UPDATE 2-Geithner says loan modifications accelerating

(Recasts lead, adds details from servicer report)

WASHINGTON, Oct 8 (Reuters) - More than half a million troubled homeowners now are participating in an Obama administration program to lower their loan payments, Treasury Secretary Timothy Geithner said on Thursday.

Treasury and the Department of Housing and Urban Development said that was a milestone for the anti-foreclosure program and put it three weeks ahead of schedule for hitting a Nov. 1 target date of helping 500,000.

But the rates at which loan servicers participating in the Making Home Affordable program were giving trial loan modifications to eligible homeowners still varied widely, from 41 percent at Saxon Mortgage Services Inc. to zero at others.

Some big lenders like Wells Fargo Bank were modifying loans for 20 percent of those who were eligible and J.P. Morgan Chase Bank NA was giving 27 percent of those eligible a modified loan payment.

Geithner said about 40 percent of the more than one million households that were considered eligible for lower loan payments now have received them.

Lower loan payments are substantially reducing families' mortgage costs "and therefore increasing -- in the way a typical tax cut can operate -- the amount of money they can keep to devote to other important things," Geithner said.

Geithner and Shaun Donovan, the Secretary of Housing and Urban Development, said they were meeting mortgage loan services later on Thursday to talk about how to keep up the loan modifications program.

"We are keeping the pressure on," Donovan said, adding that the administration wants services to ramp up their efforts to make it easier for people to seek loan modifications.

There have been many complaints about servicers' performance, including that they frequently lose documents from applicants to the modification program, and that callers are left waiting seemingly endlessly on hold.

The administration has issued regular reports on how mortgage servicers perform and is expected to release its latest one later on Thursday.

Geithner said some three million families have been able to refinance their mortgages, taking advantage of lower interest rates.

"The broad signs you see in the housing market...are encouraging," Geithner said. "They're still early, and we're still living with some risk that housing is going to be a source of weakness for the broader economy." (Reporting by Glenn Somerville; Editing by Diane Craft)