The second-most powerful Democrat in the Senate called the Obama administration's mortgage modification program"a waste of time" Wednesday, hours after the White House released disappointing new data about the program's effectiveness.
This morning, the Treasury Department announced that the program had helped 360,165 homeowners reduce their mortgage payments. However, that is only 16 more homes than received new foreclosure filings during the month of July, according to RealtyTrac.
In response to the new data, Senate Majority Whip Dick Durbin said, "Waiting for banks to 'volunteer' to end this foreclosure crisis is a waste of time. Treasury's latest report shows this approach has failed miserably."
The Treasury Department has been critical of the performance thus far of mortgage servicers. Although the number of servicers participating in the plan has increased from 38 in July to 47 in August, some servicers have produced alarmingly low rates of loan modifications that could avoid foreclosures. As of the end of August, the servicer with the most eligible loans -- Bank of America with 835,680 eligible modifications -- has only started modifications on 59,891 of them, a rate of 7 percent.
Other high-profile servicers have produced better results, with JP Morgan Chase helping 25 percent of eligible borrowers and CitiMortgage 23 percent. Saxon Mortgage Services had the highest help rate of 39 percent.
Overall, out of 2,965,980 homeowners that are eligible for help under the plan, Treasury said that 572,354 have been offered loan modifications, a rate of 19 percent, but only 360,165 have had modifications started at a rate of only 12 percent.
The new numbers demonstrate that the program -- initiated last spring -- is now gaining traction, but much work remains to be done if the administration is going to meet its goal of helping 500,000 homeowners before Nov. 1, as well as an eventual total of 3 to 4 million homeowners.
In prepared testimony for a congressional hearing this morning, Treasury's Assistant Secretary for Financial Institutions Michael Barr touted that the program "has already been more successful than any previous similar program in modifying mortgages for at risk borrowers to sustainably affordable levels and helping to avoid preventable foreclosures."
However, Barr added, "We recognize that challenges remain in implementing and scaling up the program and are committed to working to overcome those challenges and reach as many borrowers as possible. In particular, we remain focused on addressing challenges in three key areas: capacity, transparency, and borrower outreach."
Even if the program proves successful, Barr warned, "We should still expect millions of foreclosures."
Analysts with Credit Suisse have estimated that over 8 million mortgages face foreclosure over the next four years.
Durbin called on Treasury chief Tim Geithner to meet with lawmakers in an effort to address the problem.
"It's time for the Treasury secretary to sit down with congressional leadership and work to end this blight on our economic future," he said in his statement.