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United States Government Accountability Office: 
GAO: 

Report to Congressional Addresses: 

January 2013: 

Troubled Asset Relief Program: 

Treasury Sees Some Returns as It Exits Programs and Continues to Fund 
Mortgage Programs: 

GAO-13-192: 

GAO Highlights: 

Highlights of GAO-13-192, a report to congressional addressees. 

Why GAO Did This Study: 

The Emergency Economic Stabilization Act of 2008 authorized Treasury 
to create TARP, a $700 billion program designed to restore liquidity 
and stability to the financial system and to preserve homeownership by 
assisting borrowers struggling to make their mortgage payments. The 
act also required that GAO report every 60 days on TARP activities in 
the financial and mortgage sectors. This report examines the condition 
and status of (1) nonmortgage-related TARP programs and (2) TARP-
funded mortgage programs and Treasury’s efforts to better ensure that 
servicers are implementing as intended two new requirements designed 
to improve interactions with borrowers (the MHA single point of 
contact and resolution of escalated cases requirements). To do this 
work, GAO analyzed audited financial data for various TARP programs; 
reviewed documentation such as program terms and agency reports on 
TARP programs; and interviewed Office of Financial Stability officials. 

Treasury generally agreed with the findings. Treasury, Ally Financial, 
and General Motors provided technical comments that GAO incorporated, 
as appropriate. 

What GAO Found: 

As of September 30, 2012, the Department of the Treasury (Treasury) 
was managing assets totaling $63.2 billion in nonmortgage-related 
Troubled Asset Relief Programs (TARP) (see figure). As of this date, 
Treasury had exited 4 of the 10 nonmortgage-related programs, and in 
December 2012 Treasury announced the exit from a fifth program—the 
American International Group (AIG) Investment Program. Exactly when 
Treasury will exit the remaining five programs remains uncertain. 
Treasury has identified several factors that will affect its 
decisions. For example, 

* for the Capital Purchase Program (CPP, created to provide capital to 
financial institutions), the financial condition of the participating 
institutions and the success of auctions; 

* for the Community Development Capital Initiative (CDCI, created to 
provide capital to credit unions and financial institutions in 
underserved communities), which Treasury has not yet decided to exit, 
the financial condition of the participating institutions and the rate 
at which the institutions repay Treasury; and; 

* for the Automotive Industry Financing Program (AIFP, created to 
prevent a significant disruption of the American automotive industry). 

Some programs, such as CPP, have yielded returns that exceed the 
original investments. Others, such as CDCI and AIFP, have not.
Unlike the nonmortgage-related TARP programs, TARP-funded mortgage 
programs, which focus on mitigating foreclosures, are ongoing, and 
Treasury’s oversight of new requirements designed to improve servicers’
interactions with borrowers showed both challenges and improvements. 
Treasury allocated $45.6 billion in TARP funds to three programs, 
including Making Home Affordable (MHA), but more than $40 billion of 
the funding has not yet been disbursed, and the programs have not 
reached the expected number of borrowers. The centerpiece of MHA is 
the Home Affordable Modification Program, which has provided about 1.1 
million permanent modifications to borrowers. To help ensure that 
homeowners receive appropriate assistance from servicers under this 
and other MHA programs, since September 2011 Treasury has required 
servicers to identify a “relationship manager” to serve as the 
homeowner’s single point of contact throughout a delinquency or 
imminent default resolution process. GAO found that Treasury’s initial 
reviews of servicers’ implementation of this requirement had 
identified some inconsistencies. However, oversight of a second 
requirement designed to improve the resolution of borrower inquiries 
and disputes (escalated cases) showed that the nine largest servicers 
had met the performance target. Treasury officials said that the MHA 
program administrator, Fannie Mae, handled oversight of the escalation 
process and the vendors who supported in keeping with Treasury’s 
guidelines. 

Table: Status of Programs, as of September 30, 2012: 

Non-mortgage-related programs with outstanding assets: 

Program: Capital Purchase Program (CPP): To provide capital to viable 
banks through the purchase of preferred shares and subordinated 
debentures; 
Amounts: 
Outstanding assets: $8.7 billion; 
Disbursed: $204.9 billion. 

Program: Community Development Capital Initiative Program: To provide 
capital to credit unions and financial institutions in underserved 
communities; 
Amounts: 
Outstanding assets: $0.6 billion; 
Disbursed: $0.6 billion. 

Program: Automotive Industry Financing Program (AIFP): To prevent a 
significant disruption of the American automotive industry; 
Amounts: 
Outstanding assets: $37.3 billion; 
Disbursed: $79.7 billion. 

Program: AIG Investment Program: To provide stability in financial 
markets and avoid disruptions to the markets from the deterioration of 
AIG's financial condition; 
Amounts: On December 14, 2012, Treasury announced that it had received 
payment from its final sale of AIG stock, bringing to an end the 
government's assistance to the company. 

Program: Public-Private Investment Program: To address the challenge 
of "legacy assets" by partnering with investors to purchase certain 
residential and commercial mortgage-backed securities; 
Amounts: 
Outstanding assets: $9.8 billion; 
Disbursed: $18.6 billion. 

Program: Term Asset-backed Securities Loan Facility: To provide 
liquidity in securitization markets for various asset classes to 
improve access to credit for consumers and businesses; 
Amounts: 
Outstanding assets: $0.1 billion; 
Disbursed: $0.1 billion. 

Non-mortgage programs Treasury has exited: 

Program: SBA 7(a) Program: To alleviate liquidity strains in secondary 
markets for SBA 7(a) loans. Treasury purchased 31 SBA 7(a) securities 
between March and September 2010[A]; 
Lifetime income: $0.004 billion. 

Program: Asset Guarantee Program (AGP): To provide federal government 
assurances for assets held b financial institutions that were viewed 
as critical to the functioning of the nation's financial system[B]; 
Lifetime income: $3.9 billion. 

Program: Targeted Investment Program (TIP): To foster market stability 
and strengthen the economy by making investments on a case-by-case 
basis in institutions that Treasury deemed critical to the functioning 
of the financial system; 
Lifetime income: $4.0 billion. 

Program: Capital Assessment Program (CAP): Created to provide capital 
to institutions not able to raise it privately to meet Supervisory 
Capital Assessment Program (SCAP)--or "stress test"--requirements. 
This program was never used. 
Lifetime income: N/A. 

TARP-funded mortgage programs: To offer assistance to homeowners at 
risk of foreclosure[C]. 
Payments: $5.5 billion; 
Authorized: $45.6 billion. 

Source: GAO analysis of Treasury data. 

Notes: The September 30, 2012, data are audited numbers from 
Treasury’s financial statements. Outstanding assets are presented at 
book value. 

[A] The SBA 7(a) program is SBA’s primary program for helping small 
businesses obtain access to credit when they cannot obtain it from 
private lending institutions. The program provides credit for working 
capital and other business needs. 

[B] Treasury no longer holds assets for this program that it must 
manage, though the Federal Deposit Insurance Corporation still holds 
Citigroup trust preferred stock and Treasury could receive income when 
these assets are sold. 

[C] TARP-funded mortgage programs include a variety of programs to 
assist homeowners. Unlike the investment programs, these programs do 
not hold assets to manage and sell and thus have no outstanding assets. 

[End of table] 

View [hyperlink, http://www.gao.gov/products/GAO-13-192] or key 
components. For more information, contact Thomas J. McCool at (202) 
512-2642 or mccoolt@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Most Nonmortgage-Related Programs Continue to Wind Down: 

Mortgage Programs Remain Active, and Oversight Has Shown Both 
Challenges and Improvements: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Treasury's Termination of the TARP Small Business 
Administration 7(a) Securities Purchase Program: 

Appendix III: Treasury's Office of Financial Stability Staffing and 
Use of Private Sector Contracting: 

Appendix IV: Comments from the Department of the Treasury: 

Appendix V: GAO Contacts and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Programs Supported by TARP Funding and Their Estimated 
Lifetime Income (Cost) as of September 30, 2012: 

Table 2: Treasury Offerings of Its AIG Common Stock Holdings, May 2011 
to December 2012: 

Table 3: Cumulative Value of Contracts and Financial Agency Agreements 
in Support of TARP: 

Figures: 

Figure 1: Timeline for Recent Major Events from TARP's Implementation 
and Unwinding, October 3, 2008, through September 10, 2012: 

Figure 2: Status of CPP, as of September 30, 2012: 

Figure 3: Status of Institutions That Received CPP Investments, as of 
September 30, 2012: 

Figure 4: Number of Institutions Missing Scheduled Dividend or 
Interest Payments, by Quarter, as of August 31, 2012: 

Figure 5: Status of CDCI, as of September 30, 2012: 

Figure 6: Status of AIFP, as of September 30, 2012: 

Figure 7: GM's Share Price, November 18, 2010, through December 18, 
2012: 

Figure 8: Status of TALF, as of September 30, 2012: 

Figure 9: Status of PPIP, as of September 30, 2012: 

Figure 10: HAMP Modifications Started Monthly, January 2010 through 
September 2012: 

Figure 11: Status of Mortgage Programs as of September 2012: 

Figure 12: Status of SBA 7(a) Securities Purchase Program, as of 
September 30, 2012: 

Figure 13: OFS Employees and Detailees, November 21, 2008, through 
September 30, 2012: 

Abbreviations: 

ABS: asset-backed securities: 

AIFP: Automotive Industry Financing Program: 

AGP: Asset Guarantee Program: 

AIG: American International Group, Inc. 

CAP: Capital Assessment Program: 

CDCI: Community Development Capital Initiative: 

CDFI: Community Development Financial Institutions: 

CMBS: commercial mortgage-backed securities: 

CPP: Capital Purchase Program: 

Dodd-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection 
Act: 

EBIT: earnings before interest and tax: 

EESA: Emergency Economic Stabilization Act: 

Federal Reserve: Board of Governors of the Federal Reserve System: 

FDIC: Federal Deposit Insurance Corporation: 

FRBNY: Federal Reserve Bank of New York: 

FHA: Federal Housing Administration: 

FHA Short Refinance or FHASR: FHA Refinance of Borrowers in Negative 
Equity Positions: 

GM: General Motors: 

GMAC: General Motors Acceptance Corporation: 

HAFA: Home Affordable Foreclosure Alternatives: 

HAMP: Home Affordable Modification Program: 

Hardest Hit Fund or HHF: Housing Finance Agency Innovation Fund for 
the Hardest Hit Housing Markets: 

HUD: Department of Housing and Urban Development: 

IPO: initial public offering: 

MHA: Making Home Affordable: 

OFS: Office of Financial Stability: 

PPIF: public-private investment fund: 

PPIP: Public-Private Investment Program: 

PRA: Principal Reduction Alternative: 

RD: Rural Development: 

RHS: Department of Agriculture's Rural Housing Service: 

RMBS: residential mortgage-backed securities: 

SBA: Small Business Administration: 

SBLF: Small Business Lending Fund: 

TALF: Term Asset-backed Securities Loan Facility: 

TARP: Troubled Asset Relief Program: 

TIP: Targeted Investment Program: 

Treasury: Department of the Treasury: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

January 7, 2013: 

Congressional Addressees: 

The Emergency Economic Stabilization Act of 2008 (EESA) initially 
authorized $700 billion to assist financial institutions and markets, 
businesses, homeowners, and consumers through the Troubled Asset 
Relief Program (TARP).[Footnote 1] This amount was intended to provide 
confidence that the U.S. government would help address the greatest 
threat the financial markets and economy had faced since the Great 
Depression. As the severity and immediacy of the 2008 financial crisis 
began to diminish, Congress reduced the authorized amount to $475 
billion as part of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank Act).[Footnote 2] 

TARP costs were not estimated to reach the authorized amounts, and 
over time the projected costs have declined as financial institutions 
repay some assistance and other programs move closer to their 
termination dates.[Footnote 3] However, a number of banks that 
received investments under the Capital Purchase Program (CPP), the 
largest TARP program, have missed dividend or interest payments 
related to their government assistance, although the number of banks 
remaining in the program has decreased. TARP-funded housing programs 
also continue their expenditures in an effort to address the ongoing 
foreclosure crisis. 

The Department of the Treasury (Treasury) is the primary agency 
implementing TARP, and it has undertaken a broad range of activities. 
Treasury established the Office of Financial Stability (OFS) to carry 
out TARP activities, which have included injecting capital into key 
financial institutions, implementing programs to address problems in 
the securitization markets, providing assistance to the automobile 
industry, and offering incentives for modifying residential mortgages, 
among other activities. 

As required by EESA, we have provided oversight of TARP activities 
since they began in 2008. This 60-day report assesses the condition of 
TARP as of September 30, 2012.[Footnote 4] Specifically, it examines 
the condition and status of (1) nonmortgage-related TARP programs; and 
(2) TARP mortgage programs, including Treasury's efforts to ensure 
that servicers are implementing two requirements. These requirements 
are establishing a single point of contact for each borrower and 
following procedures for resolving disputed cases that are "escalated" 
or referred for review. 

To assess the condition and status of nonmortgage-related TARP 
programs, we collected and analyzed data about program utilization and 
assets held, as applicable, focusing primarily on financial 
information that we had audited in the Office of Financial Stability's 
(OFS) financial statements, as of September 30, 2012. In some 
instances we provided more recent, unaudited financial information. 
[Footnote 5] The financial information includes the types of assets 
held in the program, obligations that represent the highest amount 
ever obligated for a program, disbursements, and income. Further, we 
reviewed Treasury documentation such as program terms, press releases, 
and reports on TARP programs and costs. Also, we interviewed OFS 
program officials to determine the current status of each TARP 
program, the role of TARP staff, and exit considerations for TARP 
programs. To assess the condition and status of TARP-funded mortgage 
programs and Treasury's efforts to ensure that servicers were 
implementing the single point of contact requirement and procedures 
for resolving escalated cases, we analyzed Treasury's public reports 
and statements; reviewed internal Treasury documentation; and 
interviewed OFS officials. For both objectives, we also leveraged our 
past reporting on TARP, as well as that of the Special Inspector 
General for TARP, as appropriate. Unless otherwise noted, we provide 
financial information about the TARP programs throughout this report 
as of September 30, 2012. Appendix I contains additional information 
about our scope and methodology. 

We conducted this performance audit from September 2012 to January 
2013 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

Background: 

When EESA was enacted on October 3, 2008, the U.S. financial system 
was facing a severe crisis that rippled throughout the global economy, 
moving from the U.S. housing market to an array of financial assets 
and interbank lending. The crisis restricted access to credit and made 
the financing on which businesses and individuals depended 
increasingly difficult to obtain. Further tightening of credit 
exacerbated a global economic slowdown. During the crisis, Congress, 
the President, federal regulators, and others undertook a number of 
steps to facilitate financial intermediation by banks and the 
securities markets. In addition to Treasury's efforts, policy 
interventions were led by the Board of Governors of the Federal 
Reserve System (Federal Reserve) and the Federal Deposit Insurance 
Corporation. While the banking crisis in the United States no longer 
presents the same level of systemic concerns as it did in 2008, the 
financial system continues to face vulnerabilities, including lagging 
investor confidence, financial concerns about European banks and 
countries, and generally weak economic growth globally. 

TARP Programs and Implementation: 

The passage of EESA resulted in a variety of programs supported with 
TARP funding.[Footnote 6] (See table 1.) Treasury estimates several of 
the programs over their lifetimes will provide income to the 
government while others will incur a cost. Each program that remained 
active through September 30, 2012, will be addressed in this report. 

Table 1: Programs Supported by TARP Funding and Their Estimated 
Lifetime Income (Cost) as of September 30, 2012: 

Program: American International Group, Inc. (AIG) Investment Program 
(formerly Systemically Significant Failing Institutions Program); 

Program description: Provided support to AIG to avoid disruptions to 
financial markets as its financial condition deteriorated; 
Lifetime 
Income (Cost) Estimate: ($15.3 billion) TARP; $17.6 billion Non-
TARP[A]. 

Program: Asset Guarantee Program; 
Program description: Provided federal 
government assurances for assets held by financial institutions that 
were viewed as critical to the functioning of the nation's financial 
system. Bank of America and Citigroup were the only two institutions 
that participated in this program; 
Lifetime Income (Cost) Estimate: $3.9 billion. 

Program: Automotive Industry Financing Program (AIFP); 
Program description: Aimed to prevent a significant disruption of the 
American automotive industry through government investments in certain 
domestic automakers--Chrysler and General Motors (GM)--and auto 
financing companies Ally Financial (formerly known as General Motors 
Acceptance Corporation, or GMAC) and Chrysler Financial; 
Lifetime Income (Cost) Estimate: ($24.3 billion). 

Program: Capital Assessment Program; 
Program description: Created to provide capital to institutions not 
able to raise it privately to meet Supervisory Capital Assessment 
Program--or "stress test"--requirements. This program was never used; 
Lifetime Income (Cost) Estimate: N/A. 

Program: Capital Purchase Program (CPP); 
Program description: The largest TARP program, designed to provide 
capital investments to financially viable financial institutions. 
Treasury received preferred shares and subordinated debentures, along 
with warrants[B]; 
Lifetime Income (Cost) Estimate: $14.9 billion. 

Program: Consumer and Business Lending Initiative programs; 
Program description: 
* Community Development Capital Initiative (CDCI) provided 
capital to Community Development Financial Institutions (CDFI) by 
purchasing preferred stock and subordinated debentures[C]; 
Lifetime Income (Cost) Estimate: ($0.2 billion); 
* Small Business Administration (SBA) 7(a) Securities Purchase Program 
provided liquidity to secondary markets for government-guaranteed 
small business loans in SBA's 7(a) loan program; 
Lifetime Income (Cost) Estimate: $0.004 billion; 
* Term Asset-backed Securities Loan Facility (TALF) provided liquidity 
in securitization markets for various asset classes to improve access 
to credit for consumers and businesses; 
Lifetime Income (Cost) Estimate: $0.5 billion. 

