmer for his questions for five minutes. >> chairman meadows, chairman

palmer, members of the committee, lena mr. scott from an infected regular filling housing finance agency. since january 2017 it is been my honor to serve as executive director'm proud to be with you today represent our dedited staff.tors and more than thank yor t opportunity t share information about whatever most effective programs, the instant foreclosure prevention fund entity publishes on behalf of citizens in danger of losing their homes in the face of significant economic downturn. the foreclosure prevention fund helps responsible no telling homeowners struggle with mortgage payments the search for work or retrain for a new career. eligible homeowners include those facing forlosure due to no fault job loss reduction in income or temporary financial hardship such as illness, death of spouse or a natural disaster. the fund also provides housing counseling and assistance to veterans for transition to civilian life competitive given so much interest our nation should never faced the prospect of losing their home. this initiative has overstate

more than 400 veteran families losing their homes. the fund was launched in 2010 in the wake of the great recession when our state was vilified by treasury as hardest hit due to high unemployment and a high number of foreclosure filings. since then the fund has helped more than 26,000 homeowners keep their homes during difficult times. approximately $706 million was allocated to or agency under the hardest hit fund to develop this program we had two significant expand our agency capacity. this iluded hirg mor staff, leasing additional office space, building a complex application portal and website, training hundreds of partners statewide. we were notified by treasury we were to receive hardest hit funds in april 2010. initial program was approved by treasury in august 2010 and would build, , marketed and implement the program by october. standing up a program of the scale and complexity in the timeframe required long hours for staff can many of whom had

existing full-time workloads within the agency. the work is specialized, involved and stressful. when assisting homeowners who are understandably upset and potentially losing their homes. haong the thousands of -working founds assisted by the fun as a small business owner who is on the thriving business since 1990, that changed when the recession hit and by 2011 he and his wife were about to lose their home. our assistance and able to to hold onto home and a police report that business image from the recession stronger and briefly celebrate its 20th anniversary. the fund helps of the county veteran who struggle to find a plymouth after his discharge from u.s. army. the assistance kept his them in their home while the use of the g.i. bill to ruirekills he needed for a civilian job. he is now employed by a local government. i worker who was laid off from her job was able to keep her home with assistance while she sought new employment. she still lives in her home and now works for healthcare nonprofit that focuses on

providing medical care for underserved rural communities. the fund has had a an noteworty impact on state and local economies and has preserved an estimate of $4.5 billion in property values, sustaining wealth not on for the homeowners but for the neighbors as well. on average lenders and investors can expect to lose almost half of their investment and you and, therefore, close mortgage. for closures prevented if satan has spent $1.5 billion interesting. this work also offsets the cost of sosa with broader social impact of foreclosure such as familial stress can neighborhood destabilization, crime and endocrine health outcomes. as noted with health more than 26,000 north carolinians in the newly ages since the program was launched. using a significant portion of the allocated hardest hit funds. we are winding down the program and expect to commit all of her program funds are the second quarter of 2019. we are proud of what is been accomplished for north carolina and its citizens through the nc foreclosure program fund and

we'll continue to ensure that eligible homeowners have the opportunity to benefit from this program. thank you for the opportunity to share our story today and i will be happy to answer any questions. >> thank the witnesses for the testimony. the chair now recognizes adjustment from tennessee mr. duncan for five minutes for his questions. >> thank you very much, mr. char calling this important healing. ms. romero, you listed a very impressive record for your office, but you also sd that nevada, for instance,had committed 8.2 million, or lost 8.2 million and waste fraud or abuse. ms. campbell turn right beside you and said oh, is only 136,000. what is the discrepancy there? on what you think about her statement about none of it really was waste, fraud, and abuse, or very little?

>> we didn't label it as fraud. we labeled it as waste and abuse go to make that distinction could because it was our auditors,ut it doesn't make sense. i mean, to be honest, what nahac paid back was what treasure requested which also didn't make sense here .. they were not applying the necessary standard, not only what's vacant to their contract, but the first requirement of t federal cost principles, nor is it reasonable. that's just one example. there are many, many examples, like moving to a luxury building to improve employee

morale, and then deciding it's more cost than you need because you doubled the rent. breaking the lease, $20,000 in legal fees to break the lease and move and pay rent. none of that was paid back and this is all at a time when they weren't helping get money out to home owners. >> all right, thank you vy mu. thept says that as of december, 2017, 347,000 people d been helped by this hhf program. can somebody tell me how this works exactly, what -- how many homes is that? in other words, most homes are in the name of the husband and wife both or maybe more than one personment so how many homes are we talking about? does anybody know of the 347,000. >> mr. committee member, from

