Congressional investigators fear that the Obama administration’s $50-billion loan modification program may not meet the assistance goals it had promised during the launch in February.
According to the Government Accountability office, the projections to help up to 4 million troubled homeowners may have been “overstated”, having been based on unproven assumptions about the housing market and the U.S. economy.
The report revealed that about 50% of delinquent borrowers were likely to sign up for the mortgage modification program, as opposed to the 65% estimated by the Obama administration in March. As of late July 2009, only 31 mortgage companies had joined the initiative and about 180,000 borrowers had received trial loan modifications.
Since the program’s launch, foreclosures and defaults have continued to rise nationwide. According to real estate information provider RealtyTrac Inc, the number of at-risk households rose by almost 15% during the first half of the year, mostly because of unemployment. Experts believe the rise will continue until mid-2010.
Herbert Allison, the U.S. Treasury assistant secretary for financial stability, issued a statement admitting that it was hard to estimate the reach of the loan modification program. He added that the government plans to update the projections on the program’s cost and participation rate.
The government has been actively urging participating servicers to beef up their efforts by hiring more staff and improving personnel training. Housing Secretary Shaun Donovan and Treasury Secretary Timothy Geithner are scheduled to meet with company executives Tuesday, and are planning to make detailed performance reports on each company starting next month.
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