Program: TARP-funded housing programs; 
Program description: 
* Making Home Affordable includes several housing programs. The 
primary program has been the Home Affordable Modification Program 
(HAMP), under which Treasury shares the cost of reducing monthly 
payments on first lien mortgages with mortgage holders/investors and 
provides financial incentives to servicers, borrowers, and mortgage 
holders/investors for loans modified under the program[D]; 
* Hardest Hit Fund seeks to help homeowners in the states hit hardest 
by unemployment and house price declines; 
* Support for the Department of Housing and Urban Development's 
Federal Housing Administration (FHA) Short Refinance program enables 
homeowners whose mortgages exceed the value of their homes to 
refinance into more affordable mortgages; 
Lifetime Income (Cost) Estimate: ($45.6 billion) for all programs. 

Program: Public-Private Investment Program (PPIP); 
Program description: Created to address the challenge of "legacy 
assets" as part of Treasury's efforts to repair balance sheets 
throughout the financial system. Treasury partnered with private funds 
to purchase residential and commercial mortgage-backed securities; 
Lifetime Income (Cost) Estimate: $2.4 billion. 

Program: Targeted Investment Program (TIP); 
Program description: Sought to foster market stability and strengthen 
the economy by making case-by-case investments in institutions that 
Treasury deemed critical to the functioning of the financial system. 
Bank of America and Citigroup were the only two institutions that 
participated in this program; 
Lifetime Income (Cost) Estimate: $4.0 billion. 

Source: GAO analysis of Treasury data. 

Note: The data in this table are as of September 30, 2012, and do not 
reflect significant transactions related to AIG, GM, and PPP that 
occurred after that date but are discussed later in this report. 

[A] In addition to using TARP to support AIG, Treasury also supported 
AIG through non-TARP assistance. Treasury received 562,868,096 common 
shares outside of TARP from a trust created by the Federal Reserve 
Bank of New York for the benefit of the Treasury. The trust exchanged 
its AIG Series C preferred shares, for AIG common shares. 

[B] A warrant is an option to buy shares of common stock or preferred 
stock at a predetermined price on or before a specified date. 

[C] CDFIs are financial institutions that provide financing and 
related services to communities and populations that lack access to 
credit, capital, and financial services. 

[D] For more information on additional Making Home Affordable programs 
funded through TARP see GAO, Troubled Asset Relief Program: Further 
Actions Needed to Enhance Assessments and Transparency of Housing 
Programs, GAO-12-783 (Washington, D.C.: July 19, 2012). 

[End of table] 

Many TARP programs have been winding down, and some have ended. 
[Footnote 7] Treasury has stated that when deciding to sell assets and 
exit TARP programs, it strives to: 

* protect taxpayer investment and maximize overall investment returns 
within competing constraints, and promote the stability of financial 
markets and the economy by preventing disruptions to the financial 
system; 

* bolster markets' confidence in order to encourage private capital 
investment; and: 

* dispose of investments as soon as practicable. 

While Treasury has identified these goals for the exit process for 
many programs, we and others have noted that these goals, at times, 
can conflict.[Footnote 8] For example, we previously reported that 
deciding to unwind some of its assistance to General Motors (GM) by 
participating in an initial public offering (IPO) presented Treasury 
with a conflict between maximizing taxpayer returns and exiting as 
soon as practicable. Holding its shares longer could have meant 
realizing greater gains for the taxpayer but only if the stock 
appreciated in value. By participating in GM's November 2010 IPO, 
Treasury tried to fulfill both goals, selling almost half of its 
shares at an early opportunity. Treasury officials stated that 
although they strove to balance these competing goals, they had no 
strict formula for doing so. Rather, they ultimately relied on the 
best available information in deciding when to start exiting this 
program. 

Moreover, in some cases Treasury's ability to exercise control over 
the timing of its exit from TARP programs is limited. For example, 
Treasury has limited control over its exit from the Public-Private 
Investment Program (PPIP), because the program's exit depends on when 
each public-private investment fund (PPIF) decides to sell its 
investments. Treasury continues to face this tension in its goals with 
a number of TARP programs. Figure 1 provides an overview of key dates 
for TARP implementation and the unwinding of some programs. In 
addition, appendix III provides information on Treasury's 
administration of the TARP programs, including an update on the 
staffing challenges we have previously reported and Treasury's 
reliance on the private sector to assist with TARP administration and 
operations. 

Figure 1: Timeline for Recent Major Events from TARP's Implementation 
and Unwinding, October 3, 2008, through September 10, 2012: 

[Refer to PDF for image: timeline] 

2008: 

10/3: Put L. 110-343: Emergency Economic Stabilization Act (EESA) 
enacted, which authorized the Troubled Asset Relief Program (TARP). 

10/14: 
Treasury announces that it will purchase up to $250 billion in 
financial firms' preferred stock via the Capital Purchase Program 
(CPP). 

11/10: 
Treasury announces American International Group, Inc. (AIG) assistance 
through the Systemically Significant Failing Institutions (SSFI) 
Program. 

11/23: 
Treasury, the Federal Deposit Insurance Corporation (FDCI), and the 
Federal Reserve provide Citigroup assistance through guarantees, 
liquidity access, and capital, including an equity investment through 
the Targeted Investment Program (TIP). 

11/25: 
Treasury announces support for the Federal Reserve's Term Asset-backed 
Securities Loan Facility (TALF) to assist asset-backed securities. 

12/19: 
Treasury announces a plan to stabilize the automotive industry under 
the Automotive Industry Financing Program (AIFP). 

2009: 

1/16: 
Treasury, the Federal Reserve, and FDIC assist Bank of America through 
guarantees, liquidity access, and capital including protection on 
certain losses and the purchase of preferred stock under the Targeted 
Investment Program. 

2/18: 
Treasury announces the framework for its Making Home Affordable 
Program (MHA). 

2/25: 
Treasury announces the terms and conditions for the Capital Assessment 
Program (CAP). 

3/23: 
Treasury, FDIC, and the Federal Reserve announce details on the Public-
Private Investment Program (PPIP). 

6/17: 
Five of the eight largest financial institutions to first participate 
in CPP repurchase their preferred stock from Treasury. 

10/21: 
Treasury' announces new efforts under TARP to assist small businesses 
and Community Development Financial Institutions (CDFIs). 

11/9: 
CAP closes. 

12/31: 
CPP closes to new investments. 

2010: 

2/3: 
Treasury announces final terms for CDFIs, which increases capital for 
lending and expands eligibility. 

3/26: 
Treasury announces additional mortgage assistance for unemployed 
homeowners and those who owe more on their mortgages than their home's 
value. 

7/21: 
Dodd-Frank Act is enacted, which prohibits TARP funds from being 
obligated for new programs not initiated prior to June 25 2010, and 
Treasury reduces available funds for existing programs. 

10/3: 
On the second anniversary of EESA, Treasury's authorization to make 
new financial commitments for programs under TARP ends. 

11/17: 
Treasury participates in General Motor's (GM) initial public offering, 
reducing its ownership stake in GM. 

12/10: 
Treasury announces exiting Citigroup assistance with the sale of at 
Citigroup common stock. 

2011: 

1/14: 
AIG closes on the restructuring of its assistance from Treasury and 
the Federal Reserve Bank of New York so it now takes the form of 
common stock and preferred interests. 

5/24: 
In its first auction of AIG common stock, Treasury sells 200 million 
shares of the stock to the public, reducing its remaining equity 
interest from approximately 92 percent to approximately 77 percent. 

6/2: 
Treasury announces the intention to begin the disposition of its Small 
Business Administration (SBA) 7(a) securities portfolio and thereafter 
commences sales. 

7/21: 
Treasury sells all of its shares of Chrysler. 

2012: 

1/25: 
Treasury announces the closing of its support for the SBA 7(a) program 
with an $8 million gain for taxpayers. 

1/27: 
Treasury announces the extension of MHA programs through December 31, 
2013, the expansion of the Home Affordable Modification Program (HAMP) 
to include a second tier of modifications (Tier 2), and the tripling 
of incentives for the Principal REduction Alternative. 

3/27: 
Treasury announces repayment in full of the government's remaining 
preferred equity investment in the AIG-owned entity AIA Aurora LLC 
(AIA special purpose vehicle that hold ordinary shares in AIA Group 
Limited). 

5/3: 
Treasury announces updated exit strategy for CPP to include focus on 
selling remaining assets. 

6/1: 
Servicers begin evaluating borrowers for HAMP Tier 2 modifications. 

8/6: 
Treasury sells 188,524,590 shares of its AIG common stock, reducing 
its remaining equity in AIG to approximately 53 percent. 

9/10: 
Treasury agrees to sell 553.8 million shares of AIG common stock at 
$32.50 per share to reduce Treasury's remaining stake in AIG to about 
21.5 percent and to recoup its investment in AIG. 

Source: GAO analysis of Treasury data. 

[End of figure] 

Most Nonmortgage-Related Programs Continue to Wind Down: 

Most nonmortgage-programs continue to wind down, but the status and 
potential ending date of each nonmortgage-related TARP program varies. 
Key information includes, 

* the estimated date, if known, that the program will end or stop 
acquiring new assets and no longer receive funding; 

* Treasury's estimated date for exiting the program or selling the 
assets it acquired while the program was open; 

* outstanding assets, as applicable, as of September 30, 
2012;[Footnote 9] and: 

* the lifetime estimated costs (or income) for each program as 
calculated by Treasury. 

Institutions' Financial Strength and the Outcomes of Auctions Will 
Help Determine When Remaining Participants Exit CPP: 

While repayments and income from CPP investments have exceeded the 
original outlays, the financial strength of participating institutions 
and the outcome of future securities auctions will help determine when 
the remaining institutions exit the program. As we have reported, 
Treasury disbursed $204.9 billion to 707 financial institutions 
nationwide from October 2008 through December 2009.[Footnote 10] As of 
September 30, 2012, Treasury had received $219.5 billion in repayments 
and income from its CPP investments, exceeding the amount originally 
disbursed by $14.6 billion (see figure 2). The repayment and income 
amount included $193.2 billion in repayments of original CPP 
investments, as well as $11.8 billion in dividends, interest, and 
fees; $7.7 billion in warrant income; and $6.9 billion in net proceeds 
in excess of costs. After accounting for write-offs and realized 
losses on sales totaling $3.0 billion, CPP had $8.7 billion in 
outstanding investments as of September 30, 2012. Treasury estimates 
lifetime income of $14.9 billion for CPP as of September 30, 2012. 
[Footnote 11] 

Figure 2: Status of CPP, as of September 30, 2012: 

[Refer to PDF for image: illustrated table] 

Capital Purchase Program (CPP): 

Assets held: 
Preferred stock; 
Common stock; 
Warrants; 
Subordinated debt. 

Start date: October 2008; 
End date: December 2009; 
Approximate exit: Unknown. 

Status of funding: 
Highest ever obligated: $204.9 billion; 
Disbursed: $204.9 billion; 
Repayments[A]: $193.2 billion; 
Write-offs and losses: $3.0 billion; 
Outstanding investments: $8.7 billion. 

Income: 
Dividends/interest income: $11.8 billion; 
Warrant income: $7.7 billion; 
Proceeds in excess of costs: $6.9 billion; 
Total income: $26.4 billion. 

Net estimated value of outstanding investments: $5.7 billion. 

Estimated lifetime income: $14.9 billion. 

Exit considerations: 
* The financial strength of CPP participants and the outcome of future 
auctions of securities will determine whether and how quickly 
institutions can repay and when Treasury can exit. 

* The dividend rate for some CPP institutions resets beginning in the 
fall of 2013 and could prompt institutions to repay their investments. 

* Treasury expects that the sale of investments will be an ongoing 
component of the wind down of CPP's bank programs, and the outcome of 
this strategy will depend on demand from investors. 

* Treasury expects to use pooled auctions for smaller and riskier 
investments, whose outcome will also be subject to investor demand. 

Source: GAO analysis of Treasury data. 

[A] The total amount of repayments includes $363 million from 
institutions that transferred to the Community Development Capital 
Initiative and $2.2 billion from institutions that transferred to the 
Small Business Lending Fund. 

[End of figure] 

Over half (417) of the 707 institutions that originally participated 
in CPP had exited the program as of September 30, 2012.[Footnote 12] 
Of the 417 institutions that have exited CPP, about 42 percent, or 175 
institutions, exited by repaying their investments.[Footnote 13] 
Another 40 percent, or 165 institutions, exited CPP by exchanging 
their securities under other federal programs: 28 through TARP's 
Community Development Capital Initiative (CDCI) and 137 through the 
non-TARP Small Business Lending Fund (SBLF) (see figure 3).[Footnote 
14] Of the remaining 18 percent of CPP recipients that exited the 
program, 56 had their securities sold by Treasury, 18 went into 
bankruptcy or receivership, and 3 merged with another institution. 

Figure 3: Status of Institutions That Received CPP Investments, as of 
September 30, 2012: 

[Refer to PDF for image: pie chart] 

Institutions remaining in program: 290; 
Investments fully repaid: 175; 
Investments refinanced through SBLF or CDCI: 165; 
Investments sold to Treasury: 56; 
Other: 21. 

Source: GAO analysis of Treasury data. 

[End of figure] 

As of September 30, 2012, much of the $8.7 billion in outstanding 
investments was concentrated in a relatively small number of 
institutions. The largest single outstanding investment was $967.9 
million, and the top three outstanding investments totaled $2.3 
billion--27 percent of the amount outstanding. The top 25 remaining 
CPP investments accounted for $5.4 billion, or 63 percent of the 
outstanding amount. In addition, while 290 of the original 707 
institutions remained in CPP, their $8.7 billion in outstanding 
investments accounted for just 4 percent of what Treasury originally 
disbursed. 

However, the number of institutions that have missed payments has been 
rising. The cumulative number of financial institutions that had 
missed at least one scheduled dividend or interest payment by the end 
of the month in which the payments were due rose from 219 as of August 
31, 2011, to 242 as of August 31, 2012.[Footnote 15] These 242 
institutions represent over one-third of the 707 institutions that 
participated in CPP and account for a cumulative total of 1,631 missed 
payments.[Footnote 16] As of August 31, 2012, 208 institutions had 
missed three or more payments and 142 had missed six or more. The 
total amount of missed dividend and interest payments was $376 
million, although some of these payments were later made prior to the 
end of the reporting month. On a quarterly basis, the number of 
institutions missing dividend or interest payments due on their CPP 
investments increased steadily from 8 in February 2009 to 150 in 
August 2012, or about half of the institutions still in the program 
(see figure 4). This increase occurred despite the reduced program 
participation, so the proportion of those missing scheduled payments 
has risen accordingly. 

Figure 4: Number of Institutions Missing Scheduled Dividend or 
Interest Payments, by Quarter, as of August 31, 2012: 

[Refer to PDF for image: multiple line graph] 

Date: February 2009; 
Missed Payments: 8; 
Institutions: 467. 

Date: May 2009; 
Missed Payments: 18; 
Institutions: 593. 

Date: August 2009; 
Missed Payments: 34; 
Institutions: 637. 

Date: November 2009; 
Missed Payments: 54; 
Institutions: 645. 

Date: February 2010; 
Missed Payments: 79; 
Institutions: 645. 

Date: May 2010; 
Missed Payments: 97; 
Institutions: 636. 

Date: August 2010; 
Missed Payments: 123; 
Institutions: 616. 

Date: November 2010; 
Missed Payments: 132; 
Institutions: 586. 

Date: February 2011; 
Missed Payments: 152; 
Institutions: 562. 

Date: May 2011; 
Missed Payments: 156; 
Institutions: 543. 

Date: August 2011; 
Missed Payments: 159; 
Institutions: 464. 

Date: November 2011; 
Missed Payments: 158; 
Institutions: 379. 

Date: February 2012; 
Missed Payments: 158; 
Institutions: 363. 

Date: May 2012; 
Missed Payments: 153; 
Institutions: 343. 

Date: August 2012; 
Missed Payments: 150; 
Institutions: 300. 

Source: GAO analysis of Treasury data. 

Note: Dividend and interest payments are due on a quarterly basis. The 
number of participating institutions on any given quarter did not 
reach 707 (i.e., the total number of institutions that participated in 
CPP) because these institutions entered and exited the programs at 
different points in time. Also, 300 institutions remained in CPP as of 
August 31, 2012, but as of September 30, 2012, that number had 
decreased to 290. 

[End of figure] 

The number of institutions missing payments has stabilized in recent 
quarters, but most of the institutions with missed payments had missed 
them repeatedly. In particular, 133 of the 150 institutions that 
missed payments in August 2012 had also missed payments in each of the 
previous three quarters. Moreover, these 150 institutions had missed 
an average of 7.3 additional previous payments, while 4 had never 
missed a previous payment. Institutions can elect whether to pay 
dividends and may choose not to pay for a variety of reasons, 
including decisions that they or their federal and state regulators 
make to conserve cash and maintain (or increase) capital levels. 
Institutions are required to pay dividends only if they declare 
dividends, although unpaid cumulative dividends generally accrue and 
the institution must pay them before making payments to other types of 
shareholders, such as holders of common stock. 

In May 2012, Treasury announced a strategy to wind down its remaining 
investments. The strategy includes three options that the department 
says will protect taxpayer interests, promote financial stability, and 
preserve the strength of the nation's community banks. These options 
include allowing banks to repurchase or restructure their investments 
or selling Treasury-held stock through public auctions. In considering 
these options, Treasury will need to balance the goals of protecting 
taxpayer-supported investments while expeditiously unwinding the 
program. Treasury officials said that they would continue to evaluate 
the CPP exit strategy, but added that they expected to continue using 
these options for the foreseeable future. 

The first option allows banks, with the approval of their regulators, 
to repurchase from Treasury their preferred shares in full. Treasury 
points out that this strategy has been used since 2009 and is one it 
expects some banks to continue to use through late 2013. Under this 
option, Treasury's ability to exit the program largely depends on the 
ability of institutions to repay their investments. Institutions will 
have to demonstrate that they are financially strong enough to repay 
the CPP investments in order to receive regulatory approval to exit 
the program. Dividend rates will increase from 5 percent to 9 percent 
for remaining institutions beginning in late 2013, a development that 
may prompt institutions to repay their investments. If broader 
interest rates are low, especially approaching the dividend reset, 
banks could have further incentive to redeem their preferred shares. 