nevada, we count households so the numbers represent the households. so those are 347,000 hom then. households. >> all right. and how long can somebody stay on this program miss romero mentied it said eight yea years. how long -- have there been people on this program from day one and they're still on the prog can ael me? >> this is kathy with housing finance authority, i think that each state is a little bit different, but for the state of alabama for the mortgage assistance payment program our home owners have 12 months not to exceed $30,000. >> and is that pretty typical, you say each state is different, miss campbell? >> mr. committee member, our home owners depends on the

program. we have an unemplot where a home owner can stay on the program you have to 18 months, and we have a limit for all of our programs combined, no more than $100,000 per househo ol >> all right. is that ca miss romero? >> again, it varies, three years, two years, one year, it just depends on the state. >> and n and it case there's two billion unspent, is that correct, in one of these reports? >> it's actually around $800 million. the $2 billion was the new authorization and around five from the 2015 vote starting i 2016 cou be spent through 2021. so there's 800,000 left or 80% of the funds are available.

>> is there a plan since unemployment is now so low and the economy is so strong, is there a plan to end this program or phase it out? >> yes, sir. this program, the applications are available for the-- those who have dollars that two million-- or sorry, two billion was cacros the states, so the of the remaining funds that applications may be accepted through december 31st of 2020 and dollars can be put out through december and any remaining dollars. certain states have wound those town so there are no longer dollars available. >> how many of the 19 states have wound down the program? >> california and florida are already wound down or the final stages ofding down. others, many of the others are initiating that wind-down now. >> thank you very much, thank you, mr. chairman. >> the chairman recognizes the

gentleman from maryland for five minutes. >> with your permission i'll yield to mr. connolly and switch places with him. >> i thank the chair and thank my good friend from maryland, i have a hearing and markup in consideration and i appreciate this gracefulness. >> i'm concerned about the apparent mismanagement of the hardest hit program by some of our hardest hit states. according to the inspector general's report the state spend over $600,000 on cars for executives, free parking for staff and multi-parking bus passes and states also spent $50,000 on events with housing counsellors, ,000 for employee meals and 8,000 on gym mberships. in 2017, the sigtarp found nearly 3 million in such wasteful spending. mr. kranbuhl, where did the es

permissible questions. >> ranking member, i appreciate your question. i can't tell why the states make the decisions they make, but they're responsible for all of the expenses and that's the standard that they're required to follow. >> okay, somef them decided, based on those standards that it was permissible to spend up to $8,000 in gym memberships using federal funds that were intendedor housing relief. how could that happen? was there any oversight by the department of treasury with respect to the use of of these funds? >> we haveonducted more than a hundred in person-- >> i'm sorry? >> treasury department has conducted more than a hundred in-person reviews with the states to review their administrator expenses and we work with them upfront t make

sure there are standards followed, tha there are cost are v cle and weand complianc review those with them on the phone frequently if there's any-- >> well, let me ask it differently. i get all that, we'll stipulate that. the fact is that somebody spent money memberships. did that meet with your approvals, with your standards? >> there a a range of expenses that are eligible and ineligible under cost principles. >> is gym membership eligible or ineligible. >> sir, if you'd like to go through each line item i had a he be happy to meet with you and your staff? >> no, i have an f q the hearing, is a gym meership perm uroint view. >> sir, all i can tell you the federalos principles are followed and under certain circumstances-- >> for god's sake, miss romero,

is it permissible or not, since mr. kranbuhl doesn't want to answer the question. >> no, no. >> and thank you, that's declarative english since mr. kranbuhl wants to give us strictures from a manual somewhere. >> andasur did think that gym memberships were allowed under the fed cost principles. number one under the cost principles, got to be necessary to what congres authorized. >> so unless the only way i could reach an agreement with a home owner is at the gym, it wouldn't be a permissible expense? >> no, and i think that raises a real danger of what could be >> listeni to mr. kranbuhl's convoluted answer, right here right now i have more than going into this hearing

