WASHINGTON — The often-criticized government program to help homeowners avoid home foreclosures has reached its initial goal for modifying mortgages -- after the Obama administration started prodding banks in July to move more quickly in easing loan terms.
But it might be too little too late to stem the tide of foreclosures.
A government oversight report to be released today expressed doubts that the administration would reach its overall objective of preventing 3 million to 4 million foreclosures, much less keep many of those who modified their mortgages from losing their homes.
Federal officials said Thursday that the Making Home Affordable program reached its initial target of 500,000 trial mortgage modifications more than three weeks ahead of schedule.
The result indicated that despite their early sluggish response, banks and mortgage servicing companies could have pushed modifications through the program more aggressively since its launch in March, said Ken Stein, associate director of the California Reinvestment Coalition, an advocacy group for homeowners.
"They're improving and that's good, but the numbers are still insufficient," he said.
Industry officials, however, said banks already were modifying loans on their own -- about 2 million since late 2007 through the industry's Hope Now program -- and they pointed out that it took time for the government initiative to get up and running.
"This is a new program that had a lot of kinks," said Scott Talbott, the top lobbyist for the Financial Services Roundtable, which represents large financial institutions. "And now it is up to speed, and I expect the pace to continue."
But in a report today, the Congressional Oversight Panel monitoring use of government bailout money raised concerns about the effectiveness of the $75-billion Making Home Affordable program.
"It isn't clear the program in place will do enough to tame the crisis," said Elizabeth Warren, the panel's chairwoman. The report also questioned whether the modifications would put homeowners into "long-term stable situations."
Analysts echoed those worries, saying there's a long way to go to get those 500,000 homeowners into long-term restructured mortgages that they would be able to afford. And although the program is helping ease the foreclosure crisis, it's unlikely to end it.
