WASHINGTON – The Obama administration’s $50 billion mortgage relief program is finally picking up speed after a sluggish and disappointing start: Nearly one in five eligible homeowners have been offered help so far.
The Making Home Affordable plan was launched with great fanfare in March. As of last month, lenders had sent out more than 571,000 offers to reduce borrowers’ monthly payments, the Treasury Department said Wednesday.
That’s 19 percent of the nearly 3 million homeowners eligible for a loan modification under the plan, up from 15 percent at the end of July.
“There are signs the plan is working,” said Michael Barr, assistant Treasury secretary for financial institutions. “But we can do better.”
Much better, lawmakers and housing counselors say.
“We think that you’re missing the mark,” Rep. Maxine Waters, D-Calif., told a panel of mortgage industry executives at a House hearing Wednesday.
Of the modifications offered, about 360,000 borrowers, or 12 percent, have signed up for three-month trial modifications, which are supposed to be extended for five years if the homeowners make their payments on time.
To increase pressure on the industry, Waters and other lawmakers threatened to revive a failed proposal, opposed by banking lobbyists, to let bankruptcy judges rewrite the terms of a mortgage.
That change is necessary, consumer groups say, because getting a lender to do so voluntarily is still a time-consuming, bureaucratic nightmare. Many lenders are still scheduling foreclosure sales and charging borrowers fees for participating in the Obama plan.
“The administration has got to put some teeth in this and really get some consequences for the lenders and servicers who are not cooperating,” said Bonnie Mathias, a board member of the Association of Community Organizations for Reform Now, or ACORN.
But mortgage executives say they are racing to implement the program, hiring thousands of workers to handle an unprecedented flood of calls.
“We fully understand the urgency,” Jack Shackett, Bank of America’s head of credit loss prevention, told lawmakers. “We understand that we have a long way to go under very challenging circumstances.”