Within weeks of taking office, U.S. President Barack Obama rode to the rescue of homeowners resigned to financial ruin.
Obama, grappling with the worst U.S. housing crisis since the Great Depression, pledged to help as many as 9 million families keep their homes by reworking their mortgages.
Eight months later, the plan is plagued by delays, red tape and, some critics say, a reluctance by banks to do their part. Just 17 percent of eligible borrowers have had their loans modified and monthly payments cut. Hardly any have been given a cut in the amount they owe on homes which are now worth less.
That means many successful applicants are left with loans that they still will not be able to afford in the long run. So instead of resolving the housing crisis that pushed the U.S. economy into recession, America may be prolonging it and, in the process, stunting the global recovery.
Every single policy we've seen has merely kicked the problem down the road, said Laurie Goodman, a veteran analyst at broker-dealer Amherst Securities Group LP, which specializes in residential mortgage-backed securities.
But there is no easy solution to the underlying problems.
For homeowners like Jeff Latta, there was no help at all.
Latta, a 53 year-old retiree, pays $1,600 in monthly home payments that eat up 93 percent of his pension and he struggles to make child support payments.
To help pay his mortgage, Latta has slashed his bills by hunting for food in the wooded hills around his town of Albany in southern Ohio, and growing his own vegetables. He has resorted to selling pumpkins and firewood to make cash.
In March, Latta heard about Obama's Home Affordable Modification Program, or HAMP, that allows mortgage payments to be reduced to 31 percent of a homeowner's income.
The plan was launched as a central plank of Washington's efforts to stem foreclosures.
Latta applied for a loan modification but was rejected. His bank said his income from selling pumpkins and firewood -- a net of $906 in 2008 -- was too high.
Frankly, I'm disappointed, Latta said. I thought I would qualify as I am at high risk of default.
Foreclosure prevention advocate Bryce Burton at Ohio Housing Finance Agency said Latta's bank miscalculated his income. Jeff is a shining example of someone doing everything they should be to keep their house, Burton said.
Nonprofit agencies say HAMP helps combat foreclosure but success varies from lender to lender.
Mortgage servicing companies, which service but do not own loans, complain that excessive bureaucracy slows the process.
HOME VALUES DROP $4.7 TRILLION
That banks lent irresponsibly in the U.S. property boom is irrefutable. As San Diego-based realtor Steve Rodgers says: If you could fog a mirror, they'd give you a mortgage.
But borrowers are facing blame too for using their homes as machines to raise cash and consume on credit. The bubble burst in early 2007 and America went into recession later that year.
From the market's peak in 2005 to the second quarter of 2009, U.S. home equity fell 37 percent, or by $4.7 trillion, according to the Federal Reserve. To put that into context, China's economic output totaled about $4.3 trillion in 2008.
There have been recent signs the housing market may be bottoming. But rising unemployment and shadow inventory -- homes that banks have yet to foreclose on -- raise the prospect of further price declines.
Between July 2007 and August 2009 there were more than 7 million foreclosure filings, according to RealtyTrac, out of a total of 111 million households in the United States.
To stem the tide Obama launched HAMP, a $75 billion plan offering cash incentives to servicers to cut payments for distressed borrowers with most of the money coming from the $700 billion bank rescue program Congress approved last year.
But companies like subprime mortgage servicer Ocwen Financial Corp (OCN.N) complain they have been inundated with borrowers who simply have no chance of qualifying for HAMP.
I think there is a sense publicly... (that) everybody will be eligible for this program, said president Ron Faris at Ocwen headquarters in West Palm Beach, Florida.
What we are finding is probably at this point, unfortunately, less than one in three borrowers that has applied is actually eligible under the government guidelines.
Margery Rotundo, a senior vice president at Ocwen, worried about the consequences of most HAMP applicants being rejected by servicing companies, saying it might produce a tidal wave of foreclosures.
The U.S. Treasury Department said on Oct. 8 that under HAMP more than 500,000 people so far had their payments cut, slightly under 17 percent of those deemed eligible, ahead of the department's Nov. 1 deadline for reaching that number.
But Treasury officials concede that even if HAMP is a success, millions more foreclosures remain likely.
One of the big obstacles in the government's modification program has been the sheer workload.
No one, including Treasury, had any concept of how much work this was going to be in getting these documents from borrowers, said Gregory Hebner, head of Irvine, California-based MOS Group Inc which handles loss mitigation for some servicers.
Nonprofit groups also have complaints about the government's program, and others independent of it. Counselors recount tales of lenders losing documents or of difficulty reaching bank staff.
A client of mine was kept on hold for an hour and a half and transferred 17 times, said Michelle Watts, an OHFA foreclosure prevention advocate. Some people just give up.
Ohio Attorney General Richard Cordray filed a lawsuit in July against a large mortgage servicing firm, Carrington Mortgage Services, alleging it had failed to make good faith efforts to stem foreclosures, and he warned more could follow.
We'd rather not sue everyone, but we will if we have to, Cordray said.
Another problem is the number of borrowers who re-default on their modified loans. The U.S. Office of the Comptroller of the Currency says 56.2 percent of loans modified in the second quarter of 2008 re-defaulted after 12 months.
According to Amherst Securities, an even higher 70 percent of homeowners re-default within 12 months of a modification -- but it stresses its data does not include HAMP modifications.
On Oct. 9, a day after the Treasury announced HAMP was ahead of target, the Congressional Oversight Panel issued a scathing report on the program. It found fewer than half of the predicted foreclosures would be avoided under HAMP.
Furthermore, many modifications added to the principle owed by homeowners at the end of their mortgages even as the market value of their homes fell, a factor that appears to be associated with higher re-default rates, the report said.
Some nonprofit groups say the high re-default rate is because many homeowners lack counseling on budgeting.
Mark Seifert, head of nonprofit agency Empowering and Strengthening Ohio's People said his group's re-default rate is around 30 percent because counselors help homeowners cut their budgets to keep their homes. This may involve not eating out and cutting all non-essential items.
For all the problems, many nonprofit groups say HAMP has led to more successful loan modification applications.
HAMP has given us another tool in our toolbox, said Melinda Opperman, vice president of counseling group Springboard in Riverside, California. Before we could help three to four people out of 10. Now it's five to seven.