Category Archives: Whistleblower

Why the Taliban Attack is a Big Deal

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CNN in part: Earlier Monday, the insurgents seized the main roundabout in the city and made it to the prison, where they freed more than 500 inmates, who flooded the streets of Kunduz, Hussaini told CNN.

One of the released inmates told CNN, “We were hearing gunshots throughout the day, but it was 4:00 p.m. when the Kunduz prison guards left the compound. Then, the inmates broke all the doors and fences and started running towards the main gate.”

“As soon as we opened the main gate, we saw a group of armed Taliban outside the gate. They told us that we were free and could go home. … We all headed towards our homes,” he said.

The Taliban also claimed to have seized a 200-bed hospital — posting photos to social media that they claimed proved their control of the facility.

Sediqqi said at least four civilians had died and 50 others were wounded as Taliban forces were firing heavy weapons indiscriminately throughout the city.

In addition, 25 Taliban fighters were killed, Sediqqi said, and two Afghan policemen died and four others were wounded.

Will Barack Obama evaluate the rules of engagement in Afghanistan?

Politico: Barack Obama may not call what American troops will do in Afghanistan next year “combat,” but he has quietly laid the groundwork for continuing battle against the Taliban.  Obama has authorized the military to provide air support to Afghan troops next year after the U.S. has completed the transition to its “advise- and-assist” mission, the White House says.

At the same time, administration officials say they aren’t increasing the number of troops, slowing the drawdown or changing their mission, but are allowing commanders in Afghanistan to have the authority to order attacks if necessary.

That was clear in guidance Obama issued to preserve broad discretion for American commanders, who asked for a robust ability to protect U.S. troops and support the Afghan National Security Forces even though the Afghans bear main responsibility for the war against the Taliban.  Further details.

The Taliban taking over Kunduz is a big Deal

WSJ: On Monday, Taliban fighters seized Kunduz, city of about 300,000 people in the country’s north. Government forces have reportedly fled to the outskirts of town, and Taliban flags have been seen around the city.

We should be very concerned about the fall of Kunduz for four reasons:

1.) A Taliban takeover of a large urban area is no longer an abstraction.

Since losing power 14 years ago, the Taliban’s territorial triumphs in Afghanistan have been limited to taking control of pockets of rural and remote areas. This can be attributed to the international combat mission, improvements in Afghan war-fighting capacities, and an increasingly fractured and vulnerable insurgency. With the Kunduz seizure, however, the Taliban has pulled off what it could not do in nearly the last decade and a half, and what arguably no militant group other than ISIS has been able to achieve over the same period.

2.)  The Taliban now boasts a bonafide bastion far from its traditional stronghold.

The Taliban’s main areas of strength have been eastern and southern Afghanistan, near the Pakistan border. It is in these regions where much of the international coalition’s combat missions were centered. In recent years, however, the Taliban and its allies have sought to develop new bases and footholds to the north and northeast. Ominously, nearly two years ago the journalist and Taliban expert Ahmed Rashid warned that militants were trying to secure Afghanistan’s entire northeastern corridor to establish a base for operations against the government in Kabul.

3.)Afghan forces are in big trouble.

The fall of Kunduz did not come out of nowhere. Taliban forces had been chipping away at the city’s security for weeks. Afghan government forces, however, were unable or unwilling to pre-empt this threat. For all the improvements that Afghan troops have made in recent years, the country’s fighting forces remain a major work in progress. And when your country faces an insurgency capable of seizing a big city, “work in progress” is not good enough—and is, in fact, quite dangerous.

4.)The government is in a very tough spot.

It’s hard to be optimistic that Afghanistan’s national unity government will mount a robust and rapid response to the Kunduz seizure. After all, this administration—which recently marked its first anniversary in power—still lacks a full cabinet, including a defense minister. Kabul’s capacity to confront an emboldened insurgency is questionable given its inability to achieve even the most basic tasks of governance.