A second option allows banks to restructure their investments, usually 
in connection with a merger or a plan to raise new capital. With this 
option, Treasury receives cash or other securities that generally can 
be sold more easily than preferred stock. Treasury officials said 
that, as of early October 2012, approximately 28 restructurings had 
occurred. The officials expected a limited number of restructurings to 
continue, but added that because Treasury's investments were sometimes 
sold at a discount during restructuring, they would approve the sales 
only if the terms represented the best deal for taxpayers. 

Under the third option, Treasury may sell its preferred stock through 
public auctions. Treasury conducted the first such auction of CPP 
investments in March 2012 and reported that it generated strong 
investor interest. As of September 30, 2012, Treasury had conducted 
six auctions resulting in the sale of 40 investments with total net 
proceeds of about $1.3 billion. Treasury also reported that this 
option can be beneficial for community banks that do not have easy 
access to the capital markets, because it could attract new, private 
capital to replace the temporary TARP support. Treasury expects this 
option to continue to be part of its effort to wind down CPP. Thus 
far, Treasury has sold investments individually, but noted that it 
might combine other investments, particularly smaller ones, into 
pools. Whether Treasury sells stock individually or in pools, the 
outcome of this option will depend largely on investor demand for 
these securities. 

The Financial Strength of CDCI Participants Will Affect When Treasury 
Terminates the Program: 

Treasury disbursed $570 million to its 84 CDCI participants and 
completed funding the program in September 2010 (see figure 
5).[Footnote 17] As we previously reported, CDCI is structured much 
like CPP, in that it has provided capital to financial institutions by 
purchasing equity and subordinated debt from them.[Footnote 18] No 
additional funds are available through the program, as CDCI's funding 
authority expired in September 2010. As of September 2012, Treasury 
expects CDCI will cost approximately $200 million over its lifetime, 
less than half of the $570 million obligated to the program. Officials 
stated that CDCI will have a lifetime cost, while CPP is estimated to 
result in lifetime income, in part because CDCI provides a lower 
dividend rate that increases the net financing cost to Treasury. Also, 
unlike CPP, the program does not require warrants from participating 
institutions that would have helped offset Treasury's costs. As of 
September 30, 2012, two CDCI participants have repaid Treasury $2.85 
million, and Treasury has received $22 million in dividend payments 
from CDCI participants. 

Figure 5: Status of CDCI, as of September 30, 2012: 

[Refer to PDF for image: illustrated table] 

Community Development Capital Initiative (CDCI): 

Assets held: 
Preferred stock; 
Common stock; 
Subordinated debt. 

Start date: 2010[A]; 
End date: September 2010; 
Approximate exit: Unknown. 

Status of funding: 
Highest ever obligated: $0.57 billion. 

Disbursed: $0.57 billion: 
* Exchanges from CPP to CDCI: $0.36 billion; 
* Not from exchanges: $0.21 billion. 

Outstanding investments: $0.57 billion: 
* Exchanges from CPP to CDCI: $0.36 billion; 
* Not from exchanges: $0.21 billion. 

Income: 
Dividend income: $0.02 billion; 
Total income: $0.02 billion. 

Net estimated value of outstanding investments: $0.40 billion. 

Estimated lifetime cost: $0.2 billion. 

Exit considerations: 
* The low dividend rate extends until 2018 but the program could take 
longer to wind down if participants do not repay by that time; 
* Treasury currently plans to hold its CDC! investments but could 
change that practice in the future, which could affect the timing of 
its exit from CDCI. 

Source: GAO analysis of Treasury data. 

Note: Treasury began holding common stock for CDCI after September 30, 
2011. 

[A] Treasury first announced CDCI in October 2009. The program first 
provided capital to CDFIs in 2010. 

[End of figure] 

As with CPP, Treasury must continue to monitor the performance of CDCI 
participants because their financial strength will affect their 
ability to repay Treasury. According to Treasury officials, Treasury 
will continue to hold its CDCI investments and has not made any 
disposition decisions about the program. However, they said that when 
Treasury decides to exit the CDCI program, it will need tools in place 
similar to those used by CPP institutions to exit the CPP program. As 
of September 30, 2012, 5 of the 84 CDCI participants had missed at 
least one dividend or interest payment, and 2 of the participants had 
paid accrued and unpaid dividends after missing the initial scheduled 
payment date(s), according to Treasury. While the continuing weak 
economy could negatively affect distressed communities and the CDFIs 
that serve them, the program's low dividend rates may help 
participants remain current on payments. 

When Treasury will exit CDCI is unknown, but the dividend rate that 
program participants pay increases in 2018. However, Treasury 
officials noted that the program was intended to be long term and said 
that they believed the program was meeting its objective by providing 
long-term, low-cost capital. CDCI institutions have an opportunity to 
keep CDCI capital in their communities, which are usually moderate and 
low income, for a longer time. Treasury officials indicated that, as 
with CPP investments, Treasury's current practice was to hold CDCI 
investments but that this strategy could change, and Treasury could 
opt to sell its CDCI shares. 

Competing Goals and Market Conditions Have Affected Treasury's Exit 
from GM and Ally: 

Since investing roughly $80 billion in the automotive industry, as of 
September 30, 2012, Treasury had received more than $40 billion in 
proceeds. Nevertheless, Treasury still held substantial investments in 
GM and Ally Financial, which included 32 percent of GM's common stock, 
74 percent of Ally Financial's common stock, and $5.9 billion of Ally 
Financial's mandatory convertible preferred stock (see figure 6). 
[Footnote 19] 

Figure 6: Status of AIFP, as of September 30, 2012: 

[Refer to PDF for image: illustrated table] 

Automotive Industry Financing Program (AIFP): 

Assets held: 
GM: Common stock; 
Ally Financial: Common and preferred stock. 

Assets sold: 
GM: Preferred and common stock and debt obligations; 
Ally Financial: Trust preferred securities; 
Chrysler: Common stock and debt Obligations; 
Chrysler Financial: DEbt obligations. 

GM Start date: December 2008; 
End date: July 2009; 
Approximate exit: Unknown. 

Ally Financial Start date: December 2008; 
End date: December 2009; 
Approximate exit: Unknown. 

Chrysler Start date: January 2009; 
End date: June 2009; 
Approximate exit: July 2011. 

Chrysler Financial Start date: January 2009; 
End date: January 2009; 
Approximate exit: July 2009. 

Status of funding: 
Highest ever obligated: $85.0 billion. 

Disbursed: $79.7 billion: 
* GM: $51.0 billion; 
* Ally Financial: $16.3 billion; 
* Chrysler: $10.9 billion; 
* Chrysler Financial: $1.5 billion. 

Repayments: $35.2 billion; 
* GM: $23.2 billion; 
* Ally Financial: $2.5 billion; 
* Chrysler: $7.9 billion; 
* Chrysler Financial: $1.5 billion. 

Wire-offs and losses: $7.4 billion; 
* GM: $4.4 billion; 
* Ally Financial: $0; 
* Chrysler: $2.9 billion; 
* Chrysler Financial: $0. 

Outstanding investments: $37.3 billion: 
* GM: $22.6 billion; 
* Ally Financial: $3.0 billion; 
* Chrysler: $1.2 billion; 
* Chrysler Financial: $0. 

Income: 
Dividend/interest income: $4.9 billion; 
* GM: $0.77 billion; 
* Ally Financial: $3.0 billion; 
* Chrysler: $1.2 billion; 
* Chrysler Financial: $0.01 billion. 

Proceeds in excess of cost: $0.73 billion; 
* GM: $0.09 billion; 
* Ally Financial: $0.13 billion; 
* Chrysler: $0.49 billion; 
* Chrysler Financial: $0.02 billion. 

Total income: $5.7 billion. 

Net estimated value of outstanding investments: $17.6 billion; 
* GM: $11.4 billion; 
* Ally Financial: $6.2 billion; 
* Chrysler: $0; 
* Chrysler Financial: $0. 

Estimated lifetime cost: $24.3 billion. 

Exit considerations: 
* Market conditions that affect GM and Ally shares. 

Source: GAO analysis of Treasury data. 

Notes: Numbers may not sum because of rounding. Ally Financial was 
formerly known as the General Motors Acceptance Corporation, or GMAC. 
The figures in this graphic do not reflect Treasury's December 
announcement about its exit plans for its GM investments, which are 
discussed in the text of the report. 

[End of figure] 

Treasury officials told us that they continued to monitor GM's 
financial condition as well as overall market and economic conditions 
as they developed a divestment strategy for GM. In general, GM's 
financial condition has improved since the IPO, but the company 
continued to address challenges with its European operations. 
Specifically, GM's net income rose 43 percent--from about $6.5 billion 
in 2010 to about $9.3 billion in 2011, with the company achieving 11 
straight quarters of profitability since its formation in July 2009. 
However, the company saw a decline in net income in 2012--from about 
$8.5 billion in the first three quarters of 2011 to about $5.1 billion 
in the first three quarters of 2012. GM officials reported this 
decline was largely due to increased losses in the company's European 
Operations, a region where the automotive industry as a whole 
struggles. The company continues to post losses in Europe, with 
vehicle sales declining 7.4 percent between the first three quarters 
of 2011 and the first three quarters of 2012. In contrast, GM's North 
American sales increased 3.2 percent over 2011 levels for that same 
time period. The company has reported taking actions to help 
restructure its European operations and expects financial results to 
improve.[Footnote 20] 

The company has also recently made a number of other changes in an 
effort to improve its financial condition and flexibility. In June 
2012, in an effort to de-risk its pension plans and further strengthen 
its balance sheet, GM announced that it would provide certain U.S. 
salaried retirees with a continued monthly payment administered and 
paid by The Prudential Insurance Company of America and others with a 
voluntary lump-sum payment option, which it estimated would reduce its 
salaried pension obligation by about $29 billion. In November 2012 GM 
announced plans for its captive financing subsidiary, GM Financial, to 
acquire Ally Financial, Inc.'s International Operations in 14 
countries, which the company expects to drive higher vehicle sales in 
China, Mexico, Europe and Latin America. Also in November 2012, GM 
secured a new $11 billion revolving to help improve GM Financial's 
financial flexibility. 

In December 2012, two years after the GM IPO, Treasury announced that 
it would sell 200 million or 40 percent of its remaining shares in the 
company, and intends to sell the other remaining 300.1 million shares 
through a pre-arranged written trading plan within the next 12 to 15 
months, subject to market conditions. In May 2011, we reported that 
GM's share price would have to increase dramatically from current 
levels to an average of more than $54 for Treasury to fully recoup its 
investment. Because the December 2012 sale price of $27.50 per share 
is considerably less than the breakeven level, GM's shares will now 
have to increase to roughly $72 per share, or more than double the 
average 2012 share price, for Treasury to fully recoup its investment 
(see figure 7).[Footnote 21] 

Figure 7: GM's Share Price, November 18, 2010, through December 18, 
2012: 

[Refer to PDF for image: line graph] 

Post-IPO share price to fully recoup Treasury's investment: $54; 
IPO share price: $33. 

GM daily closing share price: (first trading day of each month) 

2010: 
November 28: $34.19; 
December: $34.78. 

2011: 
January: $37.06; 
February: $36.45; 
March: $32.95; 
April: $32.41; 
May: $32.18; 
June: $30.23; 
July: $30.58; 
August: $28.07; 
September: $23.03; 
October: $19.73; 
November: $23.33; 
December: $20.96. 

2012: 
January: $21.05; 
February: $24.37; 
March: $26.47; 
April: $26.76; 
May: $23.31; 
June: $22.01; 
July: $19.57; 
August: $19.66; 
September: $21.31; 
September 28: $22.75. 

Source: Yahoofinance.com and GAO analysis. 

[End of figure] 

In addition to its outstanding investments in GM, Treasury remains 
heavily invested in Ally Financial. According to Treasury officials, 
the department continues to explore all potential options for 
divesting its interest in Ally Financial, including public and private 
options such as a possible IPO or selling its equity in a private 
transaction. However, since we last reported on Ally Financial the 
company has undergone a number of changes that could affect the timing 
of Treasury's exit.[Footnote 22] For instance, on May 14, 2012, Ally 
Financial's mortgage subsidiary Residential Capital, LLC, and certain 
of its subsidiaries, filed for Chapter 11 bankruptcy. The company is 
also in the process of selling its international business, which 
includes auto finance, insurance, and banking and deposit operations 
in Canada, Mexico, Europe, the United Kingdom, China, and South 
America. According to Ally Financial, contracts for each of these 
countries have been signed, and deal closings are expected to occur in 
stages throughout the first half of 2013. Ally Financial reported that 
these actions would improve the financial viability of the company and 
increase the likelihood of repaying Treasury. Ally's net income for 
the first three quarters of 2012 has declined from the same period in 
2011--decreasing from a positive $49 million in 2011 to a loss of $204 
million in 2012. This loss is primarily attributable to charges 
related to the Residential Capital, LLC, bankruptcy filing in the 
second quarter of 2012.[Footnote 23] 

The challenges facing Ally Financial and reductions in the share 
prices of common stock holdings in GM highlight how market conditions 
contribute to the risks associated with AIFP and the variability of 
lifetime cost estimates. The projected lifetime cost of AIFP has 
increased since 2010 and as of September 30, 2012, was estimated at 
$24.3 billion--about $700 million more than in September 2011 and 
almost $10 billion more than in September 2010. According to Treasury 
officials, Treasury continues to balance its goals of exiting as soon 
as practicable and maximizing taxpayer returns. 

Treasury Sold Its Remaining AIG Shares: 

On December 11, 2012, Treasury announced that it agreed to sell all of 
its remaining shares of AIG common stock, and on December 14, 2012, 
announced that it had received payment from its final sale of AIG 
stock, bringing to an end the government's assistance to the company. 
Prior to TARP, in September 2008 AIG received assistance in the form 
of a loan from the Federal Reserve Bank of New York (FRBNY). In 
exchange, AIG provided shares of preferred stock to the AIG Credit 
Facility Trust that FRBNY created. These preferred shares were 
converted to common stock and then transferred to the Treasury. In 
addition to this and other non-TARP support, Treasury provided 
assistance to AIG in November 2008 through TARP by purchasing 
preferred shares that were also later converted to common stock. In 
late January 2011, following the recapitalization of AIG, Treasury 
owned 1.655 billion common shares in AIG (1.092 billion TARP and 0.563 
billion non-TARP) and a $20.3 billion preferred interest in two 
special purpose vehicle subsidiaries of AIG.[Footnote 24] 

In May 2011, Treasury began to sell its AIG shares. Since then and 
through six offerings, Treasury has sold all of its shares of AIG 
common stock, both TARP and non-TARP shares. The shares it sold in May 
2011 and March 2012 to the public brought $29 per share; the shares it 
sold in May and August of 2012 to the public brought $30.50 per share; 
and the shares it sold in September and December 2012 to the public 
brought $32.50 per share. The share price, on a weighted average 
basis, was $31.18, exceeding Treasury's break-even price of $28.73 per 
share on an overall cost basis for both the TARP and non-TARP shares. 
[Footnote 25] At an average price of $31.18 per share, the returns 
include about $34 billion on the 1.092 billion TARP shares and $17.6 
billion on the 563 million non-TARP shares--totaling over $51.6 
billion in proceeds. (See table 2.) While it has sold its remaining 
AIG common shares, Treasury continues to hold warrants to purchase 
approximately 2.7 million shares of AIG common stock. 

Table 2: Treasury Offerings of Its AIG Common Stock Holdings, May 2011 
to September 2012: 

Execution date: 5/24/2011; 
Treasury shares sold to the public (includes over allotments sold): 
200,000,000; 
Treasury shares sold to AIG: [Empty]; 
Price per share: $29.00; 
Proceeds: $5,800,000,000; 
Treasury's remaining AIG common shares: 1,455,037,962; 
Percent government equity remaining in AIG: 77%. 

Execution date: 3/08/2012; 
Treasury shares sold to the public (includes over allotments sold): 
103,448,276; 
Treasury shares sold to AIG: 103,448,276; 
Price per share: 29.00; 
Proceeds: $6,000,000,008; 
Treasury's remaining AIG common shares: 1,248,141,410; 
Percent government equity remaining in AIG: 70%. 

Execution date: 5/06/2012; 
5/07/2012; 
Treasury shares sold to the public (includes over allotments sold): 
98,360,656; 
Treasury shares sold to AIG: 65,573,770; 
Price per share: 30.50; 
Proceeds: $4,999,999,993; 
Treasury's remaining AIG common shares: 1,084,206,984; 
Percent government equity remaining in AIG: 63%. 

Execution date: 5/07/2012; 
Treasury shares sold to the public (includes over allotments sold): 
24,590,163[A]; 
Treasury shares sold to AIG: 0; 
Price per share: 30.50; 
Proceeds: $749,999,972; 
Treasury's remaining AIG common shares: 1,059,616,821; 
Percent government equity remaining in AIG: 61%. 

Execution dates: 8/03/2012; 
Treasury shares sold to the public (includes over allotments sold): 
65,573,770; 
Treasury shares sold to AIG: 98,360,656; 
Price per share: 30.50; 
Proceeds: $4,999,999,993; 
Treasury's remaining AIG common shares: 895,682,395; 
Percent government equity remaining in AIG: [Empty]. 

Execution dates: 8/06/2012; 
Treasury shares sold to the public (includes over allotments sold): 
24,590,164[B]; 
Treasury shares sold to AIG: 0; 
Price per share: 30.50; 
Proceeds: $750,000,002; 
Treasury's remaining AIG common shares: 871,092,231; 
Percent government equity remaining in AIG: 53%. 

Execution dates: 9/10/2012; 
Treasury shares sold to the public (includes over allotments sold): 
400,000,000;
Treasury shares sold to AIG: 153,846,153; 
Price per share: 32.50; 
Proceeds: $17,999,999,973; 
Treasury's remaining AIG common shares: 317,246,078; 
Percent government equity remaining in AIG: 21.5%. 

Execution dates: 9/11/2012; 
Treasury shares sold to the public (includes over allotments sold): 
83,076,922[C]; 
Treasury shares sold to AIG: 0; 
Price per share: 32.50; 
Proceeds: $2,699,999,965; 
Treasury's remaining AIG common shares: 234,169,156; 
Percent government equity remaining in AIG: 15.9%. 

