Desperately Seeking Mortgage Help

June 4, 2009— -- Chris Slaman thought he was living within his means. When he purchased his home for $650,000 four years ago, he put down $120,000 and took on a $3,000 a month mortgage.

Then, like so many other Americans, he lost his job. As his savings dwindled, what once seemed reasonable gradually became impossible.

Slaman landed another engineering job a few months later but it was too late to recover.

"It just sort of snowballs," said Slaman, 45. "You can't see the light."

In order to get a loan modification, he purposely stopped making payments. His lender, IndyMac – which was taken over by the government – offered him a loan modification that would have cut his monthly payment from $3,000 to $2,600.

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But there was a catch, a big one. The bank wanted him to put two year's worth of property taxes in escrow. He would have six months to build up that escrow fund, but for those six months his monthly payment would be $3,900.

"For us, this was more money than we were paying from the beginning," said Slaman, who lives in Santa Clarita, Calif. "That was the deal breaker. I never attempted to make another payment."

Now he is ready to hand over the keys and look for a rental property.

Across the country, through this recession, it's a similar story.

President Obama initiated a new program in February -- Making Home Affordable -- which aimed at making it easier for people like Slaman to have their loans modified.

The administration got 14 loan servicers -- including five of the largest -- to voluntarily sign on to the program. Under the plan, the government partially subsidizes interest-rate reductions for eligible borrowers so that their monthly payments are 31 percent of their pre-tax income.

Two weeks ago, the Treasury Department announced that 55,000 people had received loan modification offers through the $75 billion program.

Bruce Marks, CEO of the Neighborhood Assistance Corporation of America, a non-profit community advocacy and homeownership organization, calls that a "failure."