WASHINGTON -(Dow Jones)- Despite its improving efforts to slow the pace of foreclosures, the administration’s homeowner rescue programs “even when they are fully operational, will not reach the overwhelming majority of homeowners in trouble,” the Congressional Oversight Panel said in a report released Wednesday.
The panel, which oversees the $700 billion Troubled Asset Relief Program, said Treasury’s response to the nation’s foreclosure problems “continues to lag well behind the pace of the crisis.”
The Treasury later Wednesday plans to release a report showing that through March it had offered to modify troubled mortgages for more than 1.4 million borrowers and was saving hundreds of dollars a month for 1.1 million homeowners.
Only a fraction of those who have received mortgage modifications through the Treasury’s programs have what are called “permanent modifications,” however. Permanent modifications allow for borrowers’ renegotiated mortgage terms to stay in place for five years.
Some homeowners “may make payments for five years under a so-called ‘permanent modification,’ only to see their payments rise again when the modification period ends,” the panel noted.
Failed permanent modifications would signal what the panel called “the worst form of failure” of the administration’s incentive-driven mortgage modification program.
“Billions of taxpayer dollars will have been spent to delay rather than prevent foreclosures,” its report said.
Through March, the Treasury said more than 230,000 borrowers had received permanent modifications, and that another 108,000 deals were pending acceptance by borrowers. Still, the figures pale in comparison to the number of homeowners who are two or more months late on mortgage payments.
The Obama administration’s foreclosure prevention programs “are not intended to help every homeowner in trouble,” Treasury spokeswoman Meg Reilly said. “We cannot help those who simply bought a home that they could not afford.”
Meena Thiruvengadam, Dow Jones Newswires