Execution dates: Totals; 
Treasury shares sold to the public (includes over allotments sold): 
999,639,951; 
Treasury shares sold to AIG: 421,228,855; 
Proceeds: $43,999,999,906. 

Source: GAO analysis of Treasury data. 

[A] These additional shares were sold as a result of underwriters 
exercising their overallotment option and were sold under the same 
prospectus and registration statement as the shares sold on May 6, 
2012. 

[B] These additional shares were sold as a result of underwriters 
exercising their overallotment option and were sold under the same 
prospectus and registration statement as the shares sold on August 3, 
2012. 

[C] These additional shares were sold as a result of underwriters 
exercising their overallotment option and were sold under the same 
prospectus and registration statement as the shares sold on September 
10, 2012. 

[D] After the closing of December 11, 2012, offering, Treasury will 
continue to hold warrants to purchase approximately 2.7 million shares 
of AIG common stock. Proceeds from the sale of these warrants will 
provide an additional positive return to taxpayers. 

[End of table] 

Treasury received approximately $72.8 billion of proceeds and canceled 
$2 billion of its commitment, undrawn, on the AIG investments, 
exceeding the $69.8 billion total Treasury commitment to assist AIG by 
approximately $5 billion. As of December 2012, the total reflected the 
$54.3 billion generated on Treasury's common stock sales and AIG 
repaid $20.3 billion on the preferred interests in two special purpose 
vehicle subsidiaries of AIG. In addition, Treasury said that it 
received $930 million in interest and participation rights on the 
special purpose vehicle investments. Treasury's returns from selling 
common stock have been in addition to those realized by the returns of 
other assistance to AIG. With AIG's final repayment of all FRBNY 
assistance to the company in 2012, FRBNY had realized returns in the 
form of interest, dividends, and fees in excess of the assistance it 
provided AIG through a revolving credit facility and several special 
purpose vehicles.[Footnote 26] 

As of September 30, 2012, prior to the December 2012 sale of AIG 
shares. Treasury lowered its expected lifetime cost from $24.3 billion 
to $15.3 billion for its TARP shares and increased its expected income 
from $12.8 billion to $17.6 billion for its non-TARP shares, changing 
what was an expected net estimated cost of $11.5 billion to a net 
expected gain of $2.3 billion for assistance to AIG.[Footnote 27] 

Treasury Expects Lifetime Income from Term Asset-backed Securities 
Loan Facility (TALF) and Plans to Exit the Program by 2015: 

The Federal Reserve established TALF in an effort to reopen the 
securitization markets and improve access to credit for consumers and 
businesses.[Footnote 28] As of September 30, 2012, Treasury is 
committed to contributing as much as $1.4 billion to provide credit 
protection to FRBNY for TALF loans should borrowers fail to repay and 
surrender the asset-backed securities (ABS) or commercial mortgage-
backed securities (CMBS) pledged as collateral.[Footnote 29] To date, 
Treasury has disbursed $100 million for start-up costs related to the 
FRBNY-established TALF special-purpose vehicle, TALF LLC (see figure 
8). TALF LLC receives a portion of the interest income earned on TALF 
loans (known as excess interest under the program) that can be used to 
purchase any borrower-surrendered collateral from FRBNY. 

Figure 8: Status of TALF, as of September 30, 2012: 

[Refer to PDF for image: illustrated table] 

AIG Investment Program: 

Assets held: 
AIG preferred interest (in AIA Aurora LLC special purpose vehicle);
AIG Common stock. 

Assets sold: 
AIG preferred interest (in American Life Insurance Company Holdings 
LLC special purpose vehicle). 

Start date: November 2008; 
End date: N/A; 
Approximate exit: December 2012[B]. 

Status of funding: 
Highest ever obligated, TARP (preferred): $69.8 billion. 

Disbursed, TARP[A] (preferred): $67.8 billion. 

Repayments, TARP Preferred (common): $49.3 billion. 

Write-offs and losses (common): $11.7 billion. 

Outstanding investments, TARP (common): $6.7 billion. 

Income: 
Dividend income, TARP (preferred): $0.64 billion; 
Other income (preferred): $0.17 billion; 
Total income (preferred): $0.81 billion. 

Net estimated value of outstanding investments (common): $5.1 billion. 

Estimated lifetime cost: 
TARP common shares: $15.3 billion. 

Estimated lifetime income: 
Non-TARP shares: $17.6 billion; 
Net incomer: $2.3 billion. 

Exit considerations: 
* None[B]. 

Source: GAO analysis of Treasury data. 

[A] Although the program was first announced in November 2008, the 
first program activity was initiated in March 2009. 

[B] The outstanding investments is the $100 million contributed by 
Treasury to the TALF special purpose vehicle. The net estimated value 
of Treasury's outstanding investments is the projected returns from 
the SPV consisting of the $100 million contributed by Treasury to TALF 
LLC and the TARP share of the SPV's excess interest as calculated 
using Statements of Federal Financial Accounting Standards that are 
consistent with the Federal Credit Reform Act (Credit Reform 
Accounting). 

[End of figure] 

FRBNY stopped issuing new TALF loans in 2010.[Footnote 30] Treasury 
officials report that FRBNY TALF loan balances, which were $29.7 
billion in September 2010, had fallen to $11.3 billion as of September 
30, 2011, and to $1.5 billion as of September 26, 2012. Agency 
officials also indicated that all TALF loans were current and that 
borrowers continued to pay down their loans. 

Excess interest in TALF LLC grew by more than 30 percent between 
October 2010 and September 2011, rising from $523 million to $685.6 
million. Over the next year (September 2011 to September 2012), it 
grew to $754.2 million. If the balance of excess interest in TALF LLC 
exceeds the value of any surrendered collateral, Treasury may not need 
to disburse any additional funds for the program and could instead 
realize lifetime income because it will receive 90 percent of funds 
remaining in TALF LLC after all obligations are repaid and the program 
ends. Further, the equity that borrowers hold in TALF collateral has 
grown since TALF loans were first issued.[Footnote 31] As of September 
30, 2012, Treasury estimated that TALF would result in a lifetime 
income of approximately $517 million. Treasury officials told us in 
September 2012 that they did not have any particular concerns about 
the CMBS market that would have an effect on current TALF holdings, 
and that prices remained strong throughout 2012. Despite these 
positive trends, the officials told us that FRBNY and Treasury staff 
will continue to monitor market conditions and credit rating agency 
actions that could affect TALF assets. As we have previously reported, 
market value fluctuations could affect future results. 

Treasury expects to exit TALF by 2015, although it does not have 
complete control over its exit because its role in TALF is secondary 
to that of the Federal Reserve. Treasury models loan repayments using 
TALF loan terms and data provided by the Federal Reserve and projects 
repayment schedules, collateral cash flows, prepayments, and 
performance loss rates. Based on these analyses, Treasury expects that 
the last TALF loan will be paid in 2015. No borrowers have surrendered 
TALF collateral to date, and all loans are current. However, should 
TALF LLC be required to purchase and manage TALF assets, Treasury 
could be involved in TALF beyond 2015, as TALF assets may have 
maturity dates that extend beyond the loan maturity dates. 

The Investment Periods for PPIP Funds Have Terminated, and All PPIF 
Funds Have Begun Unwinding: 

Treasury created PPIP, partnering with private funds, to purchase 
troubled mortgage-related assets from financial institutions. Treasury 
provided the PPIFs with equity and loan commitments of approximately 
$7.4 billion and $14.7 billion, respectively, but disbursed a total of 
$18.6 billion. PPIFs have finished their 3-year investment period, 
which started at each fund's inception date. There were nine PPIFs 
established through PPIP, the first of which was liquidated in the 
first quarter of 2010 and the last terminated in December 2012. 
[Footnote 32] PPIFs with terminated investment periods can no longer 
draw money from Treasury or make new investments under this authority, 
and Treasury has not granted approval for any new draws under the PPIP 
program.[Footnote 33] With the investment periods ended, PPIFs must 
begin unwinding their positions and completely divest within 5 years, 
although Treasury can decide to extend this period for up to 2 
additional years for each PPIF. According to Treasury, the PPIF 
liquidated in the first quarter of 2010 yielded Treasury a profit of 
$20.1 million on its $156.3 million equity investments and the PPIF 
whose investment period ended in September 2011 returned all of its 
equity proceeds to Treasury and fully wound down its fund. Three 
additional PPIFs have returned 100 percent of Treasury and private 
investors' equity investments in the fund with equity gains and fully 
repaid Treasury's debt. According to Treasury, these three funds have 
a small amount of capital remaining to unwind their operations. The 
investment periods for the remaining PPIFs have subsequently ended and 
thus have begun to unwind. 

According to Treasury, as of September 30, 2012, PPIFs had accessed 
about 86 percent of the equity and debt available through Treasury and 
private investors, and had repaid Treasury a total of $6.7 billion in 
debt financing. In addition, since September 30, 2012, Treasury has 
received around $5.5 billion of payments under PPIP. As of September 
30, 2012, Treasury estimates that PPIP will ultimately result in 
lifetime income of about $2.4 billion (see figure 9). As of November 
5, 2012, the four PPIFs that have sold all of their remaining 
investments and returned substantially all of the proceeds have 
generated more than $1.4 billion in realized gains and income on 
Treasury's equity and warrant investments. However, according to 
Treasury, the ultimate results will depend on a variety of factors, 
including when PPIFs choose to divest and the performance of the 
assets they hold. 

Figure 9: Status of PPIP, as of September 30, 2012: 

[Refer to PDF for image: illustrated table] 

Public-Private Investment Program (PPIP): 

Assets held: 
Eligible residential mortgage-backed securities (RMBS) and commercial 
mortgage-backed securities (CMBS). 

Start date: September 2009[A]; 
End date: 2012; 
Approximate exit: 2017[B]. 

Status of funding: 

Highest ever obligated: $30.3 billion: 
Equity: $10.1 billion; 
Debt: $20.2 billion. 

Disbursed: $18.6 billion: 
Equity: $6.2 billion; 
Debt: $12.4 billion. 

Repayments: $8.8 billion; 
Equity: $2.1 billion; 
Debt: $6.7 billion. 

Outstanding investments: $9.8 billion; 
Equity: $4.1 billion; 
Debt: $5.7 billion. 

Income: 

Dividend income, Equity: $1.78 billion; 
Interest income, Debt: $0.30 billion; 
Proceeds in excess of cost, Debt: $0.31 billion; 
Total income, Equity: $2.39 billion. 

Net estimated value of outstanding investments: $10.8 billion: 
Equity: $5.1 billion; 
Debt: $5.7 billion. 

Estimated lifetime income: $2.4 billion. 

Exit considerations: 
* The effects of the market of PPIFs deleveraging at the end of their 
investment periods; 
* When PPIFs decide to unwind could affect the PPIF exit date. 

Status of capital repayments: 

Debt financing: 
Total approved: $14.2 billion; 
$6.7 billion repaid out of $12.4 billion drawdown. 

Equity capital: 
Total approved: $7.5 billion; 
$2.2 billion repaid out of $6.2 billion provided. 

Source: GAO analysis of Treasury data. 

[A] PPIFs began their investment periods in 2009. The program was first 
announced in March 2009. 

[B] The stipulated exit date is 2017, though the program could be 
extended through 2019. 

Note: The figures in this graphic do not reflect the approximately 
$5.5 billion of payments under PPIP received after September 30, 2012, 
which are discussed in the text of the report. 

[End of figure] 

Treasury officials said that their role while PPIFs were in their 
investment periods was to follow the progress of each PPIF's 
investment strategy and the risks and target returns of the 
portfolios. In this role, Treasury staff and contractors monitored 
compliance with PPIP terms. With the end of the PPIFs' investment 
periods, Treasury officials said that Treasury would focus on the 
strategies PPIFs used to maintain and ultimately divest themselves of 
their portfolios. Also, Treasury officials said that the contractors 
hired to provide investment fund consulting and analysis of PPIF 
portfolios would continue to provide such services in this 
postinvestment period. 

Current PPIP terms stipulate an exit by 2017.[Footnote 34] Unlike the 
circumstances found in some other TARP programs, Treasury officials do 
not face the same consideration of competing goals in exiting the 
program because the terms of the program dictate when the PPIFs must 
wind down. However, Treasury officials noted that PPIFs can liquidate 
at any time before the exit date. Officials also noted that the 
program was designed to discourage firms from keeping their 
investments outstanding longer than needed by the PPIF fund managers 
after the investment period expired, at which time PPIFs would no 
longer have access to debt financing from Treasury, unless permitted 
by provisions within the loan agreement and approved by Treasury. Now 
that the investment periods have terminated, PPIFs must pay down their 
Treasury loans and make distributions to their partners as the PPIFs 
receive proceeds from RMBS and CMBS payments and dispositions. 
Officials noted that this program structure created an incentive for 
PPIFs to sell their assets promptly once their access to Treasury 
ended. The officials also said that they were not concerned about any 
effects of PPIPs' eventual winding down on markets, as the 5-year 
period for unwinding would likely mitigate them. 

Mortgage Programs Remain Active, and Oversight Has Shown Both 
Challenges and Improvements: 

To help meet EESA's goals of preventing avoidable foreclosures and 
preserving homeownership, Treasury allocated $45.6 billion in TARP 
funds to three mortgage programs: 

* Making Home Affordable (MHA), which has several components, 
including the Home Affordable Modification Program (HAMP); 

* Housing Finance Agency Innovation Fund for the Hardest Hit Housing 
Markets (Hardest Hit Fund or HHF); and: 

* Department of Housing and Urban Development's (HUD) Federal Housing 
Administration (FHA) Refinance of Borrowers in Negative Equity 
Positions (FHA Short Refinance or FHASR).[Footnote 35] 

The bulk of the funds allocated to TARP programs to help distressed 
borrowers avoid foreclosure--$40.1 billion--had not yet been disbursed 
as of September 30, 2012. The estimated lifetime cost for the mortgage 
programs is $45.6 billion. Unlike for the programs discussed 
previously, Treasury will continue to disburse TARP funds under the 
mortgage programs for several more years. Specifically, homeowners 
have until December 31, 2013, to apply for assistance under MHA 
programs, and Treasury will continue to pay incentives for up to 5 
years after the last permanent modification begins. Treasury's 
obligation under FHASR will continue until September 2020. Unlike TARP 
expenditures under some other programs, such as those that provided 
capital infusions to banks, expenditures under these programs are 
generally direct outlays of funds with no provision for repayment. 
[Footnote 36] 

TARP-Funded Mortgage Programs Continue to Assist Homeowners, but Much 
of the Funding Remains Unspent: 

The centerpiece of Treasury's MHA program is HAMP, which seeks to help 
eligible borrowers facing financial distress avoid foreclosure by 
reducing their monthly first-lien mortgage payments to more affordable 
levels.[Footnote 37] Treasury announced HAMP (now called HAMP Tier 1) 
on February 18, 2009. Generally, HAMP Tier 1 is available to qualified 
borrowers who occupy their properties as their primary residences and 
whose first-lien mortgage payment is more than 31 percent of their 
monthly gross income. Treasury shares with mortgage holders or 
investors the cost of lowering borrowers' monthly payments to 31 
percent of monthly income for a 5-year period. In an effort to reach 
more borrowers, Treasury established HAMP Tier 2, which servicers 
began implementing in June 2012. HAMP Tier 2 is available for either 
owner-occupied or rental properties, and borrowers' monthly mortgage 
payments prior to modification do not have to exceed a specified 
threshold. Treasury also provides incentive payments for modifications 
under HAMP Tier 1 and HAMP Tier 2 to servicers and investors, and to 
borrowers under HAMP Tier 1. 

Treasury originally announced that up to 3 million to 4 million 
borrowers would be helped under HAMP.[Footnote 38] However, Treasury 
reported that through September 2012 only about 1.1 million permanent 
modifications had been started.[Footnote 39] Monthly activity peaked 
during the early part of 2010 and has experienced a significant 
decline, as shown in figure 10. Since June 1, 2010, when Treasury 
began requiring all servicers to perform full income verification to 
determine a borrower's eligibility for HAMP before offering a trial 
modification, the monthly number of new trial modifications reported 
by servicers has remained below 40,000. Monthly trial modification 
starts during September 2012 were the lowest reported since the 
initial roll-out of the program in 2009. Treasury has not yet 
published data on the number of trial periods or permanent 
modifications started under HAMP Tier 2, according to Treasury 
officials. 

Figure 10: HAMP Modifications Started Monthly, January 2010 through 
September 2012: 

[Refer to PDF for image: multiple line graph] 

2010: 

January; 
Trial modifications started: 95,000; 
Permanent modifications started: 50,000. 

February; 
Trial modifications started: 88,000; 
Permanent modifications started: 53,000. 

March; 
Trial modifications started: 70,000; 
Permanent modifications started: 61,000. 

April; 
Trial modifications started: 49,000; 
Permanent modifications started: 68,000. 

May; 
Trial modifications started: 27,000; 
Permanent modifications started: 48,000. 

June; 
Trial modifications started: 22,000; 
Permanent modifications started: 51,000. 

July; 
Trial modifications started: 24,000; 
Permanent modifications started: 37,000. 

August; 
Trial modifications started: 24,000; 
Permanent modifications started: 33,000. 

September; 
Trial modifications started: 31,000; 
Permanent modifications started: 28,000. 

October; 
Trial modifications started: 30,000; 
Permanent modifications started: 24,000. 

November; 
Trial modifications started: 31,000; 
Permanent modifications started: 30,000. 

December; 
Trial modifications started: 35,000; 
Permanent modifications started: 30,000. 

2011: 

January; 
Trial modifications started: 26,000; 
Permanent modifications started: 28,000. 

February; 
Trial modifications started: 35,000; 
Permanent modifications started: 26,000. 

March; 
Trial modifications started: 34,000; 
Permanent modifications started: 36,000. 

April; 
Trial modifications started: 33,000; 
Permanent modifications started: 29,000. 

May; 
Trial modifications started: 27,000; 
Permanent modifications started: 32,000. 

June; 
Trial modifications started: 26,000; 
Permanent modifications started: 32,000. 

July; 
Trial modifications started: 23,000; 
Permanent modifications started: 28,000. 

August; 
Trial modifications started: 21,000; 
Permanent modifications started: 26,000. 

