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Success of federal mortgage relief program rebutted

WASHINGTON — The Obama administration's mortgage relief program to reduce monthly payments has reached one in five eligible homeowners, a government report says, but most of those borrowers are on temporary trial plans that have yet to be made final.

As of the end of October, more than 650,000 borrowers, or 20 percent of those eligible, had signed up for trials lasting up to five months in the "Making Home Affordable" program, the Treasury Department said Tuesday.

To make the change permanent, though, borrowers must complete a big stack of paperwork and show they can make their payments on time.

At the start of September, only about 1,700 permanent modifications had been made. The Treasury Department expects to release updated data later this month.

"We're seeing some early indications that the servicers haven't done enough to get all the documents in," said Michael Barr, an assistant Treasury secretary.

In Florida, only 12 percent of the homeowners who were either two payments behind or in foreclosure had enrolled in the program, possibly because of high numbers of investor-owned properties that don't qualify for it.

Consumer advocates say banks aren't doing enough to follow through. "It's going to be the make-or-break issue," said Alan White, a law professor at Valparaiso University and a consumer attorney. The government, he said, will have to "crack the whip or consider firing some of these servicers."

Mortgage companies that are performing poorly, he said, should have their right to collect payments on loans revoked and transferred to companies that are doing the job better.

Launched with great fanfare in March, the plan got off to a weak start, but now nearly 920,000 loan modification offers have been sent to more than 3.2 million eligible home­owners. That works out to 29 percent, up from 15 percent at the end of July.

In California, about 130,000 homeowners — about 19 percent of the state's homeowners who were either two payments behind or in foreclosure at the end of last month — have been enrolled in the loan-modification plan, which President Barack Obama unveiled in February.

Two other hard-hit states, Arizona and Nevada, had similar rates of assistance as California, at 22 percent and 18 percent, respectively.

Many housing advocates have been disappointed with the $50 billion plan's progress and say that getting a loan modification remains a battle, and economists doubt the Obama administration will reach its broad goal of helping 3 million to 4 million borrowers within three years.

Success of federal mortgage relief program rebutted 11/10/09 [Last modified: Tuesday, November 10, 2009 9:04pm]
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