Fortunately, there may be a silver lining to all this: a potential blow to ISIS. The terror group has gradually made inroads in Afghanistan, winning the allegiances of disaffected Taliban leaders. However, the Kunduz takeover underscores that the Taliban remains the biggest militant threat in Afghanistan, and that it can pull off, albeit on a smaller scale, the type of dramatic acts that ISIS can pull off in Iraq and Syria. This could boost Taliban recruitment efforts in Afghanistan, and dampen those of ISIS.

Either way, today’s news from Kunduz is a very big deal, and deserves a fair share of airtime.

 

 

Union Corruption Runs Far and Wide

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For a listing of union members corruption, investigations and indictments, go here.

For a chilling read of an 84 page report on union corruption and how cases play into the RICO Act, go here.  There is a long history of criminal activity and it is an enterprise that still occurs and grows.

Report: Government Unions Take from the Poor to Give to the Rich

White-collar professionals dominate public sector union ranks

FreeBeacon: The government employees who now make up a majority of the nation’s union members are a far cry from the blue-collar archetype of old, according to a new report.

The Competitive Enterprise Institute will release a report on Tuesday morning documenting the changing nature of unionism in America, as white-collar professionals in the public sector overtake the private sector working class as the face of unionism.

“Public sector unions may claim they stand up for the little guy, but generally they aren’t representing blue collar workers against a better-educated, white-collar management,” said Carrie Sheffield, a scholar at the institute, in a release. “Government unions represent skilled, white-collar workers who enjoy big benefits and job security, courtesy of the taxpayer.”

Government workers are more likely to work behind a desk and enjoy civil service protections than the manufacturing workers who stood at the forefront of the labor movement at the start of the 20th century, according to the report. A majority of them have college educations.

“A larger share of public sector than private sector workers are employed in “management, professional, and related occupations.” In 2013, 56.2 percent of public sector workers and 37.8 percent of private sector workers were employed in these occupations,” the report says. “As the percentage of public sector union members increased between 1971 and 2004, the fraction of union members in the top third of the nation’s income distribution increased by 24 percent, while the proportion of unionists in the bottom third of the distribution declined by 45 percent. This is because better-educated and more affluent workers are more likely to belong to public rather than private sector unions.”

Sheffield said that these paychecks and costs have grown rapidly—retired New York City cops, the report notes, now outnumber active duty ones—in recent years and have the effect of pitting taxpayers, including the working class, against well-paid civil servants.

Pension debt and other unfunded compensation for government workers have led to several major municipal bankruptcies. Detroit, for example, declared bankruptcy when it was unable to meet nearly $20 billion in debt, about half of which was attributed to worker retirement benefits.

“Unfortunately for taxpayers, government unions donate huge amounts to elected officials who then vote on those expanding benefit packages—much to the detriment of cities like Detroit and Stockton, California, and states like Illinois and New Jersey that are on the brink of fiscal insolvency,” Sheffield said in a release.

The shift has created incentives to grow government and spur political involvement from public servants. The current system allows government unions to pump millions of dollars to candidates, who become the agents that the unions negotiate with at the bargaining table.

Sheffield recounts how early private sector union boosters were skeptical of government unions. President Franklin Delano Roosevelt, a champion of organized labor, once said that “Collective bargaining, as usually understood, cannot be transplanted into the public service.”

The institute says that lawmakers should enact reforms akin to that of Gov. Scott Walker in Wisconsin to return to the balance outlined by Roosevelt. Walker was able to become the first sitting governor to survive a recall vote by highlighting the high costs associated with union-negotiated benefits and its effect on his state’s working class. Sheffield said that lawmakers should do the same.

“Government unions are a powerful interest group that is uniquely privileged in being funded by taxpayers. Their members generally have higher levels of education than the average private sector worker, and enjoy greater compensation and job security. David taking on Goliath they are certainly not,” the report says.

Hillary, State of State and the Foundation

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One has to wonder how retired Admiral Kirby, the State Department spokesperson is gonna spin all the mess noted below.

Hillary Clinton last month signed a certification of all emails being turned over and back to the State Department. Now there is a signature and possible perjury condition.