because we're not clear and no wonder states are approving expenditures that clearly, to any common senseness would not be allowable this kindf fuzzy guidance. the treasury department, miss romero, since mr. kranbuhl is not going to be cooperative in answering, they only sought to recoup 29% of the money misspent or wasted. is that acceptable from your int of view? and why only 29%? >> no, it's not acceptable. you know, we worked hard to look at this. t- idn' substitute our own judgment. we applied tfederal cost principles, there's a long history of applying the federal cost principles, they apply to every grant and this is standard ig work and it's not acceptab and i want to say when he says this program is in wind-down or there's not two billion, there's $2 billion

mainin to be spent and the numbers talking about is what's gone out of treasure's door and it's not spent. when he says california is closing down. california has 334 million to be spent. >> very helpful, thank you, and thanks for the declarative answers. i yield back. >> thank you, mr. connolly, i'll take a few minutes to follow up with some questions and yield time to mr. raskin. what actions, if any, did your agency,farmer, addresshe concerns raised in the special inspector general for tarp's report? >> thank you,si excuse me, immediately foow the release of the , our agency made the decision to repay a portion oft primarily because, you know, there was a number of charges in there that we could have spent under an inorder nate amount of time debating whether

it was allowed or not allowedment we decided to repay the meals immediately. in addition we hired a third party audit firm, we brought them into our office and had them look at the expenses and look at categories and how we re categorizingxpenses to give us advice to help us address any questions related to those expenses highlighted in the report. in an i digs-- in addition to that we revised our policies based on guidance and provided the same records to treasury and they did a similar while we did not agree with nclud in the report and the categorization, we looked at sigtarp reviewing it. and we had better guidance moving forward so we would not make expenses or charge things that me allowed under the federal principles. you treasy did t additional review and we have since repaid the dollars requested ofs to repay.

>> and when did your agency make the decision to return the funds to the treasury? >> excuse me? >> when did your agency make the decision to return the funds to the treasury. >> we'd reviewed it and recognized som w questionable and we were better off to repay thanto again, debate each and every the other fees we repaid, after review. idance or training to your agency, received from the treasury on the use of administration funds? have you had any kind of correspondence or guidance from the treasury? >> we've received guidance over time fromy at different points. they were in our i think it was five over a seven-year period with -site reviews, the administrative expenses were not an issue at

any of those reviews, they have since provided some additional guidance regarding the federal principles and, again, those have been what we reviewed and instituted across the board for this program. >> so their primary communication means, it's just visiting on site. is there any other way they communicate with you? >> no, just regularly with staff. with the staff that are administering the program, regularly communicate through e-mails, through phone calls, conference calls. as issues come up, they would bring that to the attention, there's regular calls with the hardest hit funds as well communicated out to the group. >> thank you very much. ms. james, several questions and topics there, would you like to take 30 seconds and going back to the same questions give aummaryf what i asked of mr. farmer? >> so, yes, sir, the sigtarp report disclosed $705 in misuse of funds and we, of course, did not agree with that, but we did

after the treasury report reimburse $397. the funds were used concerning hardest hit activity, lunches, promotional items for some home owners. so, we did not consider the fundo be a misuse or unnecessary. >> what were some of the hardest hit fund implementation challenges, mr. >> some of those, rng the dollar amounts, itequired us to start from scratch as i mentioned in remarks, we had to hire staff. we knew this was a time limited program and we tried to hire at our peak, i think we had 50 contractors working on the program. we continued to maintain that same staff. it was a statewide program and you know, we've got a really

large state with a hundred different counties and we held events as we were rolling out the program and we had to educate the partners on what the program was going to be and figure out a delivery vehicle to get that out to the home owners. it required-- we built, in-house, we built a data be system for the portal as we referred to it for intake ofhe applications, that not only our partners, but home ownersad access, whether they were computer savvy, they had that availability and if they needed to go to a counseling agency we made sure theyw it was available. it was the size and scale. program initially, and knowing that there was-- there was a great need and it was not an area that our agency had a lot of expertise in. we're used to providing affordable housin as opposed to saving the affordable challenge and it was something that the state needed at the time and we were glad to step into the role and it's been a learning experience for us. >> thank you, mr. , cir now recognizes the gentleman from maryland, mr. raskin.

