Obama Administration Expands Housing Aid Plan

Lenders representing 75 percent of U.S. mortgages have already agreed to participate, according to administration officials. Others think it's still too early. "The jury is still out," said Guy Cecala, publisher of Inside Mortgage Finance Publications. "It is showing some potential. But they are not keeping pace with the number of loans that are going into foreclosure."

The program works by paying lenders to reduce homeowners' payments by lowering their interest rate and extending the length of their loan. About 55,000 homeowners have been offered modified loans, according to the administration official. At least 20,000 homeowners are already making lower payments, according to Washington Post interviews with major lenders and mortgage servicers. In comparison, only one homeowner has received a loan under Hope for Homeowners, the government's previous major attempt to arrest foreclosure rates launched in October. Another government program, FHASecure, refinanced only about 4,000 of the subprime borrowers it targeted before expiring at the end of last year.

Florida-based Ocwen Financial, which services about 300,000 subprime loans, has offered about 35,000 modification under the program. J.P. Morgan Chase has modified another 15,000. Saxon Mortgage Services, a unit of Morgan Stanley, has modified more than 3,300 mortgages since it implemented the program last week. It has hired an additional 80 people. Carrington, a small mortgage servicer, has modified about 500 loans and says another 1,000 will be modified soon. Bank of America said "thousands" of loans have been modified under the program.

Yet, some homeowners are still in limbo. Bethesda resident Konrad Stutzmann, 39, initially asked GMAC Mortgage to modify the loan on his one-bedroom condo in January after he lost his sales job and secured a lower-paying position elsewhere. But, Stutzmann said he was told that modifications were being offered only to borrowers who had already missed two payments. When the Obama administration launched its program in March, he tried again. But, more than two months later, he has not received a response.

In the meantime, Stutzmann said his credit score has taken a hit and his credit card limits have been lowered or cancelled. He missed a few payments on the mortgage earlier this year and has dipped into his savings to keep up with his bills and catch up with the home loan. "I would love it if they could just lower my interest rate for just a couple of years, like three years," he said. "I am hoping by then things will be looking better. But they are dragging their feet."

GMAC Mortgage says it has already approved 1,750 mortgage modifications under the administration's program and is hiring 300 to 400 more people to deal with calls from homeowners.

The program has been implemented unevenly. Houston-based Litton Mortgage Servicing, which handles about 400,000 mortgages, has not begun modifications under the program. HSBC has started modifying loans that it services for Fannie Mae and Freddie Mac under the program, but not loans in its own portfolio. "We are in the process of evaluating the Administration's plan for this portfolio of customers," the company said in a statement.

There is also growing concern that the plan doesn't do enough for borrowers who owe more than their home is worth, known as being underwater.

Currently, those homeowners are helped under a separate part of the housing program, which allows them to refinance even if they have little or no equity in their home. Thousands have received refinanced loans under the program already, according to Fannie Mae and Freddie Mac.

But the program is limited to borrowers who owe no more than 105 percent of the value of their home and have a loan backed by Fannie Mae or Freddie Mac. According to First American CoreLogic, a research firm, about 1 million homeowners with loans backed by those companies are too far underwater to qualify.

And while homeowners can reduce their payments under the refinancing program, it will not affect how much they owe for the house. Home values are expected to continue to fall through this year, pushing more people underwater and putting them at higher risk of foreclosure.

"If you want to bring down foreclosure, you have to reduce the number of underwater borrowers," said Alan M. White, an assistant professor at Valparaiso University School of Law.