Will the second time be the charm for the Obama administration's foreclosure rescue efforts?
Critics have complained that the administration's Making Home Affordable program, which began in March, hasn't done enough to stem the tide of foreclosures sweeping the country. But yesterday the administration said that the program could bring 500,000 home loan modifications by Nov. 1.
It was a goal discussed during closed-door meetings Tuesday between Treasury Department officials and mortgage company executives. Treasury Secretary Timothy Geithner said in a statement following the meetings that 200,000 loan modifications are already underway.
"Still, too many homeowners are at risk of foreclosure right now," Geithner said.
Also on Tuesday, mortgage lenders, accused of failing to follow the administration's guidelines for MHA, provided the administration with proposals on how to improve the program. Among the suggestions: the creation of a Web site that would accept all loan modification applications and better clarification from the government on who qualifies for modifications, a source told ABC News.
The administration also announced its own efforts to improve the program: Beginning Aug. 4, it will begin reporting how many loans each servicer has modified.
Another new administration initiative could discourage servicers from rejecting loan modification applications. Government-sponsored mortgage finance company Freddie Mac will audit some denied applications to "minimize the likelihood that borrower applications are overlooked or that applicants are inadvertently denied a modification," according to a government statement.
The new push by the Obama administration comes after weeks of intensifying criticism from both consumer advocates and lawmakers.
The National Consumer Law Center, which presented testimony to the Senate earlier this month, has identified dozens of ways in which some mortgage servicers have failed to follow guidelines set by the part of the Making Home Affordable Program that focuses specifically on loan modifications, the Home Affordable Modification Program (HAMP), which pays servicers at least $1,000 for each loan modification. The Government Accountability Office, meanwhile, issued a report last week concluding that there are "gaps" in the Treasury Department's oversight of the program.
Sen. Chris Dodd, D-Conn., has asked the administration to investigate alleged abuses of the program. The alleged violations by mortgage servicers include:
Charging advance fees for loan modifications.
Telling homeowners they must be in default before becoming eligible for loan modifications.
Starting foreclosure proceedings even while a homeowner is under consideration for a loan modification.
"If true and widespread, abuses of this kind threaten to undermine the effectiveness of the HAMP program and deny the relief on which so many Americans are depending for their financial stability," Dodd, the chairman of the Senate Banking Committee, wrote in a July 23 letter to Geithner and Housing Secretary Shaun Donovan.
Critics say the number of foreclosures still dwarf the number of loan modificiations: More than 2 million homeowners were facing foreclosure in the first three months of the year, according to NCLC.