Mortgage Modifications Picking Up Steam

Washington, DC, Sept. 10, 2009--Loan modifications have picked up over the past month, and servicers have placed 12% of eligible troubled borrowers into trial modifications under President Obama's foreclosure prevention plan, the Treasury Department said.

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.

Officials said Wednesday that servicers should 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 Wednesday.

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. Qualified borrowers are put into three-month trial modifications before the adjustment is made final.

Some 47 servicers are now participating in the Obama program, up from 38 servicers a month ago.

After the report came out last month, servicers acknowledged they needed to improve their performance and promised to do better in the future.