Obama admin. dissatisfied with loan modifications

By David Lawder

WASHINGTON (Reuters) - The Obama administration on Thursday said it was dissatisfied with slow progress in saving troubled mortgages from foreclosure, and officials vowed to improve their efforts and study new ways to keep unemployed Americans in their homes, possibly as renters.

A senior Treasury Department official told the Senate Banking Committee that 160,000 home owners were now on trial modifications to see if they could afford reduced monthly payments, but volumes needed to increase rapidly.

The official, Herbert Allison, said even if the administration's five-month-old "Home Affordable Modification Program" were a "total success," millions of Americans would still be at risk of losing their homes.

Lawmakers expressed frustration with the lack of traction the administration has gotten from its mortgage modification efforts, saying they fell short of what was needed to counteract the millions of foreclosures in the pipeline.

"When will you stop the bleeding?" asked Sen. Jim Bunning, a Kentucky Republican.

Allison said the program needed to get on track to accomplish 3 million to 4 million loan modifications by the end of 2012, or about 20,000 per week.

Another program in which lenders accept principal reductions to refinance homeowners into government-guaranteed mortgages has stalled, with only 51 loans refinanced.

Foreclosures have skyrocketed since a five-year U.S. housing boom peaked in 2006, sparking a global credit crisis that has plunged economies worldwide into deep recession.

In the first six months of this year, U.S. foreclosure filings jumped to a record 1.9 million on more than 1.5 million properties, RealtyTrac said on Thursday.

MAKING OWNERS RENTERS

Another administration official told the committee rising unemployment, which hit a nearly 26 year high of 9.5 percent last month, was complicating efforts to modify home loans.

William Apgar, a senior adviser at the Housing and Urban Development Department, said the administration was considering steps such as additional unemployment benefits and other steps to help the jobless meet their mortgage payments.

U.S. officials are also weighing a plan to let borrowers who have fallen behind on payments avoid eviction by renting their homes instead, sources familiar with the administration's thinking told Reuters on Tuesday.

Senator Charles Schumer, a senior Democrat on the Senate Banking panel, said on Thursday he backed the idea of letting distressed homeowners stay in their homes as renters even after they default on their mortgage.

"This could make sense as a last resort for troubled homeowners who would otherwise lose their homes and find themselves with nowhere to live," he said.