>> mr. chair, thank you very kindly. ms. romero, we got some information indicating that your office, and also the special inspector general found information that led to criminal charges against'415 people and criminal convictions with people sentenced to prison so that's not just taking the office out for lunch. what kinds of activities were taking place there and is this just in the hardest hit fund or ishat in tarp overall? >> thank you, for that question. tarp overall. so 100 of those are bankers, a good number of them are the banker's co-conspirators, we're talking about bank fraud, about 88 people who have gone to prison for scamming home owners in tarp housing programs, so there's a number of things related to the crimes that were-- >> the kinds of waste, fraud and abuse that you identified in the hardest hit program afflicts the other programs

under tarp as well? >> well, i think in terms of the tarp housing programs we've found people who tried to scam home owners. the other ones are sort of program-related like bank fraud related to tarp bank >> so, mr. kranbuhl, let me come back to you, there's a suggestion that treasurys washing its hands what's going on at the state level is somewhat indifferent or lackidaisical. do you basically trust the state authorities to impleme this in an efficient way with integrity? >> thas for your question mr. ranking member. we work with the states and conducted more than one hundred in person reviews. we can't speak to what sigtarp's methodologies that they use are. however, ours are-- our reviews are incredibly detailed. we look at each expenditure to make sure they're complying. >> have you followed through on

all the recommendations made by the special inspector general as made by her report. >> two reports are outstanding and we're reviewing, other than those two we've replied to each line item recommendation that the special inspector general provided in writing and that's available to the public. >> when you say you replied to them. >> we've written a response letter with each line item. >> right, i mean, wha inre is terminating the underlying practices that are wasting public resources that should be going to people who are in need. all right. >> we certainly are appreciative of that and are very focused on making sure no waste, fraud or abuse occurs. we follow cost principles along with every other program, that's standard. >> i get tha you detected some frustration in mr. connolly's response to you, and, but i also detect a certain kind of passivity about the enterprise that we follow the principles and we stand by law and so on. i mean, what expense i think would make some sense is bring

these people in from the 50 states to have a big meeting and say here are the principles and here is what's going to get you sent toail and we're very serious about enforcing this because it's the public's money and it's people who need it and i was curious what kin o high oc intensity you're bringing to the task of bringing integrity to the system. >> sure, we have annual-- several annual meetings to share best practices and certaiy review compliance procedures. anytime there's an instance of-- called in we work with the states to augment those and to restrengthen their internal controls, with respect to ranking member connolly's question, the federal allows for health care platforms for employees of the-- and health and wellness programs andym memberships do fall under that. >> okay. ms. romero, do you feel confident that treasure has responded positively to your

recommendations implementing them in order to crack down on waste, fraud and abuse and get money to people who need it. >> let me say i appreciate that there's been some movement, but, no. this is a-- this is an absolute misread of the federal cost principles which start with one, necessary, as to what congress intended, two, reasonable, three applicable to the program. if you want to stop what's going on, let's first start with repayment because there's no betteo t deter future misuse of funds than repayment and let's put some controls in here, but looking-- just because the federal cost pr hav line in there about health and welfare do not mean that gym memberships are health and welfare and what congress intended and that is being lost. >> i mean, i would just like to say the expenditures that are reported herere popping and i think any

government agency would be amaz to think they can spend money on, you know, lavish christmas parties, taking people on trips, even just purchasing lunch for oic on a daily or a weekly basis the thing that we saw, it doesn't make any sense. well, look, the program ose because there's a terrible crisis that threw millions of people out of work and millions of people lost their homes and the focus is is on that. the big banks got essentially this huge subs but w still have a lot of people around the country who are hurting and are in crisis and so, you know, i gues the last point i want to ask back to you mr. kranbuhl, are you convinced you've got the controls so that the money still in the pipeline is going to be spent the right waynd do you have e controls within treasury to make sure that you

guys are on top of it. >> i appreciate your question. we are very dedicated to working with this committee and to make sure each state, each ra t maket they're following the proper federal cost principles that waste, fraud and abuse are minimized if not eliminated outright, that the intended use of dollars from this congress as set forth will be followed and that the real driver of this this whole platform is to help home owners in need and we are committed tooiat, you, mr.chairman, i yield back. >> i thank the gentleman. i now recognize myself for a few questions. mr. kranbuhl, you testified that you'v expended 8.8 bi of the 9.6 billion, is thatcorrect? >> that is correct, sir. >> so, you only have 800 million left in the fund? >> that's a large number, but, yes, sir, 800 million.

