This morning, Treasury released its monthly progress report to Congress on the Troubled Asset Relief Program (TARP). The monthly report, required under Section 105(a) of the Emergency Economic Stabilization Act of 2008 (EESA), is the fifteenth report provided and summarizes Treasury’s implementation of the various TARP programs and investment transactions during January.
The following key developments took place in January and early February 2010 under TARP programs:
- Under the Fiscal Year 2011 Budget, the projected cost for TARP has fallen to $117 billion from the previous estimate of $341 billion, "based on estimated total expenditures of not more than $550 billion, considerably less than the $700 billion originally authorized." In addition, $162 billion of investments in large banks has been repaid, representing two-thirds of all TARP investments in banks.
- The Home Affordable Modification Program (HAMP) released its December Servicer Performance Report indicating that through December 2009, more than 850,000 homeowners have had a median payment reduction exceeding $500 (including trial modification periods), and more than 110,000 permanent mortgage modifications have been approved. Treasury has disbursed approximately $30 million to date, and has committed more than $35 billion (of a $50 billion total potential allocation from TARP funds) for future incentive payments.
- Also in January, Bank of America, the first servicer under HAMP, committed to participate in the Second Lien Program, and updated guidance was released for servicer documentation requirements in order to expedite conversions of current trial modifications to permanent ones. This guidance will require servicers to fully validate borrower financial information before offering a trial plan.
- Treasury released a TARP Warrant Disposition Report describing how the taxpayer has benefitted from the warrants received by Treasury under the Capital Purchase Program (CPP). The report states that taxpayers have received more than $4 billion from warrants sales in 34 banks, Treasury still holds warrants (or shares received upon exercise of warrants at the time of investment) in more than 600 banks that participated in the CPP, and that Treasury will sell the warrants of 18 banks that have fully repaid their TARP assistance in the near future.
- Treasury released the initial quarterly report on the Legacy Securities Public-Private Investment Program (PPIP) which includes a summary of PPIP capital activity, portfolio holdings and current pricing, and fund performance.
- On February 3, 2010, President Obama announced details of the new TARP program to invest lower-cost capital in Community Development Financial Institutions (CDFIs), which are banks, thrifts and credit unions that function in markets that are underserved by traditional financial institutions. Under this program:
- CDFIs will be eligible to receive capital investments of up to 5 percent of risk-weighted assets, compared to a limit of up to 2 percent as initially outlined in October – significantly increasing the potential impact on lending in low-income communities;
- CDFIs would pay dividends to Treasury at a rate of 2 percent, compared to the 5 percent under the CPP; and
- CDFIs will need approval from their banking regulator to participate in the program, however, in cases where a CDFI might not otherwise be approved by its regulator, it will be eligible to participate so long as it can raise enough private capital that, when matched with Treasury capital up to 5 percent of riskweighted assets, it can reach viability.
The report also indicated that since inception of TARP, Treasury has received $12.99 billion in dividends, interest and fees.