Are the phone calls flying to the White House demanding ‘executive privilege’ for Hillary and her team?

In part from the DailyCaller and good research team: Former Secretary of State Hillary Clinton’s use of a private email server to conduct official diplomatic business created many national security problems, but they may pale by comparison with the wreckage she left behind in her department’s main digital information security office.

Harold W. Geisel, the State Department’s acting Inspector General, issued eight scathing audits and investigation reports during Clinton’s tenure, repeatedly warning about worsening problems and growing security weaknesses within the Bureau of Information Resource Management, according to a Daily Caller News Foundation investigation.

Geisel’s critical comments about the deficiencies throughout IRM carry additional weight since he was not considered an “independent” IG.  Watchdog groups noted Geisel had served as a U.S. Ambassador for Hillary’s husband, President Clinton, and had never been confirmed by the U.S. Senate.

In fact, President Obama did not nominate an IG to the State Department during Clinton’s entire term. It was only in September 2013 that the Senate finally confirmed Geisel’s successor, Steve Linick, who currently occupies the the post.

After Clinton left the State Department in 2013, Linick quickly undertook remedial action to save the IRM. Barely two months after his Senate confirmation, he issued a “management alert” to State Department leadership, warning that IRM’s languishing security deficiencies since 2010 were still there.

“The department has yet to report externally on or correct many of the existing significant deficiencies, thereby leading to continuing undue risk in the management of information,” Linick said.

A spokesman for the Clinton campaign did not respond Sunday to a request for comment.

Clinton put Bryan Pagliano, her 2008 presidential campaign IT director, in the IRM in early 2009 as a “strategic advisor” who reported to the department’s deputy chief information officer. Pagliano had no prior national security experience or a national security clearance.

The seriousness of Clinton’s failure was summarized in a 2012 audit that warned, “the weakened security controls could adversely affect the confidentiality, integrity, and availability of information and information systems” used by U.S. officials around the world.

Geisel’s July 2013 inspection report issued after Clinton’s departure was so damning that the IRM became the butt of caustic comments throughout the IT world.

Network World, an IT review site, for example, headlined one of its articles on the issue with “FAIL: Your Tax Dollars at Play: the US State Department’s Bureau of Information of Resource Mis-Management.” The article charged that the IRM had become “a total joke.”

Another news outlet told its readers that the editors would “like to be able to tell you what the IRM does, but a new report from the Office of Inspector General concludes that it doesn’t really do anything.”

IRM “is evidently an aimless, over-funded LAN party with no real boss or reason to exist,” concluded reporter Jordan Brochette when the 2013 IG report was released.

Scott Amey, general counsel for the Project on Government Oversight, reviewed the IG reports for DCNF and concluded that “State’s IT security record is littered with questionable management, insecure systems, poor contract oversight, and inadequate training. The State IG’s reviews show a pattern of significant deficiencies and few, if any, corrections.”

Geisel issued his first audit of IRM in November 2009, eight months into Clinton’s term. It also was the first audit issued after Pagliano arrived at the bureau. Geisel identified many serious IT security deficiencies that year. Unfortunately, most of the problems would continue to be uncorrected throughout Clinton’s term.

One troubling observation early in Clinton’s secretaryship was that the IG found the State Department and even embassy chiefs of mission suffering from a lack of IT security training, including the lack of “security awareness training.”

The lack of IT security awareness by top State Department officials may partly explain why Clinton and her top aides saw no problems with the use of a personal email server. (RELATED: Fmr. CIA Head: Hillary’s Email Server Was Compromised By Foreign Intel Services)

Geisel also warned in late 2009 that at the IRM, he found “there were no Standard Operating Procedures (SOP) for managing IT-related security weaknesses.”

In an audit about IRM in February 2010, the IG reviewed how well IRM officials were implementing Secretary Rice’s 2007 modernization and consolidation progam.

