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There's disappointing news this morning on employment. The Labor Department reports that the US economy lost 131,000 jobs last month. That is worse than expected. Private sector employment actually went up, but it did not go up enough to offset layoffs of temporary census workers and some other government employees.
And as we take stock of the economy today, we're also watching the housing market. Prices have stabilized, but home foreclosure rates remained very high. And we're going to look next at a problem with a problem that was supposed to fight foreclosures. It has not fulfilled that promise.
We'll hear one possible reason why in this report by NPR's Peter Overby in collaboration with the Center for Public Integrity.
PETER OVERBY: President Obama was in office less than two months when he laid out a $75 billion plan to help homeowners keep their homes. He was speaking in Mesa, Arizona.
BARACK OBAMA: Through this plan we will help between seven and nine million families restructure or refinance their mortgages, so they can afford - - avoid foreclosure.
OVERBY: The goal of HAMP - the Home Affordable Modification Program - is really quite modest. Qualifying borrowers get to make lower monthly payments for five years. Designed to save the drowning, HAMP itself is barely treading water. In total, 389,000 homeowners have gotten those five-year respites. But that stacks up against more than 300,000 new foreclosure filings in each of the past 16 months. It's the Treasury Department that oversees HAMP. But to actually run the program, Treasury hired someone else - Fannie Mae, the home loan institution that is itself in federal receivership. Fannie is getting $113 million to run HAMP.
Enter Caroline Herron, a long-time Fannie Mae executive who left and then returned as a consultant on the HAMP project. Now she's filed a lawsuit, alleging that Fannie Mae ran HAMP not for troubled borrowers but to benefit its own bottom line.
LYNNE BERNABEI: Their only interest should have been to look out for the American taxpayers.
OVERBY: This is Herron's lawyer Lynne Bernabei. Herron says she can't discuss her work personally because of a non-disclosure agreement with Fannie.
BERNABEI: There was a tremendous - millions and millions of dollars that was wasted on a program that a lot of people, Caroline included, said wasn't functioning in the way it should be.
OVERBY: Here's one example. Herron says Fannie Mae concentrated on the work that made money for Fannie Mae. That was giving new applicants so-called trial modifications, a few months of reduced mortgage payments. Those applicants are supposed to be moved from the trials to the five-year relief plans. But Fannie made money on the trial modifications and thousands of homeowners got stuck there. That imbalance was reduced in more recent months.
But here's another example. The Treasury Department wanted HAMP to have a website where homeowners could upload documents and communicate with lenders. This web portal was intended to bring order to a mortgage modification industry that was choking on paperwork. The portal would let homeowners file online, where everything could be logged and managed.
A firm called Default Mitigation Management built just such a Web portal. Its chief operating officer is Igor Roitburg.
IGOR ROITBURG: You know, we offered to deliver to them a solution that has already been working, that addressed all of their concerns.
OVERBY: But after asking for bids, Fannie Mae scrapped the whole idea of the Web portal and picked another system - a system that drives homeowners to professional counselors for access.
Jack Guttentag, a professor emeritus at the Wharton business school, says this option just gums up the works.
JACK GUTTENTAG: You have these intermediaries. You have counselors. It's a complicated and messy and inefficient process.
OVERBY: As the portal project wound down, Fannie Mae fired Caroline Herron.
Again, her lawyer, Lynne Bernabei.
BERNABEI: She was with Fannie Mae for many years, rose to the level of vice president, was entrusted with some of their most sensitive projects. And now she doesn't have a job. She's been basically blackballed by Fannie Mae.
OVERBY: Officials at the Treasury Department and Fannie Mae declined to comment for this story. A statement from Fannie Mae does note that the company hired a former Justice Department inspector general to investigate Herron's allegations. Fannie Mae won't release his report, but it does say he found no merit to the complaint.
Peter Overby, NPR News, Washington.
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