September; 
Trial modifications started: 22,000; 
Permanent modifications started: 40,000. 

October; 
Trial modifications started: 17,000; 
Permanent modifications started: 26,000. 

November; 
Trial modifications started: 18,000; 
Permanent modifications started: 27,000. 

December; 
Trial modifications started: 18,000; 
Permanent modifications started: 23,000. 

2012: 

January; 
Trial modifications started: 16,000; 
Permanent modifications started: 18,000. 

February; 
Trial modifications started: 17,000; 
Permanent modifications started: 23,000. 

March; 
Trial modifications started: 21,000; 
Permanent modifications started: 20,000. 

April; 
Trial modifications started: 17,000; 
Permanent modifications started: 15,000. 

May; 
Trial modifications started: 18,000; 
Permanent modifications started: 17,000. 

June; 
Trial modifications started: 17,000; 
Permanent modifications started: 17,000. 

July; 
Trial modifications started: 13,000; 
Permanent modifications started: 17,000. 

August; 
Trial modifications started: 12,000; 
Permanent modifications started: 17,000. 

Source: GAO analysis of Treasury data. 

[End of figure] 

In addition to HAMP, Treasury has implemented a number of additional 
MHA components that use TARP funds to augment or complement the HAMP 
first-lien modification program:[Footnote 40] 

* Home Affordable Foreclosure Alternatives Program. The Home 
Affordable Foreclosure Alternatives Program offers assistance to 
homeowners looking to exit their homes through a short sale or deed-in-
lieu of foreclosure. Treasury offers incentives to eligible 
homeowners, servicers, and investors under the program. Through 
September 2012, servicers reported completing about 74,000 short sales 
and 1,900 deeds-in-lieu under the program. 

* Home Price Decline Protection Incentives. This program provides 
investors with additional incentives to modify loans under HAMP on 
properties located in areas where home prices have recently declined 
and where investors are concerned that price declines may persist. 
Through September 2012, Treasury had paid about $269 million to 
investors in program incentives to support the HAMP modification of 
more than 154,000 loans. 

* Principal Reduction Alternative (PRA). PRA requires servicers to 
evaluate the benefit of principal reduction for mortgages that have a 
loan-to-value ratio of 115 percent or more and that are not owned or 
guaranteed by Fannie Mae or Freddie Mac. Servicers are required to 
evaluate homeowners for PRA when evaluating them for a HAMP first-lien 
modification but are not required to actually reduce principal as part 
of the modification. Through September 2012, servicers reported having 
started about 78,000 permanent modifications with principal reductions 
under PRA. 

* Second Lien Modification Program. The Second Lien Modification 
Program provides additional assistance to homeowners receiving a HAMP 
first-lien permanent modification who have an eligible second lien 
with participating servicers. When a borrower's first lien is modified 
under HAMP, participating program servicers must offer to modify the 
borrower's eligible second lien according to a defined protocol. 
[Footnote 41] This assistance can result in a modification or even 
full or partial extinguishment of the second lien. On February 16, 
2012, Treasury doubled the amount of incentives provided on second-
lien modifications that included principal reduction and became 
effective on or after June 1, 2012. Through September 2012, servicers 
reported starting about 97,000 second-lien modifications, of which 
about 24,000 fully extinguished the second lien. 

* Government-insured or guaranteed loans (FHA-HAMP and RD-HAMP). FHA 
and the Department of Agriculture's Rural Housing Service (RHS) have 
implemented modification programs similar to HAMP Tier 1 for FHA-
insured and RHS-guaranteed first-lien mortgage loans. Each of these 
programs results in loan modifications that provide borrowers with an 
affordable monthly mortgage payment equal to 31 percent of the 
homeowners' monthly gross income and requires borrowers to complete a 
trial payment plan before permanent modification. If a modified FHA-
insured or RHS-guaranteed mortgage loan meets Treasury's eligibility 
criteria, the borrower and servicer can receive TARP-funded incentive 
payments from Treasury. Treasury reported that there were nearly 9,100 
permanent modifications started that received Treasury FHA-HAMP 
incentives through September 2012. According to Treasury officials, 
servicers had reported only 11 modifications that qualified for Rural 
Development (RD)-HAMP incentives as of September 30, 2012. 

* Treasury/FHA Second Lien Program (FHA2LP). Under this program, 
Treasury provides incentive payments to servicers and investors if 
they partially or fully extinguish second liens associated with an FHA 
Short Refinance. Servicers can receive a one-time payment of $500 for 
each second lien extinguished under the program, and investors are 
eligible for incentive payments based on the amount of principal 
extinguished. According to Treasury, no second liens had been 
extinguished and no incentive payments made under the Treasury/FHA 
Second Lien Program as of September 30, 2012. 

Treasury obligated $29.9 billion to MHA, of which nearly $4.0 billion 
had been disbursed as of September 2012 (see figure 11). Treasury 
estimated that an additional $6.5 billion could be spent on incentives 
for HAMP modifications and other MHA interventions that were already 
in effect as of September 2012, assuming none of these modifications 
default. After combining these potential incentive payments with 
incentives already paid, Treasury estimated that $19.4 billion of the 
$29.9 billion remain available for future modifications and other 
interventions. 

Figure 11: Status of Mortgage Programs as of September 2012: 

[Refer to PDF for image: illustrated table] 

TARP Mortgage Programs: 

Making Homes Affordable (MHA): 
Start date: March 2009; 
End date: Mid-2018[A]. 

Hardest-Hit Fund (HHF): 
Start date: February 2010; 
End date: December 2017. 

FHA Short Refinance (FHASR): 
Start date: September 2010; 
End date: September 2020. 

Status of funding: 

Highest ever obligated: $45.6 billion: 
MHA: $29.9 billion; 
HHF: $7.6 billion; 
FHASR: $8.1 billion. 

Payments: $5.5 billion: 
MHA: $4.0 billion; 
HHF: $1.5 billion; 
FHASR: $0. 

Recognized cost: $5.7 billion; 
MHA: $4.2 billion; 
HHF: $1.5 billion; 
FHASR: $0. 

Liability: $0.2 billion; 
MHA: $0.2 billion; 
HHF: $0; 
FHASR: $0. 

Estimated lifetime[B] cost: $45.6 billion. 

Reported activity through September 2011 by subcomponent (if 
applicable): 

MHA: 

Home Affordable Modification Program (HAMP): 1,090,596 HAMP permanent 
modifications. 

Home Price Decline Protection Program: 154,383 modifications. 

Home Affordable Foreclosure Alternatives (HAFA) Program: 75,423 HAFA 
agreements completed. 

Second Lien Modification Program (2MP): 96,922 2MP modifications. 

Principal Reduction Alternative (PRA): 77,655 PRA permanent 
modifications. 

Government Loans (FHA and Department of Agriculture Rural Housing 
Service HAMP (RD HAMP) loan modifications: 9,089 FHA-HAMP 
modifications, 7 RD-HAMP modifications. 

Treasury/FHA Second Lien Program (FHA2LP): No activity reported. 

HFAHF: 58,519 borrowers assisted. 

FHASR: 1,774 FHA loans refinanced. 

Source: GAO analysis of Treasury data. 

[A] Borrowers have until December 31, 2013, to apply for HAMP. Trial 
modifications must be successful for at least 3 months before 
borrowers can convert into a permanent modification. Incentives are 
paid for up to 5 years after the date a trial modification is 
converted to a permanent modification and servicers have several 
months to submit loan data for incentive payments. As a result, the 
last HAMP incentive payment is likely to occur sometime in 2019. 

[B] Treasury's estimated lifetime cost estimates reflect the actual 
outlay of funds to the mortgage-related programs and do not use the 
same Credit Reform accounting as the other program-specific lifetime 
cost estimates. 

[End of figure] 

In addition to the MHA program, Treasury has allocated $7.6 billion in 
TARP funds for HHF, which seeks to help homeowners in 18 states hit 
hardest by unemployment and house price declines (Alabama, Arizona, 
California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, 
Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode 
Island, South Carolina, and Tennessee) plus the District of Columbia. 
States were chosen because they had experienced steep home price 
declines, high levels of unemployment in the economic downturn, or 
both. According to Treasury, each state housing agency gathered public 
input to implement programs designed to meet the distinct challenges 
homeowners in their state were facing. As a result, HHF programs vary 
across states, but services offered often include mortgage payment 
assistance for unemployed homeowners and reinstatement assistance to 
cover arrearages (e.g., one-time payment to bring a borrower's 
delinquent mortgage current).[Footnote 42] Treasury reported that it 
had disbursed approximately $1.5 billion to the states for the HHF 
program as of September 2012. States reported having spent about $742 
million through September 2012 to help more than 77,000 homeowners 
since the program began, and $199 million on administrative expenses. 

Treasury has also allocated $8.1 billion in TARP funds to the FHA 
Short Refinance program to enable homeowners whose mortgages exceed 
the value of their homes to refinance into more affordable mortgages. 
This opportunity allows borrowers who are current on their mortgage--
or if they are delinquent, who successfully complete a trial period--
to qualify for an FHA Short Refinance loan if the lender or investor 
writes off the unpaid principal balance of the original first lien 
mortgage by at least 10 percent. Treasury entered into a letter of 
credit facility with Citibank in order to fund up to $8 billion of any 
losses associated with providing FHA Short Refinance loans. Treasury's 
commitment extends until September 2020, and to the extent that FHA 
experiences losses on those refinanced mortgage loans, Treasury will 
pay claims up to the predetermined percentage after FHA has paid its 
portion of the claim. Treasury will also pay a fee to the issuer of 
the letter of credit based on the amount of funds drawn against the 
letter of credit and any unused amount. The terms of the agreement cap 
the fee at $117 million. As of September 30, 2012, FHA had insured 
1,774 loans with a total face value of $307 million under the 
refinance program. As of September 30, 2012, Treasury had paid about 
$7.2 million in fees to Citibank, which issued the letter of credit. 
Treasury also placed $50 million in a reserve account to cover any 
future loss claims on these loans, although no funds have been 
disbursed for loss claim payments. 

Treasury Has Identified Both Implementation Challenges and 
Improvements in Processes Aimed at Enhancing Borrower Assistance: 

Through its monitoring of processes put in place to improve servicers' 
communication with borrowers and resolution of disputes, Treasury has 
identified some implementation challenges but has also found 
improvements in performance. One process, which Treasury announced in 
May 2011, requires large servicers participating in HAMP to identify a 
"relationship manager" to serve as the borrower's single point of 
contact throughout the delinquency or imminent default resolution 
process, effective September 1, 2011.[Footnote 43] By implementing 
this requirement, called the single point of contact requirement, 
Treasury was seeking to enhance communications between servicers and 
borrowers during the delinquency resolution process.[Footnote 44] To 
monitor servicers' implementation of the single point of contact 
requirement, Treasury adopted compliance review procedures to 
determine whether servicers (1) had established a single point of 
contact in accordance with MHA requirements, (2) were monitoring 
assignments and activities to verify that they were in accordance with 
internal policies and MHA guidance, and (3) had created written 
notices of assignments or changes and sent accurate, timely 
information on them to borrowers. Following the effective date of 
Treasury's requirement, Treasury's compliance agent, MHA-C, used these 
procedures to assess servicers' implementation of the single point of 
contact requirement during dedicated compliance reviews, according to 
Treasury. 

These initial reviews revealed some initial challenges with 
implementing the requirement, including delays in assigning 
relationship managers to borrowers and poor communication of 
assignments and reassignments. Servicers' performance was reflected in 
the qualitative measures of internal controls included in the servicer 
assessments that Treasury publishes quarterly, according to Treasury. 
The reviews also identified areas in which the servicers differed in 
their implementation of the requirements, such as the precise timing 
of the assignment of relationship managers. Treasury officials said 
that servicers have many options for appropriately implementing the 
requirement, given the flexibility provided in its guidance, and noted 
that servicers were making progress in addressing the issues 
identified in the initial compliance reviews. However, Treasury 
officials also stated that they were considering whether to issue 
additional guidance to clarify the requirements and to help ensure 
greater consistency across servicers. 

Treasury put in place another process aimed at enhancing borrower 
assistance: a case escalation process for resolving borrower inquiries 
and disputes. In June 2010, we reported that it was unclear whether 
the process that Treasury had established for resolving concerns about 
HAMP eligibility determinations was effective. The escalation process 
in place at that time lacked standard requirements for complaint 
tracking, and Treasury had not clearly communicated the availability 
of the escalation process through the HOPE Hotline to the borrower. 
[Footnote 45] In November 2010, Treasury announced requirements for 
servicers to adopt a standard process for resolving certain borrower 
MHA disputes--called escalated cases--effective February 1, 2011. 
Treasury now requires that servicers have procedures and personnel in 
place to provide timely and appropriate responses to escalated cases. 
Escalated cases include but are not limited to: 

* allegations that the servicer did not assess the borrower for the 
applicable MHA program(s) according to program guidelines; 

* inquiries regarding inappropriate program denials or the content of 
a nonapproval notice; and: 

* disputes or inquiries about the initiation or continuance of a 
foreclosure action in violation of program guidelines. 

In addition, MHA Help and the HAMP Solution Center (collectively 
referred to as the MHA support centers) can refer escalated cases to 
the servicer on behalf of either borrowers or third parties assisting 
borrowers. MHA Help, which is a team of specialists dedicated 
exclusively to working with borrowers and servicers to resolve 
escalated MHA cases, receives cases from borrowers who call the HOPE 
Hotline. A third party, such as a housing counselor, may escalate a 
case through the HAMP Solution Center. 

In its capacity as the MHA program administrator, Fannie Mae staffs 
the HAMP Solution Center and oversees vendors that staff MHA Help and 
the HOPE Hotline, according to Treasury. In order to resolve a case 
escalated through these support centers, the servicer must obtain the 
concurrence of the center that escalated the case with the proposed 
resolution. If the case cannot be resolved at the support center, it 
is forwarded to Treasury, which works with the servicer to resolve the 
issue: 

Treasury has adopted procedures to monitor the performance of 
servicers and borrower support centers in resolving escalated cases. 
Treasury currently publicly reports on one servicer performance 
measure related to escalations: the average number of days required to 
resolve escalated cases involving loans not owned or guaranteed by 
Fannie Mae or Freddie Mac. Treasury established a target of 30 
calendar days or fewer (including processing time by the support 
center). In the most recent two quarters for which data were available 
(the second and third quarters of 2012), the nine largest MHA 
servicers achieved that target. In the two prior quarters, one of 
these servicers did not achieve the target. 

In addition to reporting on the timeliness of the escalation process, 
Treasury conducts other reviews to monitor the program administrator's 
management of its vendors and the outcomes of the process. The program 
administrator prepares weekly and monthly performance reports for the 
HOPE Hotline and the MHA support centers. These reports include case 
escalation information for the larger MHA servicers. Treasury 
officials in the Office of Financial Agents and the Homeownership 
Preservation Office review these reports with the program 
administrator and, as necessary, its vendors. In addition, Treasury 
reviews a sample of escalated case files monthly to ensure that staff 
at the support centers are providing the services Treasury expects of 
them. Staff from the Homeownership Preservation Office score the 
files--five from each support center--on seven criteria that indicate 
whether: 

* the resolution template was properly completed; 

* the full course of the resolution could be easily identified and 
understood; 

* the case was resolved according to the escalation case process; 

* MHA policy and guidance were appropriately applied; 

* engagement with the servicer led to timely closure of the case; 

* reasonable efforts had been made to reach the requestor and resolve 
the inquiry; and: 

* the support center representative demonstrated homeowner advocacy. 

Treasury began scoring escalated case files in January 2012, and 
according to documents Treasury provided to us, the support centers' 
scores improved substantially between January 2012 and June 2012. 
Treasury officials said that they had provided training for staff of 
the support centers to serve as advocates for homeowners and had 
provided additional training for this purpose. The most notable 
improvement in the support centers' scores was in the area of 
demonstrating homeowner advocacy. Treasury's continued attention to 
resolutions of escalated cases and the performance of the support 
centers and servicers is instrumental in helping to ensure that 
eligible borrowers receive appropriate assistance. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to Treasury for its review and 
comment. In its written comments, reproduced in appendix IV, Treasury 
generally concurred with our findings. We also provided relevant 
portions of the draft report to Ally Financial and General Motors to 
verify the factual information they provided about their companies and 
business trends. Treasury, Ally Financial, and General Motors provided 
technical comments that we have incorporated as appropriate. 

We are sending copies of this report to the Financial Stability 
Oversight Board, Special Inspector General for TARP, interested 
congressional committees and members, and Treasury. The report also is 
available at no charge on the GAO website at [hyperlink, 
http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact A. Nicole Clowers at (202) 512-8678 or clowersa@gao.gov for 
questions about non-mortgage-related TARP programs, or Mathew Scire at 
(202) 512-8678 or sciremj@gao.gov for questions about mortgage-related 
TARP programs. Contact points for our Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. GAO staff who made major contributions to this report are 
listed in appendix V. 

Signed by: 

Thomas J. McCool: 
Director: 
Center for Economics, Applied Research and Methods: 

List of Addressees: 

The Honorable Barbara Mikulski:
Chairman:
The Honorable Thad Cochran:
Vice Chairman Committee on Appropriations:
United States Senate: 

The Honorable Tim Johnson:
Chairman:
The Honorable Richard C. Shelby:
Ranking Member Committee on Banking, Housing, and Urban Affairs:
United States Senate: 

The Honorable 
Chairman:
The Honorable Jeff Sessions:
Ranking Member: 
Committee on the Budget:
United States Senate: 

The Honorable Max Baucus:
Chairman:
The Honorable Orrin G. Hatch:
Ranking Member:
Committee on Finance:
United States Senate: 

The Honorable Hal Rogers:
Chairman:
The Honorable Nita Lowey:
Ranking Member:
Committee on Appropriations:
House of Representatives: 

The Honorable Paul Ryan:
Chairman:
The Honorable Chris Van Hollen:
Ranking Member:
Committee on the Budget:
House of Representatives: 

The Honorable Jeb Hensarling:
Chairman:
The Honorable Maxine Waters:
Ranking Member:
Committee on Financial Services:
House of Representatives: 

The Honorable Dave Camp:
Chairman:
The Honorable Sandy Levin:
Ranking Member:
Committee on Ways and Means:
House of Representatives: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

The objectives in this report were to examine the condition and status 
of (1) nonmortgage-related Troubled Asset Relief Programs (TARP) 
programs and (2) TARP mortgage programs, including Treasury's efforts 
to ensure that servicers are implementing two new requirements. 