It was in this 2010 audit that the first hints emerged of poor management at the IRM. Geisel concluded the bureau’s leadership failed to satisfy vulnerable IRM field staff deployed at embassies and consulates.  He called them IRM’s “customers.”

The IG “found a significant level of customer dissatisfaction among bureaus about the quality and timeliness of IT services after consolidation.”

In November 2010 Geisel issued yet another warning about shortcomings within IRM. In this report, the IG repeated that IRM “needed to make significant improvements” to address “security weaknesses,”

Once again, he emphasized that IRM had failed in providing mandatory “security awareness training” to all top security personnel. He also noted a failure to require all contractors to undergo mandatory security authorization.

“The department did not identify all employees who had significant security responsibilities and provide specialized training,” the IG charged.

The IG discovered other worrisome problems in 2010. It found officials failed to provide corrective patches for security problems in a third of the cases examined by his office. The IG also pointed to more than 1,000 “guest” IT accounts within the department’s IT systems that could provide entry paths for hackers.

Geisel further reported that the IRM had 8,000 unused email accounts and that department officials never changed the passwords on 600 active email embassy and consulate accounts.

There were also “24 of 25 Windows systems tested [that] were not compliant with the security configuration guidance.”

The damning IG reports continued in July 2011 when Geisel detailed serious problems afflicting a new IRM program called eDiplomacy that Clinton unveiled earlier that year.

Geisel was blunt: “eDiplomacy lacks a clear, agreed-upon mission statement that defines key goals and objectives. With the absence of performance measurement process, management has few means to evaluate, control, budget, and measure the success of its projects.”

Geisel painted an alarmingly negative assessment in a November 2011 audit on the IRM’s overall information security program. Specific details were redacted but the report warned for the first time of “additional security breaches,” saying “we identified weaknesses that significantly impact the information security program controls. If these control weaknesses are exploited, the department could be exposed to additional security breaches. Collectively, these control weaknesses represent a significant deficiency.”

If the breaches weren’t quickly fixed, the consequences would be harmful to “the confidentiality, integrity, and availability of information and information systems.” Complete summary here.

*** Then there is the Clinton Foundation and the proven interaction of the State Department with the Clinton Charity:

Clinton Aide Shared Classified Information With Foundation, Email Shows

Cheryl Mills sent information marked ‘confidential’ to Clinton Foundation in 2012

FreeBeacon: A member of Hillary Clinton’s staff at the Department of State emailed classified information about the government in Congo to a staffer at the Clinton Foundation in 2012, according to a copy of the correspondence obtained by the Washington Free Beacon.

Cheryl Mills, Clinton’s chief of staff at the State Department, sent the email to the Clinton Foundation’s foreign policy director, Amitabh Desai, on July 12, 2012.

The message, which was originally obtained by the group Citizens United through a public records request, is partially redacted because it includes “foreign government information” that has been classified as “Confidential” by the State Department.

Although the information was not marked classified by the State Department until this past summer, intelligence sources tell the Free Beacon that it would have been classified at the time Mills sent it because “foreign government information” is considered classified from inception.

The message could add to concerns from congressional and FBI investigators about whether former Secretary Clinton and her aides mishandled classified information while at the State Department.

The email, which discussed the relationship between the governments in Rwanda and the Democratic Republic of Congo, was originally drafted by Johnnie Carson, the State Department’s assistant secretary for African affairs, who sent it to Mills’ State Department email address.

Mills later forwarded the full message to Desai along with “talking points for Presient [sic] Clinton” shortly before Bill Clinton was scheduled to visit the region.

About half of the forwarded message was redacted due to its classified nature before the State Department released it to Citizens United last month. Although it is not clear what the redacted section includes, the State Department said in a court motion filed last week that it “concerns both foreign government information and critical aspects of U.S. foreign relations, including U.S. foreign activities carried out by officials of the U.S. Government.”

The State Department added that the “disclosure of this information has the potential to damage and inject friction into our bilateral relationship with African countries whose cooperation is important to U.S. national security.”

