NEW YORK (CNNMoney.com) – Mortgage servicers have placed 12% of eligible troubled borrowers into trial modifications under President Obama's foreclosure prevention plan, the Treasury Department said Wednesday.
The progress report, the second issued by the government, says that 360,165 homeowners who were at least two months behind in payments received relief through August. A month ago, just 9%, or 235,247 borrowers, were in trial modifications.
The Obama administration has come under fire for the program's rocky start. Officials, who met with servicers in Washington in late July, said they are on track to hit their goal of 500,000 loan modifications under way by Nov. 1.
"Our progress in implementing these programs to date has been substantial, but we recognize that much more has to be done to help
homeowners," said Michael Barr, an assistant Treasury secretary, in prepared testimony before a House Financial Services Committee panel.
The $75 billion initiative was announced in February and the first institutions to join began accepting applications in April. The plan, which is
projected to help up to 4 million homeowners, calls for servicers to reduce the monthly payments of eligible borrowers to no more than 31% of their pre-tax income.
Some 47 servicers are participating in the Obama program, up from 38 servicers a month ago. Financial institutions, borrowers and mortgage investors all receive incentives for participating in the program.
By releasing the servicers' progress reports each month, the administration is hoping to hold institutions responsible for their performance. The updates will allow the public to see which institutions are lagging in implementing the plan.
After the August report came out, servicers acknowledged they needed to improve their performance and promised to do better in the future.
Borrowers are complaining that servicers are not responding to their calls and applications, losing their paperwork or not making decisions. The financial institutions said they are ramping up their staffing and computer systems to handle the crush of applications.
Moving quickly is important. The number of people falling behind on their payments continues to mount, especially as unemployment rises.
A record number of foreclosure filings were posted in July, according to RealtyTrac. There were more than 360,000 properties with foreclosure filings - including default notices, scheduled auctions and bank repossessions - an increase of 7% from June and 32% from July 2008.