On Wednesday, The Huffington Post published adapted testimony that was set to be delivered on 10.6.11 to the House Committee on Financial Service, Subcommittee on Insurance, House and Community Opportunity, discussing the lessons learned (or not learned) by the governments involvement in attempting to assist both Wall Street and Main Street.

Neil Barofsky, the former Special Inspector General for the Troubled Asset Relief Program (TARP), would deliver the testimony.

Even the modified version is fairly long (especially for those whose eyes roll directly to the backs of their heard when this topic comes up), but it’s worth the read (see here).

For those who don’t feel like skimming though, here are some of the highlights that caught my attention:

• There were just 675,000 ongoing permanent modifications as of July 2011. Rather than 3 to 4 million promised mortgage modifications, HAMP’s output looks on pace to meet the Congressional Oversight Panel (”COP”)’s December 2010 projection of just 700,000 to 800,000 effective permanent modifications through the lifetime of the program, a small fraction of the original goal.

• In May 2011, the Government Accountability Office (”GAO”) released a survey of housing counselors who work with borrowers seeking HAMP modifications. The results confirmed the widespread anecdotal evidence of the servicers’ failures. A staggering 76% reported their views of borrowers’ overall experiences with HAMP as “negative” or “very negative.” Asked to list borrowers’ three most common complaints, 59% of counselors answered “lost documentation”; 54% answered “long trial periods”; 42% answered “wrongful denials”; and 37% answered “difficulty contacting servicer.”

• Going forward, Barofsky recommended the following: First is the importance of comprehensive planning. Treasury rushed HAMP out the door in a manner best described as “ready, fire, aim,” leading to mistakes that are still ricocheting today. Second is the importance of clearly articulated goals. HAMP began with the goal of 3 to 4 million permanent modifications, but rather than acknowledge the failures and adapt the program, Treasury has simply made up new goals, followed by an instant declaration that these new goals have been met. Third is the necessity of meaningful incentives and sanctions for third parties. HAMP was unable to secure meaningful compliance from mortgage servicers when it mattered most because it has neither effective carrots nor sticks.

The stats listed above and the problems reported in dealing with loss mitigation departments all make sense to me. Plenty of people who request our assistance with short sales have already tried loan modifications, often with a corresponding failure to success ratio, due to the reasons cited in the survey. Barofsky’s recommendations going forward make sense as well.

In conclusion, he states the following:

• … it is becoming increasingly difficult to argue against those who advocate that the government should simply get out of the way and let the market’s cruel efficiencies take over. Such a process will inevitably result in near-term losses that are higher for both homeowners and lenders, but absent an effective alternative, it may be the only way to finally end the painful and ultimately fruitless game of kick-the-can that Treasury has been playing. And perhaps, in its aftermath, that will lead to recovery.

I disagree. The government has a responsibility to fix a problem they helped to create, via deregulation and a lack of oversight. There is no excuse for shelling out billions of dollars to lenders with no strings attached, while leaving the very taxpayers responsible for providing the money out to dry.

What we haven’t learned, is that for every dollar provided to a lender, it must be tied to a troubled homeowner. Preferably, retro-actively…