Susan Walsh / AP

I'm guessing their hands were still buzzing from all the back-slapping when Treasury officials got the bad news that the Congressional Oversight Panel for the TARP called their progress "inadequate."

Yep, not exactly a word you want to hear when you've just spent the day touting your mortgage bailout program and the fact that it got half a million borrowers into new trial mods ahead of schedule.

But there go those squeaky oversight types:

The Panel expresses concern about the limited scope and scale of the Making Home Affordable program and questions whether Treasury’s strategy will lead to permanent mortgage modifications for many homeowners.

And what's their proof for such an accusation? Rising unemployment, an increase in defaults on pay option arms and a little hitch in the HAMP (Home Affordable Modification Program) itself which can increase a borrower's negative equity. In fact, panel members go so far as to claim "Treasury's strategy also makes no provision for foreclosures due to unemployment, which now appear to be one of the biggest drivers of foreclosure."

Tell me something we didn't know?

The foreclosure crisis has shifted from subprime to prime, and we didn't need a Congressional Oversight Panel to tell us that "because of the recession, declines in home prices, and the persistence of job losses, foreclosures involve families who paid sizeable down payments and took out conventional loans."

• Special Report: Investor's Real Estate Guide

But they did get a look at some data I've been unable to find, and that is that under HAMP only five, yes five, modifications of the half million involved principal forgiveness. There's your headline.

Treasury officials issued a polite retort, admitting that "the housing crisis was never going to be fixed overnight," and that "While HAMP is open to the unemployed, we continue to study further ways to help unemployed homeowners," but still, of course, they defended the program.

Questions?  Comments?