Bailout watchdog to audit housing program

WASHINGTON - The special inspector general for the financial bailout will examine how 10 states were selected for a $2.1 billion Obama administration plan to aid areas hit by the housing bust.

Bailout watchdog Neil Barofsky is performing the audit in response to a request by Rep. Darrell Issa, R-Calif., according to a letter released Tuesday by Issa's office.

The Treasury Department has been running the government's "Hardest-Hit" fund, which is stocked with financial rescue money.

Barofsky also plans to examine whether state-designed programs that are receiving assistance differ from existing government efforts, the letter indicates. He also plans to examine whether Treasury has established ways to prevent waste and fraud and whether the government has established goals and measurements for the programs.

In response, a Treasury spokesman said in an e-mail that, "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."

President Barack Obama unveiled the state assistance effort in February. Since then, state agencies have designed their own approaches. They vary by state, but many provide aid to unemployed homeowners, or "under water" borrowers who owe more on their properties than their homes are worth.

Last month, the Treasury Department approved plans for half of the states getting funding through the program - Arizona, California, Florida, Michigan and Nevada. The states, which were picked because they experienced at least a 20 percent decline in home prices, estimate that their plans will help up to 93,000 homeowners.

Besides these states, the Obama administration is providing an additional $600 million in financial support to help homeowners in states with high rates of unemployment. Those states - Ohio, North Carolina, South Carolina, Oregon and Rhode Island - have submitted plans to the Treasury Department. They are still being reviewed.