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WASHINGTON — The Obama administration's effort to persuade mortgage companies to lower payments for up to 4 million homeowners could fall short of its goal, according to congressional investigators.
The Government Accountability office said Thursday the administration's projections that its loan modification plan could help 3 million to 4 million borrowers "may be overstated" because it's based on uncertain assumptions about the mortgage market and overall economic conditions.
In March, the Obama administration launched a plan to give the lending industry up to $50 billion in financial incentives to modify mortgages for struggling borrowers. As of this week, 31 mortgage companies had signed up, and about 180,000 borrowers were enrolled in three-month trial modifications.
While the Treasury Department estimates that about 65 percent of borrowers at least two months behind on their mortgages will sign up, the actual rate of responses is more likely to be about 50 percent, the report says.
In a letter responding to the GAO report, Herbert Allison, Treasury's assistant secretary for financial stability, acknowledged that is was difficult to estimate how many people the program will reach. The government will update estimates of its cost and how many borrowers will participate, he wrote.
Since the plan was announced, foreclosures have continued to soar. RealtyTrac Inc. reported last week that U.S. households on the verge of losing their homes jumped nearly 15 percent in the first half of the year as more people lost their jobs and were unable to pay their monthly mortgage bills. Experts don't expect foreclosures to peak until the middle of next year.
Amid complaints by housing counselors that borrowers still face long and frustrating delays, government officials have been increasing pressure on the 31 participating mortgage companies to add more staff and beef up training.
Treasury Secretary Timothy Geithner and Housing Secretary Shaun Donovan have summoned mortgage company executives to a Tuesday meeting at the Treasury Department and plan next month to publish a detailed breakdown how each company is doing.
The administration's progress, "has been substantial," Allison wrote, noting that "there has never before been a government program designed to incentivize mortgage modification and help struggling homeowners on the scale of (this) program."