To assess the condition and status of all the nonmortgage-related 
programs initiated under the TARP, we collected and analyzed data 
about program utilization and assets held, as applicable, focusing 
primarily on financial information that we had audited in the Office 
of Financial Stability's (OFS) financial statements, as of September 
30, 2012. In some instances we provided more recent, unaudited 
financial information. The financial information includes the types of 
assets held in the program, obligations that represent the highest 
amount ever obligated for a program (to provide historical information 
on total obligations), disbursements, and income. We also provide 
information on program start dates, defining them based on the start 
of the first activity under a program, and we provide program end 
dates, based on official announcements or program terms from the 
Department of the Treasury (Treasury). Finally, we provide approximate 
program exit dates--either estimated by Treasury or actual if the exit 
already occurred--that reflect the time when a program will no longer 
hold assets that need to be managed. We also used OFS cost estimates 
for TARP that we audited as part of the financial statement audit. In 
addition, we tested OFS's internal controls over financial reporting 
as they relate to our annual audit of OFS's financial statements. The 
financial information used in this report is sufficiently reliable to 
assess the condition and status of TARP programs based on the results 
of our audits of fiscal years 2009, 2010, 2011, and 2012 financial 
statements for TARP.[Footnote 46] 

Further, we reviewed Treasury documentation such as program terms, 
press releases, and reports on TARP programs and costs. Also, we 
interviewed OFS program officials to determine the current status of 
each TARP program, the role of TARP staff while most programs continue 
to unwind, and to update what is known about exit considerations for 
TARP programs. Other TARP officials we interviewed included those 
responsible for financial reporting. Additionally, in reporting on 
these programs and their exit considerations we leveraged our previous 
TARP reports and publications from the Special Inspector General for 
TARP, as appropriate. In addition, we did the following: 

* For the Capital Purchase Program, we used OFS's reports to describe 
the status of the program, including the amount of investments 
outstanding, the number of institutions that had exited the program, 
and the amount of dividends paid. In addition, we reviewed Treasury's 
press releases on the program and interviewed officials from Treasury. 

* For the Community Development Capital Initiative, we interviewed 
program officials to determine what exit concerns Treasury has for the 
program. 

* To update the status of the Automotive Industry Financing Program 
and Treasury's plans for managing its investment in the companies, we 
leveraged our past work and reviewed information on Treasury's plans 
for overseeing its remaining financial interests in General Motors 
(GM) and Ally Financial, including Treasury reports. To obtain 
information on the current financial condition of the companies, we 
reviewed information on GM's and Ally Financial's finances and 
operations, including financial statements and industry analysts' 
reports. We also interviewed officials from Treasury. 

* To update the status of the American International Group, Inc. (AIG) 
Investment Program (formerly the Systemically Significant Failing 
Institutions Program), we reviewed relevant documents from Treasury 
and other parties. For the AIG Investment Program, these documents 
included Emergency Economic Stabilization Act of 2008 (EESA) monthly 
105(a) reports provided periodically to Congress by Treasury, public 
information made available by the Federal Reserve Bank of New York, 
and other relevant documentation such as AIG's financial disclosures 
and Treasury's press releases. We also interviewed officials from 
Treasury. 

* For the Term Asset-Backed Securities Loan Facility (TALF), we 
reviewed program terms and requested data from Treasury about loan 
prepayments and TALF LLC activity. Additionally, we interviewed OFS 
officials about their role in the program as it continues to unwind. 

* To update the status of the Public-Private Investment Program, we 
analyzed program quarterly reports, term sheets, and other 
documentation related to the public-private investment funds. We also 
interviewed OFS staff responsible for the program to determine the 
status of the program while it remains in active investment status. 

* To obtain the final status for Small Business Administration (SBA) 
7(a) Securities Purchase Program that Treasury exited and for which 
Treasury no longer holds assets that it must manage, we reviewed 
Treasury's recent reports and leveraged our past work. 

To assess the status of TARP-funded mortgage programs and Treasury's 
efforts to ensure servicers are implementing the Making Home 
Affordable (MHA) single point of contact and resolution of escalated 
cases requirements, we reviewed Treasury reports, guidance, and 
documentation and interviewed Treasury officials. Specifically, to 
determine the status of Treasury's TARP-funded housing programs, we 
obtained and reviewed Treasury's published reports on the programs and 
servicer performance, as well as guidelines and related updates issued 
by Treasury for each of the programs. In addition, we obtained 
information from and interviewed Treasury officials about the status 
of the TARP-funded mortgage programs, including the actions Treasury 
had taken to address our prior recommendations. To assess the status 
of Treasury's efforts to ensure servicers are implementing the MHA 
single point of contact requirement, we reviewed Treasury's compliance 
review procedures and review findings related to single point of 
contact for several of the largest MHA servicers. To assess Treasury's 
oversight of the escalated case resolution process, we obtained 
documentation from Treasury of its process for monitoring the MHA 
borrower support centers--MHA Help and the Home Affordable 
Modification Program (HAMP) Solution Center--and reviewed monthly 
performance reports. We also interviewed Treasury officials about 
their oversight of the single point of contact requirement and case 
escalation process. 

We conducted this performance audit from September 2012 to January 
2013 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Treasury's Termination of the TARP Small Business 
Administration 7(a) Securities Purchase Program: 

The SBA 7(a) Securities Purchase Program was launched as part of TARP 
to help facilitate the recovery of the secondary market for small 
business loans. Under this program, Treasury purchased securities that 
comprised the guaranteed portion of SBA 7(a) loans. 

These loans finance a wide range of small business needs, including 
working capital, machinery, equipment, furniture, and fixtures. 
Treasury originally invested $367 million in 31 SBA 7(a) securities 
between March and September 2010. These securities comprised more than 
1,000 loans from 17 different industries, including retail, food 
services, manufacturing, scientific and technical services, health 
care, and educational services. Since Treasury began its purchases, 
the SBA 7(a) market has recovered with new SBA 7(a) loan volumes 
returning to precrisis levels. 

Treasury sold its eight remaining securities in the portfolio for 
approximately $63.2 million in proceeds on January 24, 2012. That sale 
marked the wind down of this TARP program. In total, Treasury 
recovered $376 million through sales ($334 million) and principal and 
interest payments ($42 million) over the life of the SBA 7(a) 
Securities Purchase Program. After considering Treasury's cost of 
financing, the SBA 7(a) Securities Purchase Program resulted in an 
income of approximately $4 million to taxpayers on Treasury's original 
investment of $367 million (see figure 12). 

Figure 12: Status of SBA 7(a) Securities Purchase Program, as of 
September 30, 2012: 

[Refer to PDF for image: illustrated table] 

SBA 7(a) Securities Purchase Program: 

Assets held: 
Securities backed by SBA 7(a) guaranteed loans. 

Start date: March 2010[A]; 
End date: September 2010[B]; 
Approximate exit: January 2012. 

Status of funding: 

Highest ever obligated: $0.38 billion; 
Disbursed: $0.37 billion; 
Repayments: $0.37 billion; 
Outstanding investments: $0. 

Income: 

Interest income: $0.01 billion; 
Proceeds in excess of cost: -$0.004 billion; 
Total income: $0.01 billion. 

Net estimated value of outstanding investments: $0. 

Estimated lifetime income: $4 billion. 

Exit considerations: 
* Not applicable. 

Source: GAO analysis of Treasury data. 

Note: This figure represents financial information as of September 30, 
2012. 

[A] The program's first activity was in March 2010, although it was 
first announced in March 2009. 

[B] The program's funding ended in September 2010, though some 
purchases that were previously committed to prior to September were 
fulfilled after that date. 

[End of figure] 

[End of section] 

Appendix III: Treasury's Office of Financial Stability Staffing and 
Use of Private Sector Contracting: 

Office of Financial Stability Staffing: 

As we noted in our 2012 annual TARP report, Treasury has addressed 
several staffing challenges that we had previously identified, and the 
overall staffing numbers, which began to decline in 2011, continued to 
decrease through September 30, 2012 (see figure 13).[Footnote 47] 
Treasury's Office of Financial Stability (OFS) used employees 
(including term employees) and detailees from other Treasury offices 
and other federal agencies to meet its workload requirements. 

Figure 13: OFS Employees and Detailees, November 21, 2008, through 
September 30, 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Date: November 21, 2008; 
Employees (including term appointments): 5; 
Staff detailed to OFS from other areas of Treasury and other federal 
agencies: 43; 
Total number of employees: 48. 

Date: January 26, 2009; 
Employees (including term appointments): 38; 
Staff detailed to OFS from other areas of Treasury and other federal 
agencies: 52; 
Total number of employees: 90. 

Date: March 16, 2009; 
Employees (including term appointments): 77; 
Staff detailed to OFS from other areas of Treasury and other federal 
agencies: 36; 
Total number of employees: 113. 

Date: June 8, 2009; 
Employees (including term appointments): 137; 
Staff detailed to OFS from other areas of Treasury and other federal 
agencies: 29; 
Total number of employees: 166. 

Date: September 15, 2009; 
Employees (including term appointments): 184; 
Staff detailed to OFS from other areas of Treasury and other federal 
agencies: 12; 
Total number of employees: 196. 

Date: September 25, 2010; 
Employees (including term appointments): 216; 
Staff detailed to OFS from other areas of Treasury and other federal 
agencies: 3; 
Total number of employees: 219. 

Date: September 30, 2011; 
Employees (including term appointments): 190; 
Staff detailed to other areas of Treasury and to other federal 
agencies: 8; 
Total number of employees: 198. 

Date: September 30, 2012; 
Employees (including term appointments): 150; 
Staff detailed to other areas of Treasury and to other federal 
agencies: 13; 
Total number of employees: 163. 

Source: GAO analysis of Treasury data. 

[End of figure] 

OFS's overall staffing numbers declined from 198 in 2011 to 163 in 
2012, but staffing levels within individual OFS offices have 
fluctuated according to the resources needed. Many OFS staff were not 
replaced because their skill sets were no longer needed; for example, 
many staff in the Chief Investment Office were not replaced as the 
investment programs wound down. 

According to Treasury officials, Treasury evaluates departing staff on 
a case-by-case basis to determine whether a vacancy needs to be filled 
and whether present staff can cover the departing staff's 
responsibilities, and only one new staff person was added in 2012. In 
addition, OFS officials stated that OFS had detailed some of its staff 
to other Treasury programs, as Treasury had exited several programs 
and no longer had assets to manage for them and many of the other TARP 
programs were winding down. Treasury officials continue to anticipate 
that staffing levels in OFS offices will decrease over time, and some 
staff have moved or may relocate to other parts of Treasury or other 
federal agencies. 

Treasury also has addressed several turnover-related staffing issues. 
We previously reported that a number of staff from the OFS leadership 
team departed in 2010 and 2011, and in 2013 the terms of two other 
leadership team members are scheduled to expire. As we previously 
reported, OFS addressed this leadership challenge by replacing the 
Assistant Secretary of Financial Stability with OFS's former Chief 
Counsel in 2011 and replacing departing OFS leaders with existing OFS 
staff members (generally to term positions). We also reported that OFS 
had been addressing other staffing issues, including implementation of 
its staffing plan. 

Contracts and Other Agreements Supporting TARP Administration and 
Operations: 

Since TARP was established, Treasury has relied on the private sector 
to assist OFS with TARP administration and operations. Treasury 
engages with private sector firms through financial agency agreements, 
contracts, and blanket purchase agreements.[Footnote 48] According to 
OFS procedures, financial agency agreements are used for services that 
cannot be provided with existing Treasury or contractor resources. 
Specifically, Treasury has relied on financial agents for asset 
management, transaction structuring, disposition services, custodial 
services, and administration and compliance support for the TARP 
housing assistance programs. In addition, Treasury uses TARP contracts 
for a variety of legal, investment consulting, accounting, and other 
services and supplies. 

Through September 30, 2012, Treasury had awarded 19 financial agency 
agreements, 13 of which remained active, and awarded or used 131 
contracts and blanket purchase agreements, of which about 40 percent 
remained active.[Footnote 49] As shown in table 3, the obligated value 
of the financial agency agreements and contracts totaled more than 
$900 million, with most of the funding going for financial agency 
agreements. The increase in obligations since 2010 is largely due to 
Treasury's reliance on financial agents to support the oversight of 
TARP assets and the continued implementation of the housing programs 
over the last couple of years. Also, 3 of its financial agency 
agreements for transaction structuring and disposition services 
remained active. 

Table 3: Cumulative Value of Contracts and Financial Agency Agreements 
in Support of TARP: 

Financial agency agreements: 
Obligated value through fiscal year 2010: $327,355,188; 
Obligated value through fiscal year 2011: $547,487,042; 
Obligated value through fiscal year 2012: $722,512,644. 

Contracts: 
Obligated value through fiscal year 2010: $108,907,207; 
Obligated value through fiscal year 2011: $154,934,812; 
Obligated value through fiscal year 2012: $184,892,212. 

Totals: 
Obligated value through fiscal year 2010: $436,262,395; 
Obligated value through fiscal year 2011: $702,421,854; 
Obligated value through fiscal year 2012: $907,404,856. 

Source: GAO analysis of Treasury data. 

[End of table] 

The vast majority of the financial agency agreement obligations shown 
above (approximately $525 million) are for Federal National Mortgage 
Association (Fannie Mae) and Federal Home Loan Mortgage Corporation 
(Freddie Mac), which provide administrative and compliance services, 
respectively, for the TARP housing programs.[Footnote 50] The two 
largest contracts are $35 million with PricewaterhouseCoopers, LLP for 
internal control services and $17 million with Cadwalader, Wickersham 
& Taft, LLP for legal services. Treasury also has encouraged small and 
minority-and women-owned businesses to pursue opportunities for TARP 
contracts and financial agency agreements. The majority of these 
businesses participating in TARP are subcontractors. 

Managing Potential Conflicts of Interest: 

Treasury has taken a number of actions since 2008, in part in response 
to recommendations we made, to establish a structured system to manage 
potential conflicts of interest involving its contractors and 
financial agents. The system is based on a regulation Treasury issued 
in interim form in 2009 and final form in 2011 that prohibits retained 
entities from engaging in activities that create organizational or 
personal conflicts of interest without a waiver or mitigation under a 
Treasury-approved plan.[Footnote 51] The regulation sets forth 
standards to address actual and potential conflicts that may arise, 
establishes responsibilities for contractors and financial agents in 
preventing conflicts from occurring, and outlines Treasury's process 
for reviewing and addressing conflicts. 

Treasury has developed and implemented a multifaceted process to 
manage and oversee potential conflicts of interest that is managed by 
OFS's Office of the Chief Compliance Officer. The process includes 
reviewing proposed contracts and financial agency agreements, 
approving contractor and financial agent mitigation plans, responding 
to conflict-of-interest inquiries from contractors and financial 
agents, verifying that contractors and financial agents are regularly 
certifying that they are preventing or properly mitigating actual or 
potential conflicts of interest, and preparing feedback reports that 
provide a snapshot of how each contractor and financial agent is 
performing with respect to conflict-of-interest requirements. In 
addition, because the monitoring of conflicts of interest is based to 
some degree on self-reported information that contractors and 
financial agents submit, Treasury began conducting onsite design and 
compliance reviews in 2011. These reviews are designed to evaluate the 
effectiveness of contractors' and financial agents' internal controls 
and procedures for identifying and addressing conflicts of interest. 

[End of section] 

Appendix IV: Comments from the Department of the Treasury: 

Assistant Secretary: 
Department of the Treasury: 
Washington, D.C. 

December 12, 2012: 

Thomas J. McCool: 
Director, Center for Economics Applied Research and Methods: 
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548: 

Dear Mr. McCool: 

Thank you for the opportunity to review your draft report titled 
"Treasury Sees Some Returns as It Exits Programs and Continues to Fund 
Mortgage Programs" (Draft Report), which was provided to the 
Department of the Treasury (Treasury) on November 28, 2012. Treasury 
appreciates the efforts of the Government Accountability Office (GAO) 
in providing an updated summary of the current condition and status of 
the Troubled Asset Relief Program (TARP). 

Four years after the establishment of TARP, Treasury has made 
substantial progress in withdrawing the extraordinary assistance that 
had to be provided during the financial crisis. As Treasury winds down 
the TARP investment programs, protecting the taxpayers' interest, 
maximizing returns, and exiting as soon as practicable continue to be 
our priorities. 

With respect to our housing programs, we have taken significant steps 
to expand the reach of our programs and strengthen oversight of 
servicers. We appreciate the Draft Report's recognition of these 
efforts and the positive effect they have had on assisting borrowers. 
Treasury's housing programs have directly helped over one million 
homeowners avoid foreclosure and have indirectly helped millions more 
by setting new standards throughout the mortgage servicing industry. 

Treasury values GAO's detailed review of TARP and shares its 
underlying objective of continuously improving the program. We look 
forward to continuing to work with you and your team as we move 
forward. 

5incerly, 

Signed by: 

Timothy G. Massad: 
Assistant Secretary for Financial Stability: 

[End of section] 

Appendix V: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Thomas J. McCool, (202) 512-2642 or mccoolt@gao.gov: 

A. Nicole Clowers, (202) 512-8678 or clowersa@gao.gov: 

Mathew J. Scire, (202) 512-8678 or sciremj@gao.gov: 

Staff Acknowledgments: 

In addition to the contacts named above, Dan Garcia-Diaz; Gary Engel; 
and William T. Woods (lead directors); Marcia Carlsen; Lynda Downing; 
Harry Medina; Joseph O'Neill; John Oppenheim; Raymond Sendejas; and 
Karen Tremba (lead assistant directors); Donald Brown; Emily Chalmers; 
Rachel DeMarcus; Sarah Farkas; John Forrester; Christopher Forys; 
Jackie Hamilton; Heather Krause; Risto Laboski; Aaron Livernois; John 
Lord; Marc Molino; Dragan Matic; and Erin Schoening have made 
significant contributions to this report. 

