Home loan aid program fails thousands

When Renee Penny of Columbia, Tenn., heard about the federal government's "Making Home Affordable" loan modification program last spring, she thought she had found welcome relief.

But a few weeks ago, Bank of America mailed a response to the laid-off auto parts worker's request for mortgage help: The bank told her it would reduce her mortgage by $6 a month, to about $1,176 per payment.

"I feel like they're just waiting to snatch my house from me," said Penny, who has spent six months jousting with bank representatives while hoping for a better result. Now, she fears the bank will foreclose on her property unless she can pay her newly modified loan.

Penny isn't alone in her disappointment over a much-touted loan relief effort championed by the Obama administration. In fact, a U.S. Treasury Department report card released Thursday shows weak results under the "Making Home Affordable" plan, which has helped only 4 percent of the borrowers who signed up nationally.

Among big lenders, Bank of America Corp. had the worst performance in the Treasury report card. The nation's largest lender completed just 98 modifications for the 160,000 borrowers who had signed up by the end of November.

GMAC Mortgage had the most modifications of any lender included in the report — 7,100 cases.

About 760,000 borrowers have signed up for the program since it launched in March. As of last month, just over 31,000 homeowners had received permanent loan modifications. Nearly the same number have fallen out of the program completely either because they missed payments or were found to be ineligible for it.

Thursday's report shows the administration is not going to hit its long-term target of helping up to 4 million borrowers with modified loans, said Ted Gayer, an economist at the Brookings Institution.

About 14 percent of homeowners with a mortgage are either behind or in foreclosure nationwide. "Nobody really knows how big that wave will be," Gayer said.

It makes you 'kooky'

The Treasury Department said it plans to increase pressure on the financial industry to improve. The administration's focus is to "get as many of those eligible homeowners as possible into permanent modifications," said Phyllis Caldwell, head of Treasury's homeownership preservation office.