Only 12 percent of U.S. homeowners eligible for loan modifications under the Obama administration's housing rescue plan have had their mortgages reworked, and millions more foreclosures are coming, the Treasury Department said on Wednesday.
A Treasury report showed 360,165 people had their monthly payments reduced through August, up from 235,247 through July, but a senior Treasury official conceded much more must be done to soften the impact of a severe and prolonged housing crisis.
The recent crisis in the housing sector has devastated families and communities across the country and is at the center of our financial crisis and economic downturn, Michael Barr, assistant Treasury secretary for financial institutions, told a House Financial Services subcommittee.
Treasury has begun releasing monthly reports on the loan modification program, called the Home Affordable Modification Program, or HAMP, that it launched in February. At the time, it was suggested that millions of Americans might be able to get some relief through negotiations with their mortgage lenders.
But the program is off to a relatively slow start.
In July, Treasury said that just 9 percent of the estimated number of homeowners eligible had had their loans modified, so August's 12 percent total represents only modest progress.
Barr said any effort to modify mortgages has limits because even in the best of times, there typically are hundreds of thousands of foreclosures in U.S. housing markets.
However, the current program, which brings banks and loan servicers together with at-risk homeowners, was on target to help a half-million Americans homeowners by November 1, he said.
That is a small start on a huge problem.
Barr said that even if HAMP is a total success, we should still expect millions of foreclosures as administration and industry efforts continue to stabilize a crisis-stricken housing sector.
Treasury said that 47 loan servicers have signed up for the loan modification program initiated by Treasury. But the Treasury report showed 21 had modified less than 5 percent of eligible troubled loans and several had not modified any.
Barr said a strong housing market was crucial to a sustained U.S. economic recovery and noted that analysts say more than six million Americans are at risk of foreclosure in the next three years.
Much more remains to be done and we will continue to work with other agencies, regulators and the private sector to reach as many families as possible, Barr said.
(Additional reporting by Tim Ahmann; Editing by Neil Stempleman)