>> ye, that that is large number. buit also indicates that the program is virtually shut down. >> it isn nd-- it iin down. we have less than 1% of all dollars from tarp, 475 billion dollar program left to deploy, yes, sir. >> miss romero, is that number consistent with what the ig has found. >> well, that's what's left the u.s. treasury, but the money's not been spent. so, you think about it this way, when we investigate fraud or whewe audit waste, those are only spent money, the money is protected. there's $2 billion left unspent in the program. >> so, there's still $2 billion out that there's $800 million left in treasury? i just want to get that straight. >> yes, for my purposes, whatever is sitening treasury is nice and safe and secure, whatever is out there and going beuture$2 billion that's what i've got to watch out for. >> what responsible, mr

mr. kranbuhl do you think the department of treasury has for assuring the last few years that this money was spent to achieve the stated purposes, to help families who were home owners keep their >> well, there are several, several measures taken to make re that the dollars are spent. >> no, i'm asking you-- this is not a filibuster time i want to know what responsibility does the deme treasury have when you're overseeing a program like this to make sure that, in this case, administrative costs don't get outf hand? i mean, you do have an oversight responsibility? >> certainly. from a cost-- from an administrative cost perspective, we work with them to each state to look at their internal controls, but more importantly, we' working with them to make sure that dollars are being deployed. if they're having a challenge we're working with hsa to make sure that their platforms are

successful to those who need it. >> where was treasury when you had people driving mercedes or renting office piece in the taj mahal or, i mean, i really appreciate the work of the inspector general, but generally if the inspector general is coming to call the report is not always a good report and it's unfortunate, it's indicative there's a problem with oversight. and treasury has a responsibility here and i don't like the idea of us having to have hearings lehis and then coming back and trying to fix a problem that should never have occurred to start with. so, i just want to know, does the treasury take seriously its oversight responsibility to make sure that the people at the state level who are handling federal dollars, taxpayer doars, areot abusing those dollars? >> certainly. we actually are identifying

many of the items thatta has identified through our work and we're referring to sigtarp for their review and we're very focused on that, mr. chairman. >> well, tell me what action has beentaken. has anybody been fired? has anybody been referred for investigation for, you criminal? >> there are many cases where we have required the states to replace their management teams to make sure in the cases in nevada, for instance, we worked with fha to assure that proper accountability was occurring. >> he was forced to resign and pay $20,000 in severance. for crying out loud, is there anything that they could have done to have gotten him fired? >> as we review each situation, we offer recommendations. >> let me ask this question of the folks who administer the state level. did treasury provide any

guidance or training to you or your agency on the use of administrative funds? did you attend any kind of training on-line, in person, facetime? i mean, did you get any training? >> i know, this is in nevada, because of the way i was brought in, i was in constant contact with treasury. prior to me coming on, i did read correspondence where treasury and sigrp both, as well as the housing division had expressed some concern. nevada's situation-- ments you didn't get attending. you did not attend a training session? mean-- no, actually i came in the door with training because i was walking hand in hand with treasury because i came in after the problem was discovered. >> all right. how about you, miss james. >> i wouldn't say that we received training. we did receive guidance, via the agreement that we signed, but in terms of facetime, it

was always discussed at our summits, but training per se, i cannot say that. >> how about you, mr. farmer? >> i would agree with miss james, that's the same-- miss romerromero, is that a problem if you're chargedith handlingdrf millions dollars, is that adequate training? >> no. >> let me ask you this, miss fomes,ou guys had $35 million demolition and you repurposed 34 million and spent a million of it and only demolished three houses since 2014. i hope you didn't spend a million dollars on it because i think for a million dollars i could have gone in there with a sledgehammer and a wheel barro and in a four year period would

have done it gladly for a million dollars. >> no doubt. >> that drives me crazy. prior to this job i ran a think tank and alsoorked in the private sector and in an engineering-- a couple of engineering companies and had my staff do research for the birmingham area. the average cost to completely demolish a house, it ranged from $5,000 for a smaller home to $15,000. at 15,000, that's 67 houses that should have been demolished for a million dollars. now, if you want to look at the median, 10,000, that's a hundred houses. you demolished me houses let's say that's $45,000, the toughest ones to take down and haul off. what happened to that other 955,000? >> we're leaving this program now, you can watch the entire program at c-span.org. the u. senate is about to meet. they're continuing work on

defense department programs and policy for 2019. amendments have been stalled over which amendments should get a vote. so, a final vote, which was projected to happen by the end of this week, is now likely next wednesday. unless senators can reach an agreement on the amendments. on-span2. coverage now here the presiding officer: t senate willome to order. the chaplain will lead the senate in prayer. the chaplain: let us pray. loving and ever-present god, we thank you for being our helper in the present and our hope for the future. we trust you to direct our steps with youprovidalow. forgive our slowness t