Mortgage relief program is still too slow, many say

— -- USA-ECONOMY/MORTGAGES (UPDATE 2):UPDATE 2-US home loan demand at 3-month high as rates fall

Just 12% of eligible mortgages have been modified under a $75 billion federal program to rework home loans into more affordable monthly payments, according to a Treasury Department report Wednesday.

A total of 360,165 mortgage modifications are in a three-month trial period, and another 571,354 offers for modifications have been made to struggling homeowners, the report says.

The goal of the program, announced in March, is to keep up to 4 million borrowers in their homes, an unprecedented federal effort aimed at stemming the foreclosures that are undermining the housing market.

Treasury officials say they don't have reliable data yet on how many mortgages have moved out of the trial period, either becoming permanent or winding up in default.

Some economists say the administration's goals aren't realistic given the current pace of modification activity.

"It's still a slow ramping up," says Mark Zandi, at Moody's Economy.com. "It's much improved from earlier in the summer and servicers are better staffed. But it's slow going compared to the serious delinquencies and foreclosures that continue to surge."

Among major lenders, those in the lead include J.P. Morgan Chase, which has started trial modifications on 25% of eligible mortgages that are 60 or more days delinquent. CitiMortgage started trial modifications on 23% of eligible mortgages.

Those trailing the pack include Wachovia, which has modified just 2% of eligible mortgages, Bank of America, which has modified 7%, and Wells Fargo, at 11%.

During a House Financial Services subcommittee hearing Wednesday, legislators took lenders to task for the slow progress and criticized the program.

Several legislators said they may need to reconsider legislation that would empowers bankruptcy judges to modify mortgages if progress on existing programs doesn't improve.

"I am disappointed in the pace of this program… the servicers are not going a very good job," said Rep. Barney Frank, D-Mass.