UPDATE 1-US Treasury wants more lender leeway on loans

Sat Nov 28, 2009 10:18pm EST

(Recasts with Treasury Department comments, previous NEW YORK)

WASHINGTON Nov 28 (Reuters) - The U.S. Treasury Department wants lenders and companies that process monthly mortgage payments to do more to rework troubled home mortgage loans and will announce new measures on Monday aimed at achieving that goal, a department spokeswoman said on Saturday.

The New York Times in its Sunday edition quoted Michael Barr, the Treasury Department's assistant secretary for financial institutions, as expressing dissatisfaction with lenders over the slow pace at which they are amending loan agreements to help borrowers make their monthly payments.

"The banks are not doing a good enough job," the Times quoted Barr saying in a Friday interview. "Some of the firms ought to be embarrassed, and they will be."

Treasury spokeswoman Meg Reilly said on Saturday the department was "taking additional steps to enhance (mortgage) servicer transparency and accountability as part of a broader focus on maximizing conversion rates to permanent modifications."

That could include new resources for borrowers, Reilly said without offering details. The department will announce new measures on Monday, Reilly added.

The Treasury Department has said lenders have boosted efforts to modify mortgage payments -- essentially by reducing monthly payments so that chances of foreclosure decrease. But there are widespread reports that borrowers continue to have problems negotiating with banks and mortgage brokers to get their payments lowered.

Most loans modified by banks under a program that Treasury monitors remain in a trial stage, and only a small percentage have become permanent.

Barr was quoted by the New York Times as saying that the Obama administration will try to shame lenders by publicly naming institutions that fail to move quickly enough to lower mortgage payments permanently.

"They're not getting a penny from the federal government until they move forward," Barr told the Times.

White House spokeswoman Jennifer Psaki told the Times the Obama administration would continue to refine the mortgage program as needed. "We will not be satisfied until more program participants are transitioning from trial to permanent modifications," Psaki was quoted as saying.

(Reporting By Glenn Somerville, editing by Will Dunham) ((Reuters Messaging: glenn.somerville.reuters.com@reuters.net, e-mail: glenn.somerville@thomsonreuters.com; Tel: +1 202 236 1498))