The Clinton Foundation and the State Department did not respond to request for comment about the email, or say whether Desai—a non-government employee who has worked at the foundation since 2007—would have been authorized to view “Confidential” information.

Mills currently sits on the board of the Clinton Foundation. She previously served on the board until a month after she joined the State Department in 2009.

An attorney for Mills said that she never knowingly transmitted classified information, and would presume that any information sent to her unclassified State Department email address—as opposed to through the department’s secure email system—was unclassified.

“When a subject matter sent the information on the unclassified system, [Mills] presumed it was unclassified,” said the attorney. ”She never knowingly transmitted classified information.”

Mills’ spokesperson also disputed the notion that the information would have been classified when it was sent. The attorney said that some information is not deemed classified until it is transmitted outside of the State Department.

“Information that is considered unclassified when discussed inside the State Department can later be deemed classified when it is being released outside of the Department,” said the attorney.

Intelligence experts have told the Free Beacon and other media outlets that “foreign government information” is one of the few categories of information that is automatically presumed classified from the time the U.S. government receives it, because it is so diplomatically sensitive.

Foreign government information is “born classified,” J. William Leonard, a former director of the U.S. Information Security Oversight Office, told Reuters in August.

The controversy over Clinton’s use of a private email server while at the State Department has been dogging her presidential bid since it was first revealed by the New York Times earlier this spring.

The Democratic frontrunner has turned over many of her emails in response to a State Department request and congressional inquiries. However, she has said that any emails that were deemed “personal” were deleted from her server.

The FBI is currently attempting to recover the deleted emails as part of an investigation into her server, according to reports.

Clinton declined to say whether the FBI investigation could uncover additional damaging revelations, during an interview with Chuck Todd of Meet the Press on Sunday.

“All I can tell you is that when my attorneys conducted this exhaustive process [of deleting personal emails], I did not participate,” said Clinton.

Clinton is scheduled to testify before Congress on the email issue in October.

Citizens United president David Bossie said the latest news reveals the ways in which the Clintons’s various interests intersect.

“The tangled web that is Clinton, Inc.—the State Department, the Clinton Foundation, and Teneo—is coming more and more into focus every day. Classified information moving from the State Department to the Clinton Foundation is extremely problematic—we’ll see if there’s a pattern here,” Bossie said.

 

 

 

Iran Busy Schedule in New York

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Too busy in fact to attend Barack Obama’s opening United Nations General Assembly salvo, Iran is quite preoccupied.

Hassan Rouhani delivered his remarks and then left the chamber.

On the side, there are several meetings with Iran and one such provocative session is the Iranian proposal to swap 4 U.S. citizens held in prison for 19 Iranians the United States has jailed for violating sanctions.

There are still on going side discussions over the Iran deal and many open items remain unresolved as well as how the United Nations as a global body will address the human rights violations in Iran, if at all.

Rather than listen to the countless speeches on climate change, which Francois Hollande of France pushed hard, you can bet covert operations are in full swing following who is taking Iranian representatives to lunch, cocktails and dinner.

Lining up to do business with Iran is the order of the day by U.S. corporate CEO’s.

Rouhani meets with American CEOs, seeks Iran investment

Iranian president says economic conditions created by nuke deal should be used by major firms; US companies currently banned from doing business with Tehran

TimesofIsrael: Iranian President Hassan Rouhani met on Saturday with a group of American CEOs and managers to discuss possibilities for future, private US investment in Iran once the nuclear deal signed in July is implemented and sanctions are lifted in exchange for Tehran curbing its nuclear activities.

The meeting came on the sidelines of the United Nations General Assembly in New York and a day after Rouhani met with a group of editors of American media outlets.

“The post-sanctions atmosphere has created new economic and political conditions which should be used by major trade, economic and industrial firms,” Rouhani told the group of American business leaders.

Following the signing of the nuclear agreement in Vienna in July, many European states rushed to renew trade relations with Iran with countries sending delegations to Tehran to discuss possibilities. European firms were also flocking to Tehran to sniff out lucrative business deals.

