Treasury Department said on Monday that 11 percent of the permanent loan workouts for troubled homeowners entered into in the last nine months have defaulted.
In total, it says nearly 500,000 permanent modifications have been negotiated with lenders under the Making Home Affordable Program and nearly 28,000 modifications were reported in September.
The Treasury launched the mortgage modification program, known by its acronym HAMP, in April 2009 to cut mortgage payments for struggling homeowners who were at risk of foreclosure.
It provides taxpayer-financed incentives to mortgage servicing firms to reduce payments to 31 percent of a qualifying homeowner's income.
Since it began, some 1.369 million trial modifications have been started but the report issued on Monday showed that nearly 700,000 have been canceled -- 51 percent of the total.
The most common causes for canceling trial modifications were insufficient documentation and trial payment defaults and ineligibility on the part of homeowners whose housing expense was already less than 31 percent of their household income.
The program has won only tepid support from U.S. lawmakers and the public in view of the widespread and ongoing wave of foreclosures taking place across the country.
In many cases, falling home prices are putting homeowners "under water" on their mortgages -- owing more than their properties are worth -- and therefore sapping their will and ability to keep up payments on existing or modified loans.
(Reporting by Glenn Somerville.)