Lawmakers frustrated with foreclosure aid programs

WASHINGTON - Lawmakers vented Thursday about the government's inability to solve the nation's housing woes as fresh data showed foreclosure filings continued to rise.

Sen. Christopher Dodd., D-Conn., chairman of the Senate Banking Committee, called the overall lack of progress by the government "disgraceful." He noted that borrowers are facing long delays as they try to get help.

"We're being asked everyday by our constituents and others: What's going on?" Dodd said at a committee hearing.

In March, the Obama administration launched a $50 billion plan to give the lending industry financial incentives to modify mortgages to lower payments for struggling borrowers. As of mid-July, about 160,000 borrowers were enrolled in three-month trial modifications under the plan. Officials say that number is growing.

Herbert Allison, the Treasury Department's assistant secretary for financial stability, said the administration is prodding mortgage companies to add more staff and beef up training.

Though modifications are on the rise, Allison said, "We're not satisfied."

Last week, top officials summoned executives from the 27 participating mortgage companies to a July 28 meeting to discuss their results. And next month, the government plans to publish a detailed breakdown of how well each company is performing under the program.

"They have a strong incentive to modify as many eligible loans as possible," Allison said.

But lawmakers aren't satisfied, especially given the billions of dollars the government has handed out to bail out troubled banks.

"When are you going to stop the bleeding?" Sen. Jim Bunning, R-Ky., asked repeatedly.

Allison responded: "We are moving as fast as we can to get out in front of the problem."

Banking industry executives defended their track records, saying the program is complex and hundreds of employees had to be hired and trained.

"We understand that this time has been frustrating for our at-risk customers and that they are anxious and in need of answers," said Mary Coffin, executive vice president of Wells Fargo's mortgage division.

Curtis Glovier, managing director of Fortress Investment Group, a hedge fund, said the program doesn't do much for borrowers who owe far more on their mortgage than their home is currently worth. Even after loans are modified at a below-market rate for five years, there is still a "meaningful risk" the homeowner could fall behind again.

A report Thursday from RealtyTrac Inc. said the foreclosure crisis affected more than 1.5 million homes in the first six months of the year.

More than 336,000 households received at least one foreclosure-related notice in June, up 33 percent from year-ago levels, according to the foreclosure listing firm. That works out to one in every 380 U.S. homes.

As the mortgage crisis mounts, one new idea being considered by the Obama administration is to let consumers rent out homes from their lenders after losing them to foreclosure. "Someone living in a home is a lot better than a vacant foreclosed home," said Sen. Charles Schumer, D-N.Y.

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