The US remains an exception as core sanctions imposed by Washington will remain even after the nuclear-related sanctions are lifted, meaning US companies would not be able to do business with Tehran.

These secondary sanctions are linked to US charges of Iranian human rights violations, terrorism and other allegations of wrongdoing. They have the effect of banning doing business with Iran, with only few exceptions, such as supplying parts for Iran’s civilian aviation sector.

But Rouhani expressed his conviction that these measures would also be lifted, according to the semi-official Fars news agency.

“Tehran has not impeded the presence of the US firms, and these companies can also use the competitive atmosphere resulting from the post-sanction conditions for investment and transferring technology to Iran,” Rouhani said at the meeting.

There is a lot to miss out on for US firms in Iran. The country of 80 million people generates a $400 billion economy, boasts the world’s fourth-largest oil reserves, the second-biggest stores of natural gas, and has well-established manufacturing and agricultural industries. It is also investing heavily in the tourism industry.

Rouhani was on a sort of charm offensive in New York ahead of his speech before the UNGA Monday. On Friday, he met with a group US editors to discuss a series of topics including the nuclear deal, developments in the Mideast and US-Iran ties and investment in Iran.

Rouhani said that in the wake of the nuclear deal, a door has opened for foreign investment in Iran.

“I think there are great opportunities, unrivaled opportunities, for American investment in Iran,” if the US government permits, he said.

Rouhani said relations between the two countries had improved in recent years but that there was “still a long road to travel” until they establish normal ties.

The Iranian president said the opposition expressed by some US lawmakers on the Iranian nuclear deal reflected “extremely bitter extremist judgments,” and was not well-received in Iran.

“It was as if they were on another planet,” he said, according to Reuters. “They did not seem to know where Iran was.”

“The nuclear issue is a big test within the framework of issues between the United States and Iran,” Rouhani told the group. “If we can see that we can reach success…and both sides have contributed to that success in good faith, then perhaps we can build on that.”

Rouhani said implementation of the nuclear deal would improve the atmosphere to allow progress to be made.

He also said that Iran can play a constructive role in addressing the threat of the Islamic State group, which has seized control of large swaths of Syria and Iraq, and that world powers were wrong to try to keep Iran out of the discussions on how to deal with the threat.

Iran is “a powerful and effective country in the region, this is undeniable,” Rouhani said. Without Iranian intervention on the side of the Baghdad government at a crucial juncture last year, he said, the Islamic State might already have taken over all of Iraq.

“Had it not been for Iran’s help, Baghdad would have fallen and certainly Daesh would have been ruling in Baghdad,” he said.

 

 

Remember that Mortgage Crisis in 2009? Part Deux

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Primer:

Obama extended this program through December 2015.

The Making Home Affordable Program is a critical part of the Obama administration’s efforts to provide relief to families at risk of foreclosure and help the housing market recover from the housing crisis, HUD explained.

“The housing market is gaining steam, but many homeowners are still struggling,” said Treasury Secretary Jacob Lew.

He added, “Helping responsible homeowners avoid foreclosure is part of our wide-ranging efforts to strengthen the middle class, and Making Home Affordable offers homeowners some of the deepest and most dependable assistance available to prevent foreclosure. Extending the program for two years will benefit many additional families while maintaining clear standards and accountability for an important part of the mortgage industry.”

Now the real truth of more toxic mortgages. A must read in full detail by clicking here.

Hedge funds get cheap homes, homeowners get the boot

PublicIntegrity: Julius Uwansc was in trouble with his mortgage after refinancing in 2009, just after the real estate bubble popped. Like millions of others, he found himself owing more on his house than it was worth.

The Nigerian-born father of four moved into his house on Richardson Road in Gwynn Oak, Maryland, in 2005. “We loved it because it has this big yard where the kids can play,” Uwansc says.

But soon after closing on the loan, Uwansc began having trouble making payments. He believed he had worked out a loan modification with Bank of America in 2011 after signing paperwork, but the bank disputed the terms Uwansc thought he had secured. When he didn’t pay the amount the bank said he owed, it claimed he was in default.