[End of section] 

Related GAO Products: 

Treasury Continues to Implement Its Oversight System for Addressing 
TARP Conflicts of Interest. [hyperlink, 
http://www.gao.gov/products/GAO-12-984R]. Washington, D.C.: 

September 18, 2012. 

Troubled Asset Relief Program: Further Actions Needed to Enhance 
Assessments and Transparency of Housing Programs. [hyperlink, 
http://www.gao.gov/products/GAO-12-783]. Washington, D.C.: July 19, 
2012. 

Foreclosure Mitigation: Agencies Could Improve Effectiveness of 
Federal Efforts with Additional Data Collection and Analysis. 
[hyperlink, http://www.gao.gov/products/GAO-12-296]. Washington, D.C.: 
June 28, 2012. 

Troubled Asset Relief Program: Government's Exposure to AIG Lessens as 
Equity Investments Are Sold. [hyperlink, 
http://www.gao.gov/products/GAO-12-574]. Washington, D.C.: May 7, 2012. 

Capital Purchase Program: Revenues Have Exceeded Investments, but 
Concerns about Outstanding Investments Remain. [hyperlink, 
http://www.gao.gov/products/GAO-12-301]. Washington, D.C.: March 8, 
2012. 

Management Report: Improvements Are Needed in Internal Control over 
Financial Reporting for the Troubled Asset Relief Program. [hyperlink, 
http://www.gao.gov/products/GAO-12-415R]. Washington, D.C.: February 
13, 2012. 

Troubled Asset Relief Program: As Treasury Continues to Exit Programs, 
Opportunities to Enhance Communication on Costs Exist. [hyperlink, 
http://www.gao.gov/products/GAO-12-229]. Washington, D.C.: January 9, 
2012: 

Financial Audit: Office of Financial Stability (Troubled Asset Relief 
Program) Fiscal Years 2011 and 2010 Financial Statements. [hyperlink, 
http://www.gao.gov/products/GAO-12-169]. Washington, D.C.: November 
10, 2011. 

Troubled Asset Relief Program: Status of GAO Recommendations to 
Treasury. [hyperlink, http://www.gao.gov/products/GAO-11-906R]. 
Washington, D.C.: September 16, 2011. 

Troubled Asset Relief Program: The Government's Exposure to AIG 
Following the Company's Recapitalization. [hyperlink, 
http://www.gao.gov/products/GAO-11-716]. Washington, D.C.: July 28, 
2011. 

Troubled Asset Relief Program: Results of Housing Counselors Survey on 
Borrowers' Experiences with the Home Affordable Modification Program. 
[hyperlink, http://www.gao.gov/products/GAO-11-367R]. Washington, 
D.C.: May 26, 2011. 

Troubled Asset Relief Program: Survey of Housing Counselors about the 
Home Affordable Modification Program, an E-supplement to [hyperlink, 
http://www.gao.gov/products/GAO-11-367R]. [hyperlink, 
http://www.gao.gov/products/GAO-11-368SP]. Washington, D.C.: May 26, 
2011. 

TARP: Treasury's Exit from GM and Chrysler Highlights Competing Goals, 
and Results of Support to Auto Communities Are Unclear. [hyperlink, 
http://www.gao.gov/products/GAO-11-471]. Washington, D.C.: May 10, 
2011. 

Management Report: Improvements Are Needed in Internal Control Over 
Financial Reporting for the Troubled Asset Relief Program. [hyperlink, 
http://www.gao.gov/products/GAO-11-434R]. Washington, D.C.: April 18, 
2011. 

Troubled Asset Relief Program: Status of Programs and Implementation 
of GAO Recommendations. [hyperlink, 
http://www.gao.gov/products/GAO-11-476T]. Washington, D.C.: March 17, 
2011. 

Troubled Asset Relief Program: Treasury Continues to Face 
Implementation Challenges and Data Weaknesses in Its Making Home 
Affordable Program. [hyperlink, 
http://www.gao.gov/products/GAO-11-288]. Washington, D.C.: March 17, 
2011. 

Troubled Asset Relief Program: Actions Needed by Treasury to Address 
Challenges in Implementing Making Home Affordable Programs. 
[hyperlink, http://www.gao.gov/products/GAO-11-338T]. Washington, 
D.C.: March 2, 2011. 

Troubled Asset Relief Program: Third Quarter 2010 Update of Government 
Assistance Provided to AIG and Description of Recent Execution of 
Recapitalization Plan. [hyperlink, 
http://www.gao.gov/products/GAO-11-46]. Washington, D.C.: January 20, 
2011. 

Troubled Asset Relief Program: Status of Programs and Implementation 
of GAO Recommendations. [hyperlink, 
http://www.gao.gov/products/GAO-11-74]. Washington, D.C.: January 12, 
2011. 

Financial Audit: Office of Financial Stability (Troubled Asset Relief 
Program) Fiscal Years 2010 and 2009 Financial Statements. [hyperlink, 
http://www.gao.gov/products/GAO-11-174]. Washington, D.C.: November 
15, 2010. 

Troubled Asset Relief Program: Opportunities Exist to Apply Lessons 
Learned from the Capital Purchase Program to Similarly Designed 
Programs and to Improve the Repayment Process. [hyperlink, 
http://www.gao.gov/products/GAO-11-47]. Washington, D.C.: October 4, 
2010. 

Troubled Asset Relief Program: Bank Stress Test Offers Lessons as 
Regulators Take Further Actions to Strengthen Supervisory Oversight. 
[hyperlink, http://www.gao.gov/products/GAO-10-861]. Washington, D.C.: 
September 29, 2010. 

Financial Assistance: Ongoing Challenges and Guiding Principles 
Related to Government Assistance for Private Sector Companies. 
[hyperlink, http://www.gao.gov/products/GAO-10-719]. Washington, D.C.: 
August 3, 2010. 

Troubled Asset Relief Program: Continued Attention Needed to Ensure 
the Transparency and Accountability of Ongoing Programs. [hyperlink, 
http://www.gao.gov/products/GAO-10-933T]. Washington, D.C.: July 21, 
2010. 

Management Report: Improvements are Needed in Internal Control Over 
Financial Reporting for the Troubled Asset Relief Program. [hyperlink, 
http://www.gao.gov/products/GAO-10-743R]. Washington, D.C.: June 30, 
2010. 

Troubled Asset Relief Program: Treasury's Framework for Deciding to 
Extend TARP Was Sufficient, but Could be Strengthened for Future 
Decisions. [hyperlink, http://www.gao.gov/products/GAO-10-531]. 
Washington, D.C.: June 30, 2010. 

Troubled Asset Relief Program: Further Actions Needed to Fully and 
Equitably Implement Foreclosure Mitigation Programs. [hyperlink, 
http://www.gao.gov/products/GAO-10-634]. Washington, D.C.: June 24, 
2010. 

Debt Management: Treasury Was Able to Fund Economic Stabilization and 
Recovery Expenditures in a Short Period of Time, but Debt Management 
Challenges Remain. [hyperlink, 
http://www.gao.gov/products/GAO-10-498]. Washington, D.C.: May 18, 
2010. 

Troubled Asset Relief Program: Update of Government Assistance 
Provided to AIG. [hyperlink, http://www.gao.gov/products/GAO-10-475]. 
Washington, D.C.: April 27, 2010. 

Troubled Asset Relief Program: Automaker Pension Funding and Multiple 
Federal Roles Pose Challenges for the Future. [hyperlink, 
http://www.gao.gov/products/GAO-10-492]. Washington, D.C.: April 6, 
2010. 

Troubled Asset Relief Program: Home Affordable Modification Program 
Continues to Face Implementation Challenges. [hyperlink, 
http://www.gao.gov/products/GAO-10-556T]. Washington, D.C.: March 25, 
2010. 

Troubled Asset Relief Program: Treasury Needs to Strengthen Its 
Decision-Making Process on the Term Asset-Backed Securities Loan 
Facility. [hyperlink, http://www.gao.gov/products/GAO-10-25]. 
Washington, D.C.: February 5, 2010. 

Troubled Asset Relief Program: The U.S. Government Role as Shareholder 
in AIG, Citigroup, Chrysler, and General Motors and Preliminary Views 
on its Investment Management Activities. [hyperlink, 
http://www.gao.gov/products/GAO-10-325T]. Washington, D.C.: December 
16, 2009. 

Financial Audit: Office of Financial Stability (Troubled Asset Relief 
Program) Fiscal Year 2009 Financial Statements. [hyperlink, 
http://www.gao.gov/products/GAO-10-301]. Washington, D.C.: December 9, 
2009. 

Troubled Asset Relief Program: Continued Stewardship Needed as 
Treasury Develops Strategies for Monitoring and Divesting Financial 
Interests in Chrysler and GM. [hyperlink, 
http://www.gao.gov/products/GAO-10-151]. Washington, D.C.: November 2, 
2009. 

Troubled Asset Relief Program: Capital Purchase Program Transactions 
for October 28, 2008, through September 25, 2009, and Information on 
Financial Agency Agreements, Contracts, Blanket Purchase Agreements, 
and Interagency Agreements Awarded as of September 18, 2009. 
[hyperlink, http://www.gao.gov/products/GAO-10-24SP]. Washington, 
D.C.: October 8, 2009. 

Troubled Asset Relief Program: One Year Later, Actions Are Needed to 
Address Remaining Transparency and Accountability Challenges. 
[hyperlink, http://www.gao.gov/products/GAO-10-16]. Washington, D.C.: 
October 8, 2009. 

Debt Management: Treasury Inflation Protected Securities Should Play a 
Heightened Role in Addressing Debt Management Challenges. [hyperlink, 
http://www.gao.gov/products/GAO-09-932]. Washington, D.C.: September 
29, 2009. 

Troubled Asset Relief Program: Status of Efforts to Address 
Transparency and Accountability Issues. [hyperlink, 
http://www.gao.gov/products/GAO-09-1048T]. Washington, D.C.: September 
24, 2009. 

Troubled Asset Relief Program: Status of Government Assistance 
Provided to AIG. [hyperlink, http://www.gao.gov/products/GAO-09-975]. 
Washington, D.C.: September 21, 2009. 

Troubled Asset Relief Program: Treasury Actions Needed to Make the 
Home Affordable Modification Program More Transparent and Accountable. 
[hyperlink, http://www.gao.gov/products/GAO-09-837]. Washington, D.C.: 
July 23, 2009. 

Troubled Asset Relief Program: Status of Efforts to Address 
Transparency and Accountability Issues. [hyperlink, 
http://www.gao.gov/products/GAO-09-920T]. Washington, D.C.: July 22, 
2009. 

Troubled Asset Relief Program: Status of Participants' Dividend 
Payments and Repurchases of Preferred Stock and Warrants. [hyperlink, 
http://www.gao.gov/products/GAO-09-889T]. Washington, D.C.: July 9, 
2009. 

Troubled Asset Relief Program: Capital Purchase Program Transactions 
for October 28, 2008, through May 29, 2009, and Information on 
Financial Agency Agreements, Contracts, Blanket Purchase Agreements, 
and Interagency Agreements Awarded as of June 1, 2009. [hyperlink, 
http://www.gao.gov/products/GAO-09-707SP]. Washington, D.C.: June 17, 
2009. 

Troubled Asset Relief Program: June 2009 Status of Efforts to Address 
Transparency and Accountability Issues. [hyperlink, 
http://www.gao.gov/products/GAO-09-658]. Washington, D.C.: June 17, 
2009. 

Auto Industry: Summary of Government Efforts and Automakers' 
Restructuring to Date. [hyperlink, 
http://www.gao.gov/products/GAO-09-553]. Washington, D.C.: April 23, 
2009. 

Troubled Asset Relief Program: March 2009 Status of Efforts to Address 
Transparency and Accountability Issues. [hyperlink, 
http://www.gao.gov/products/GAO-09-504]. Washington, D.C.: March 31, 
2009. 

Troubled Asset Relief Program: Capital Purchase Program Transactions 
for the Period October 28, 2008 through March 20, 2009 and Information 
on Financial Agency Agreements, Contracts, and Blanket Purchase 
Agreements Awarded as of March 13, 2009. [hyperlink, 
http://www.gao.gov/products/GAO-09-522SP]. Washington, D.C.: March 31, 
2009. 

Troubled Asset Relief Program: March 2009 Status of Efforts to Address 
Transparency and Accountability Issues. [hyperlink, 
http://www.gao.gov/products/GAO-09-539T]. Washington, D.C.: March 31, 
2009. 

Troubled Asset Relief Program: Status of Efforts to Address 
Transparency and Accountability Issues. [hyperlink, 
http://www.gao.gov/products/GAO-09-484T]. Washington, D.C.: March 19, 
2009. 

Federal Financial Assistance: Preliminary Observations on Assistance 
Provided to AIG. [hyperlink, http://www.gao.gov/products/GAO-09-490T]. 
Washington, D.C.: March 18, 2009. 

Troubled Asset Relief Program: Status of Efforts to Address 
Transparency and Accountability Issues. [hyperlink, 
http://www.gao.gov/products/GAO-09-474T]. Washington, D.C.: March 11, 
2009. 

Troubled Asset Relief Program: Status of Efforts to Address 
Transparency and Accountability Issues. [hyperlink, 
http://www.gao.gov/products/GAO-09-417T]. Washington, D.C.: February 
24, 2009. 

Troubled Asset Relief Program: Status of Efforts to Address 
Transparency and Accountability Issues. [hyperlink, 
http://www.gao.gov/products/GAO-09-359T]. Washington, D.C.: February 
5, 2009. 

Troubled Asset Relief Program: Status of Efforts to Address 
Transparency and Accountability Issues. [hyperlink, 
http://www.gao.gov/products/GAO-09-296]. Washington, D.C.: January 30, 
2009. 

Troubled Asset Relief Program: Additional Actions Needed to Better 
Ensure Integrity, Accountability, and Transparency. [hyperlink, 
http://www.gao.gov/products/GAO-09-266T]. Washington, D.C.: December 
10, 2008. 

Auto Industry: A Framework for Considering Federal Financial 
Assistance. [hyperlink, http://www.gao.gov/products/GAO-09-247T]. 
Washington, D.C.: December 5, 2008. 

Auto Industry: A Framework for Considering Federal Financial 
Assistance. [hyperlink, http://www.gao.gov/products/GAO-09-242T]. 
Washington, D.C.: December 4, 2008. 

Troubled Asset Relief Program: Status of Efforts to Address Defaults 
and Foreclosures on Home Mortgages. [hyperlink, 
http://www.gao.gov/products/GAO-09-231T]. Washington, D.C.: December 
4, 2008. 

Troubled Asset Relief Program: Additional Actions Needed to Better 
Ensure Integrity, Accountability, and Transparency. [hyperlink, 
http://www.gao.gov/products/GAO-09-161]. Washington, D.C.: December 2, 
2008. 

[End of section] 

Footnotes: 

[1] EESA, Pub. L. No. 110-343, 122 Stat. 3765 (2008) (codified at 12 
U.S.C. §§ 5201 et seq.). EESA originally authorized Treasury to 
purchase or guarantee up to $700 billion in troubled assets. The 
Helping Families Save Their Homes Act of 2009, Pub. L. No. 111-22, 
Div. A, 123 Stat. 1632 (2009), amended EESA to reduce the maximum 
allowable amount of outstanding troubled assets under EESA by almost 
$1.3 billion, from $700 billion to $698.741 billion. 

[2] The Dodd-Frank Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010), 
(1) reduced Treasury's authority to purchase or insure troubled assets 
to a maximum of $475 billion and (2) prohibited Treasury, under EESA, 
from incurring any additional obligations for a program or initiative 
unless the program or initiative had already been initiated prior to 
June 25, 2010. 

[3] The Department of the Treasury, the Congressional Budget Office, 
and the Office of Management and Budget provided cost estimates that 
were all below $700 billion; the highest estimate was about half the 
$700 billion allocated for TARP. 

[4] We have issued 60-day TARP reports as required by EESA section 116 
(codified at 12 U.S.C. § 5226). These reports may be found at 
[hyperlink, http://www.gao.gov]. 

[5] We provided non-audited financial information for significant 
repayments occurring after September 30, 2012. This included 
information related to the American International Group (AIG) 
Investment Program, the Automotive Industry Financing Program (AIFP), 
and the Public-Private Investment Program (PPIP). In the first case, 
Treasury has recouped its assistance to AIG, and in case of AIFP, the 
updates relate directly to Treasury's exit strategy. We added 
information for PPIP because the payment amounts were relatively 
large. Our future reports on TARP will address audited financial 
information for the various nonmortgage TARP programs for the post-
September 30, 2012, period. 

[6] For more information on these programs, see our previous reports 
on TARP issued after each of its first 3 years of implementation: GAO, 
Troubled Asset Relief Program: As Treasury Continues to Exit Programs, 
Opportunities to Enhance Communication on Costs Exist, [hyperlink, 
http://www.gao.gov/products/GAO-12-229] (Washington, D.C.: Jan. 9, 
2012), Troubled Asset Relief Program: Status of GAO Recommendations to 
Treasury, [hyperlink, http://www.gao.gov/products/GAO-11-906R] 
(Washington, D.C.: Sept. 16, 2011), Troubled Asset Relief Program: 
Status of Programs and Implementation of GAO Recommendations, 
[hyperlink, http://www.gao.gov/products/GAO-11-74] (Washington, D.C.: 
Jan. 12, 2011), and Troubled Asset Relief Program: One Year Later, 
Actions Are Needed to Address Remaining Transparency and 
Accountability Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-10-16] (Washington, D.C.: Oct. 8, 
2009). 

[7] In addition to programs that are moving towards exit, the Asset 
Guarantee Program, the Capital Assessment Program, the Targeted 
Investment Program, and the SBA 7(a) Securities Purchase Program are 
no longer active, and Treasury no longer holds assets related to these 
programs that it must manage. We have previously reported on programs 
that ended in 2012 (see appendix II). The Asset Guarantee Program, 
which provided federal government assurances for assets held by 
financial institutions deemed critical to the functioning of the U.S. 
financial system, still had a receivable outstanding from the Federal 
Deposit Insurance Corporation (FDIC) as of September 30, 2012, that 
could affect the overall cost of TARP. 

