The Obama administration's mortgage relief plan provided help to only 7 percent of borrowers who signed up last year, another black mark for the struggling program.
About 900,000 borrowers have enrolled in the $75 billion program since it launched in March, the Treasury Department said Friday. But as of last month, only about 66,500 homeowners had received permanent relief. Another 46,000 have been approved and should be finalized soon.
The plan aims to make borrowers' mortgages more affordable by reducing the mortgage interest rate to as low as 2 percent. They receive temporary modifications, which are supposed to become permanent after borrowers make three payments on time and complete necessary paperwork, including proof of income and a letter explaining the reason for their financial hardship.
The Treasury Department is pressing the 102 mortgage companies that are participating in the program to do a better job.
The mortgage companies say they have struggled to get homeowners to return the necessary paperwork. Wells Fargo executives project that only about half of the borrowers who enrolled last summer will wind up being approved.
The rest will either won't send back all the required documents or will be deemed ineligible according to the government's formula. Collecting the documents up front would make the process much easier, said Mike Heid, co-president of Wells Fargo & Co.'s mortgage division.
"You could make a better decision for the consumer right up front," he said.
Nevertheless, homeowners and housing counselors say navigating the bureaucratic maze often seems impossible.
The nation's economic woes have made more borrowers fall behind on their payments. More than half of the borrowers approved for a loan modification have seen their income cut, according to the Treasury Department.
Unemployment, now at 10 percent, is expected to remain elevated for the whole year. Industry executives and housing advocates alike have been in talks with the Treasury Department to develop a program to aid the unemployed, but nothing has been rolled out yet. _____________________________________
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