WASHINGTON — The Obama administration’s mortgage-relief program 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, the Treasury Department said Tuesday. The modifications reduce monthly payments to more-affordable levels.
To make the change permanent, borrowers must complete a big stack of paperwork and show they can make their payments on time. At the beginning 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.
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.
One legal challenge to the program was rejected this week, when a federal judge dismissed a class-action lawsuit filed by a group of Minnesota homeowners who sought to block foreclosures in that state.
Government officials say they are pressing mortgage companies hard to improve their performance. Still, many housing advocates have been disappointed with the $50 billion plan’s progress and say that getting a loan modification remains a battle.
Economists doubt the Obama administration will reach its broad goal of helping 3 million to 4 million borrowers within three years.