[8] See GAO, TARP: Treasury's Exit from GM and Chrysler Highlights 
Competing Goals, and Results of Support to Auto Communities Are 
Unclear, [hyperlink, http://www.gao.gov/products/GAO-11-471] 
(Washington, D.C.: May 10, 2011). The Congressional Oversight Panel 
also noted these competing goals. See Congressional Oversight Panel, 
January Oversight Report: Exiting TARP and Unwinding Its Impact on the 
Financial Markets (Washington, D.C.: Jan. 14, 2010). 

[9] Note that some numbers in our program figures will not total due 
to rounding. 

[10] See [hyperlink, http://www.gao.gov/products/GAO-11-74]. We also 
reported on CPP in Troubled Asset Relief Program: Opportunities Exist 
to Apply Lessons Learned from the Capital Purchase Program to 
Similarly Designed Programs and to Improve the Repayment Process, 
[hyperlink, http://www.gao.gov/products/GAO-11-47] (Washington, D.C.: 
Oct. 4, 2010) and Capital Purchase Program: Revenues Have Exceeded 
Investments, but Concerns about Outstanding Investments Remain, 
[hyperlink, http://www.gao.gov/products/GAO-12-301] (Washington, D.C.: 
Mar. 8, 2012). 

[11] Throughout this report we use "lifetime income" to refer to 
instances when cost estimates suggest that certain TARP programs could 
result in net income for the taxpayer because the proceeds from 
Treasury's investments (e.g., repayments, dividends, and interest 
payments) are expected to exceed costs. 

[12] See Department of the Treasury, Troubled Asset Relief Program 
(TARP) Monthly 105(a) Report-September 2012 (Washington, D.C.: Oct. 
10, 2012). 

[13] Additionally, 16 institutions have made partial repayments but 
remain in the program. 

[14] CDCI is a TARP program that provides capital to Community 
Development Financial Institutions that have a federal depository 
institution supervisor. The program structure is similar to CPP but 
includes credit unions and provides more favorable capital terms. SBLF 
was created by the Small Business Jobs Act of 2010, Pub. L. No. 111-
240, 124 Stat. 2504 (2010), enacted on September 27, 2010. SBLF is a 
capital support program that encourages small and midsize banks and 
community development loan funds to lend to small businesses. 

[15] Under CPP terms, institutions pay cumulative dividends on their 
preferred shares, except for banks that are not subsidiaries of 
holding companies, which pay noncumulative dividends. Some other types 
of institutions, such as S-corporations, received their CPP investment 
in the form of subordinated debt and pay Treasury interest rather than 
dividends. An S-corporation makes a valid election to be taxed under 
subchapter S of chapter 1 of the Internal Revenue Code and thus does 
not pay any income taxes. Instead, the corporation's income or losses 
are divided among and passed through to its shareholders. 

[16] These figures differ from the number of dividend or interest 
payments outstanding because some institutions made their payments 
after the end of the reporting month. CPP dividend and interest 
payments are due on February 15, May 15, August 15, and November 15 of 
each year, or the first business day subsequent to those dates. The 
reporting period ends on the last day of the calendar month in which 
the dividend or interest payment is due. In its dividend and interest 
reports, Treasury no longer considers a payment to be missed or unpaid 
once the institution (1) repays its investment amount and exits CPP, 
(2) repays dividends by way of capitalization at the time of exchange, 
or (3) enters bankruptcy or its bank subsidiary is placed into 
receivership. We included such institutions in our counts. 

[17] Twenty-eight of these institutions previously participated in 
CPP. According to Treasury, of this amount, approximately $363 million 
from these 28 institutions was exchanged from investments under CPP 
into CDCI. Institutions interested in transferring to CDCI from CPP 
were required to be (1) current on dividend payments, (2) in good 
standing with CPP, and (3) in compliance with all reporting 
requirements. 

[18] While similar to CPP, CDCI differs from CPP in several important 
aspects: (1) CDCI provides financial assistance to CDFIs, which in 
turn provide financial services to underserved communities; (2) CDCI 
also provides assistance to credit unions, unlike CPP; and (3) CDCI 
provides more favorable capital terms to its participants than CPP, 
including a longer repayment period at a lower dividend rate. For more 
details, see [hyperlink, http://www.gao.gov/products/GAO-11-74]. 

[19] On December 18, 2012, Treasury announced it would sell 200 
million of its remaining GM shares to the company, which would reduce 
Treasury's investment to 19 percent. If Treasury converted its 
mandatory convertible preferred securities, its common equity in Ally 
Financial would increase to 81 percent. 

[20] In its third quarter earnings release, GM estimated the adjusted 
earnings before interest and tax (EBIT) for its European operations to 
be at a loss of $1.5 billion to $1.8 billion for 2012, depending on 
the level of restructuring activity in the fourth quarter. The company 
is also targeting 2013 to be slightly better than 2012 with break-even 
EBIT adjusted results by mid-decade. 

[21] See [hyperlink, http://www.gao.gov/products/GAO-11-471]. 
Additional reporting on AIFP appears in GAO, Troubled Asset Relief 
Program: Automaker Pension Funding and Multiple Federal Roles Pose 
Challenges for the Future, [hyperlink, 
http://www.gao.gov/products/GAO-10-492] (Washington, D.C.: Apr. 6, 
2010); Troubled Asset Relief Program: Continued Stewardship Needed as 
Treasury Develops Strategies for Monitoring and Divesting Financial 
Interests in Chrysler and GM, [hyperlink, 
http://www.gao.gov/products/GAO-10-151] (Washington, D.C.: Nov. 2, 
2009); and Auto Industry: Summary of Government Efforts and 
Automakers' Restructuring to Date, [hyperlink, 
http://www.gao.gov/products/GAO-09-553] (Washington, D.C.: Apr. 23, 
2009). 

[22] On March 31, 2011, Ally Financial filed a registration statement 
with the Securities and Exchange Commission for a proposed IPO. 
Additionally, Treasury officials have not ruled out the possible sale 
of its equity in a private transaction. 

[23] In 2012, Ally's net income declined from $310 million in the 
first quarter to a loss of $898 million in the second quarter, and 
then increased to $384 million in the third quarter. Ally's second 
quarter net income included a non-recurring charge of $1.192 billion 
related to the Residential Capital, LLC, bankruptcy. Ally officials 
noted that the company's core income for the first three quarters of 
2012--which excludes the Residential Capital, LLC bankruptcy filing 
and reflects the income (loss) from continuing operations before taxes 
and primarily bond exchange original issue discount ("OID") 
amortization expense--has increased from $1.009 billion in 2011 to 
$1.451 billion in 2012. 

[24] Specifically, in September 2008, a trust created by FRBNY 
received 100,000 shares of Series C preferred stock, and the Treasury 
received a 77.9 percent voting interest in AIG, in exchange for an 
FRBNY revolving loan. This transaction predated TARP. In November 
2008, Treasury used TARP funds to purchase $40 billion in cumulative 
preferred shares of Series D stock, which was exchanged in April 2009 
for $41.6 billion of Series E noncumulative preferred stock (the 
difference of $1.6 billion was in accumulated but unpaid dividends on 
the Series D stock). That same month, Treasury used TARP funds to 
purchase 300,000 shares of Series F noncumulative preferred stock and 
a warrant to purchase up to 3,000 shares of AIG common stock in 
exchange for providing AIG with a $29.835 billion equity facility. In 
January 2011, AIG was recapitalized, and Treasury exchanged its Series 
E and F preferred stock for 1.0921 billion shares of common shares and 
a $20.3 billion preferred interest in two special purpose vehicle 
subsidiaries of AIG. We refer to these shares as "TARP shares." Also 
in January, the trust exchanged its Series C preferred stock for 562.9 
million shares of common stock and subsequently transferred these 
shares to Treasury. We refer to these shares as "non-TARP shares." 
Treasury owned a total of 1.655 billion common shares in AIG or 
approximately 92 percent of the company as of January, 2011. For 
additional information on the non-TARP assistance provided to AIG see 
GAO, Financial Crisis: Review of Federal Reserve System Financial 
Assistance to American International Group, Inc., [hyperlink, 
http://www.gao.gov/products/GAO-11-616] (Washington, D.C.: Sept. 30, 
2011). 

[25] See GAO, Troubled Asset Relief Program: The Government's Exposure 
to AIG Following the Company's Recapitalization, [hyperlink, 
http://www.gao.gov/products/GAO-11-716] (Washington, D.C.: July 18, 
2011). As discussed in GAO-11-716, this calculation is based on a cash-
in/cash-out approach and reflects Treasury's primary goal of recouping 
taxpayers' costs. It includes only the cost of the liquidation 
preferences in the Series E and Series F preferred shares--$47.543 
billion--to calculate a breakeven share price of $28.73. Under a 
different approach that captures $47.543 billion of liquidation 
preferences in Series E and Series F preferred shares, plus $1.605 
billion of unpaid dividends and fees (for a total of $49.148 billion), 
the breakeven share price would increase to approximately $29.70, 
which represents the minimum average price at which Treasury would 
need to sell all of its shares to fully recover the $49.148 billion. 
Additional AIG reporting includes GAO, Troubled Asset Relief Program: 
Third Quarter 2010 Update of Government Assistance Provided to AIG and 
Description of Recent Execution of Recapitalization Plan, [hyperlink, 
http://www.gao.gov/products/GAO-11-46] (Washington, D.C.: Jan. 20, 
2011); Troubled Asset Relief Program: Update of Government Assistance 
Provided to AIG, [hyperlink, http://www.gao.gov/products/GAO-10-475] 
(Washington, D.C.: Apr. 27, 2010); and Troubled Asset Relief Program: 
Status of Government Assistance Provided to AIG, [hyperlink, 
http://www.gao.gov/products/GAO-09-975] (Washington, D.C.: Sept. 21, 
2009). 

[26] See [hyperlink, http://www.gao.gov/products/GAO-12-574] for a 
more detailed discussion of FRBNY's assistance to AIG. 

[27] Unlike the other lifetime estimates reported here, the lifetime 
income estimate of $17.6 billion for Treasury's non-TARP shares has 
not been audited by GAO. The estimate was obtained from the Department 
of the Treasury, Troubled Asset Relief Program: Monthly Report to 
Congress (Washington, D.C.: Nov. 9, 2012). 

[28] FRBNY provided loans to certain institutions and business 
entities in return for collateral in the form of securities that are 
forfeited if the loans are not repaid. Securitization is a process 
that aggregates into pools similar debt instruments--such as loans, 
leases, or receivables. Interest-bearing securities backed by these 
pools are then sold to investors. These ABS provide a source of 
liquidity for consumers and small businesses, because financial 
institutions can take assets that they would otherwise hold on their 
balance sheets, sell them as securities, and use the proceeds to 
originate new loans, among other purposes. CMBS are securitizations 
with cash flows backed by principal and interest payments on a pool of 
loans on commercial properties. For additional information about 
securitization and about TALF, see GAO, Federal Reserve System: 
Opportunities Exist to Strengthen Policies and Processes for Managing 
Emergency Assistance, [hyperlink, 
http://www.gao.gov/products/GAO-11-696] (Washington, D.C.: July 21, 
2011), and Troubled Asset Relief Program: Treasury Needs to Strengthen 
Its Decision-Making Process on the Term Asset-Backed Securities Loan 
Facility, [hyperlink, http://www.gao.gov/products/GAO-10-25] 
(Washington, D.C.: Feb. 5, 2010). 

[29] Initially, Treasury committed to providing as much as $20 billion 
in credit protection to FRBNY, but in July 2010, Treasury and the 
Federal Reserve agreed to reduce the credit protection to $4.3 
billion. In June 2012, they agreed to reduce the credit protection 
again, this time to $1.4 billion. 

[30] TALF expired on March 31, 2010, for loans backed by ABS and 
legacy CMBS, and on June 30, 2010, for loans backed by newly issued 
CMBS. 

[31] FRBNY established the "haircut" or amount of equity the borrower 
holds in TALF collateral based on its weighted average life and market 
risks for each sector and subsector. The haircut is also the 
difference between the value of the TALF collateral and the value of 
the loan. In other words, if haircuts have grown, the borrower has 
more equity in the collateral and should be less likely to default on 
the loan. See [hyperlink, http://www.gao.gov/products/GAO-10-25] for 
more details. 

[32] According to Treasury, of the remaining seven PPIFs, one 
terminated its investment period in September 2011 and another PPIF 
terminated its investment period in July 2012. Investment periods for 
four other PPIFs terminated in October 2012 and the remaining one 
terminated in November 2012. 

[33] PPIFs received an approximately equal share of equity from 
Treasury and private investors. PPIFs also received access to credit 
from Treasury. PPIFs were able to draw on these funds to invest in 
eligible residential mortgage-backed securities and commercial 
mortgage-backed securities. According to Treasury officials, approvals 
could be given for pending transactions placed prior to the end of the 
investment period, for example. 

[34] While PPIP is scheduled to end in 2017 (8 years after the last 
PPIP was initiated), it could be extended for 2 years. Such decisions 
would occur on a case-by-case basis for each PPIF, depending on market 
conditions and other factors. 

[35] Treasury also refers to FHASR as the FHA-Refinance Program. 

[36] Under the FHASR program, if FHA recovers any amount of a claim 
payment from a servicer, FHA will remit Treasury's share to Treasury. 

[37] HAMP first-lien modifications are available to qualified 
borrowers who took out their loans on or before January 1, 2009. Only 
single-family properties (one to four units) with mortgages no greater 
than $729,750 for a one-unit property are eligible. 

[38] We have made a number of recommendations to Treasury regarding 
its efforts to implement the MHA program. See GAO, Troubled Asset 
Relief Program: Further Actions Needed to Enhance Assessments and 
Transparency of Housing Programs, [hyperlink, 
http://www.gao.gov/products/GAO-12-783] (Washington, D.C.: July 19, 
2012); [hyperlink, http://www.gao.gov/products/GAO-11-288]; Troubled 
Asset Relief Program: Further Actions Needed to Fully and Equitably 
Implement Foreclosure Mitigation Programs, [hyperlink, 
http://www.gao.gov/products/GAO-10-634] (Washington, D.C.: June 24, 
2010); and Troubled Asset Relief Program: Treasury Actions Needed to 
Make the Home Affordable Modification Program More Transparent and 
Accountable, [hyperlink, http://www.gao.gov/products/GAO-09-837] 
(Washington, D.C: July 23, 2009). While Treasury has taken various 
actions consistent with our recommendations, several of our MHA-
related recommendations remain open. We will be providing a status 
report of these recommendations later in 2013. 

[39] Under HAMP, borrowers must successfully complete a trial 
modification of at least 3 months before receiving a permanent 
modification. Totals include HAMP modifications completed by Fannie 
Mae and Freddie Mac, which participate in HAMP but do not receive TARP 
funding for incentives. 

[40] Another Treasury program, the Home Affordable Unemployment 
Program, does not entail the use of TARP or other federal program 
funds. The Unemployment Program requires servicers participating in 
MHA to grant qualified unemployed borrowers a forbearance period for a 
minimum of 12 months. During this period, mortgage payments are 
temporarily reduced or suspended while borrowers look for new jobs. 
Borrowers can apply for a HAMP modification either when they secure 
employment or before the forbearance period ends. Treasury reported 
that more than 27,000 Unemployment Program forbearance plans had been 
started through August 2012. 

[41] In order to be eligible for the Second Lien Modification Program, 
borrowers' loans must meet certain criteria. For example, the loan 
must have been originated on or before January 1, 2009; have an unpaid 
balance of greater than $5,000 and a premodification monthly payment 
greater than $100; and can be modified only once under the program. 

[42] See [hyperlink, http://www.gao.gov/products/GAO-12-783] for an 
expanded discussion of the various state programs. 

[43] The requirement applies to servicers with program participation 
caps of $75,000,000 or more as of May 18, 2011, although all 
participating servicers are encouraged to adopt this practice. 
Treasury's requirement is similar to a requirement issued by federal 
banking regulators as part of consent orders obtained against 14 
servicers and by the April 2012 national mortgage settlement agreed to 
by state attorneys general, the federal government, and five servicers. 

[44] In November 2012, Treasury issued a report entitled, Making 
Contact: The Path to Improving Mortgage Industry Communication with 
Homeowners, which describes how the largest servicers have implemented 
the single point of contact requirement, including the different 
customer relationship models servicers are using. The report is 
available at [hyperlink, http://www.treasury.gov/initiatives/financial-
stability/reports/Documents/SPOC%20Special%20Report_Final.pdf] 
accessed on December 12, 2012. 

[45] [hyperlink, http://www.gao.gov/products/GAO-10-634]. 

[46] See [hyperlink, http://www.gao.gov/products/GAO-13-126R], 
[hyperlink, http://www.gao.gov/products/GAO-12-169], [hyperlink, 
http://www.gao.gov/products/GAO-11-174], and [hyperlink, 
http://www.gao.gov/products/GAO-10-301]. 

[47] See [hyperlink, http://www.gao.gov/products/GAO-12-229]. 

[48] A blanket purchase agreement is a method of filling anticipated 
repetitive needs for supplies or services through qualified sources of 
supply. The agreement contains the basic terms and conditions 
governing the types of services the firms will provide. As specific 
needs arise, blanket purchase agreements allow Treasury to issue task 
orders to the firms describing the specific services required, 
establishing time frames, and setting pricing arrangements. 

[49] The 131 contracts and blanket purchase agreements include six 
contractual arrangements in which OFS is engaging vendors that have 
existing contracts with other Treasury offices or bureaus or with 
other federal agencies. For more information about Treasury's use of 
financial agency agreements and contracts and blanket purchase 
agreements, see GAO, Treasury Continues to Implement Its Oversight 
System for Addressing TARP Conflicts of Interest, [hyperlink, 
http://www.gao.gov/products/GAO-12-984R] (Washington, D.C.: Sept. 18, 
2012). 

[50] Congress established Fannie Mae and Freddie Mac as government 
sponsored entities, chartering them as for-profit, shareholder-owned 
corporations to stabilize and assist the U.S. secondary mortgage 
market and facilitate the flow of mortgage credit. 

[51] 31 C.F.R. Part 31. 

[End of section] 

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