WASHINGTON -(Dow Jones)- Just 12% of eligible borrowers have started trial loan modifications under the Obama administration's $75 billion mortgage foreclosure-prevention plan, according to a Treasury report released Wednesday.
Wells Fargo & Co. (WFC) and Bank of America (BAC) have made only tepid progress implementing the program, having started trial modifications for only 11% and 7% of eligible borrowers, respectively.
Meanwhile, JP Morgan Chase (JPM) and Citigroup (C) have started trial modifications for 25% and 23% of eligible borrowers, respectively. For purposes of the report, Treasury defines eligible borrowers as people who are at least 60 days behind on their mortgage payments.
The data come amid growing concern that the effort, which relies on hefty government incentives for lenders and borrowers, won't be enough to combat mounting foreclosures around the country.
All told, more than 570,000 trial modifications have been offered to borrowers under the program and around 360,000 trial modifications are under way, Treasury reported. Borrowers must make payments for three months before a loan modification is complete and payments are disbursed to borrowers and servicers.
Meanwhile, foreclosure filings increased 7% in July from the previous month, according to RealtyTrac. And mortgage defaults continue to soar as job losses pummel U.S. household finances. Nearly one in 12 borrowers are seriously delinquent on their mortgage, the Mortgage Bankers Association reported last month.
Treasury said 47 mortgage servicers have now signed up to participatein the program, representing 85% of all eligible mortgages. Saxon Mortgage Services, a subsidiary of Saxon Capital Inc. (SAXN), has performed the best, having offered trial modifications to 39% of eligible borrowers.
In a U.S. House hearing Wednesday, House Financial Services Chairman Barney Frank, D-Mass., said he is disappointed at the pace of the program.
The panel's top Republican, Rep. Spencer Bachus, R-Ala., said the effort "was flawed from the inception" because it didn't focus on creating jobs.
"As long as people are losing jobs, they're going to lose their homes," Bachus said.
But Treasury Assistant Secretary for Financial Institutions Michael S. Barr defended the program's progress at the hearing.
"There are clear signs that the incentives offered under the Home Affordable Modification Program are having a substantial effect," he said in prepared remarks.
A Bank of America (BAC) executive, Jack Schakett, is expected to say that the bank continues to have difficulty getting needed information from customers as well as responses from its efforts to reach customers, according to prepared remarks.