Uwansc’s mortgage was insured by the Federal Housing Administration, meaning if he failed to make payments, the bank would typically be paid the full value of what was left of the mortgage, plus costs associated with servicing the debt.

Bank of America filed for a claim and received payment. The mortgage was then transferred to the Department of Housing and Urban Development, which oversees the FHA.

Normally at this point, instead of taking over the mortgage, HUD regulations would require the bank to work with the borrower during a pre-foreclosure stage. If there’s no way to keep the homeowner in the home, HUD shepherds the property through the foreclosure process.

But not in this case.

The program

In 2010, HUD launched the mortgage sales program — now known as the Distressed Asset Stabilization Program, or DASP — under intense pressure from Congress to improve its finances. HUD can’t reduce the principal owed on mortgages it holds for homeowners, but it can sell the mortgages in bulk to investors at a steep discount — at times as little as 41 percent of the mortgages’ collective value.

The agency, through the FHA, insures loans to lower-income and first-time homebuyers. During the 2008 financial crisis and subsequent recession, many of those homeowners fell behind on their mortgage payments and foreclosures loomed.

Meanwhile, the FHA, due to an onslaught of claims, was desperately in need of a funding infusion.

The DASP program has a dual purpose: to lessen the impact of FHA insurance claims on defaulted mortgages on HUD’s finances, and according to a statement in April by Genger Charles, then the acting commissioner of HUD’s Office of Housing, to provide borrowers “a second chance at avoiding foreclosure.” Through DASP, lenders cash in on an FHA insurance claim on mortgages that are at least six months delinquent and HUD takes ownership of the mortgages. HUD then sells those mortgages to the highest bidder in bulk auctions.

Over 98,000 loans have been funneled through the DASP system since it began in 2010, with mortgages amounting to more than $16.7 billion in total debt.

The sales have helped the FHA insurance fund become solvent. According to an analysis of HUD’s sales results by the Center for Public Integrity, buyers have paid HUD $11.2 billion over the course of these auctions. The fund currently holds $4.8 billion, after being $16 billion in the red two years ago.

But when it comes to helping homeowners avoid foreclosure, the results are unimpressive. The program, it was hoped, would help homeowners because the investors who bought the loans were expected to offer better terms to borrowers.  As part of the initiative, HUD included a stipulation that buyers must wait six months (it has since been bumped up to a full year) to foreclose to allow borrowers a chance to work with their new creditors.

“Once we sell [the mortgage] for something less than the principal balance,” explains HUD spokesperson Brian Sullivan, the lender “has more room to work with the homeowner.”

But the new owners of these mortgages are more likely to flip the homes for a profit or take advantage of the booming rental market, say some advocates. The transactions may make good financial sense, but they can leave struggling homeowners like Julius Uwansc in the dark, and in some cases on the streets.

“The investors are there to make money,” says Diane Cippolone, a mortgage servicing consultant to the National Fair Housing Alliance, a nonprofit organization. “They are not there to do neighborhood revitalization or neighborhood stabilization.

Depending on secrecy

FHA loans by law offer extra protections against foreclosure. In order to obtain that FHA insurance, a loan servicer, the company that collects payments and administers the loan, must make a series of efforts to modify loan terms to help owners keep their homes.

A lender can file a claim and turn the loan over to HUD for sale only when all these efforts have failed. The loans in DASP, according to HUD spokesman Sullivan, “are all headed to foreclosure — 100 percent of them — because they’ve exhausted their loss-mitigation options.”

But legal advocates and several borrowers say they have seen otherwise. The original lender reports that they’ve taken all the necessary steps, and HUD essentially takes their word for it, says the NCLC’s Geoff Walsh. “We’re hearing from a lot of homeowners that were still involved in loss mitigation,” he says, and could avoid foreclosure through normal FHA pathways.

Uwansc says he had no idea his mortgage was up for sale. Walsh says, “The program depends on secrecy. The program depends on the homeowner not knowing that their loan is being sold.”