Administration Touts Rise in Mortgage Modifications Under Housing Plan; Republicans Call It 'Total Failure'

Feb. 17, 2010— -- One year after President Obama announced a new plan to help struggling homeowners avoid foreclosure, 116,000 borrowers had received permanent loan modifications under the administration's housing help program as of January, nearly double the number from the previous month, the Treasury Department announced today.

The agency said another 76,000 borrowers have been offered permanent modifications, but have yet to finalize them. In all, over 1 million homeowners have started trial modifications, saving an average of more than $500 a month, with total savings over $2.2 billion.

"With nearly 1 million homeowners paying less each month and the number of permanent modifications steadily rising, [the Home Affordable Modification Program] is doing the job it was designed to do," Phyllis Caldwell, head of Treasury's Homeownership Preservation Office, said in a statement. "Struggling families are receiving payment relief and the housing market is showing signs of stabilization."

When a loan is "modified," the homeowner may pay a lower interest rate on their mortgage, or have more time to pay the loan off. In tough times, it can be a win-win situation. The homeowner may be able to escape foreclosure, and the lender does not get stuck with an empty house it may have trouble selling.

Critics have argued that the embattled $75 billion program – designed to help 3 to 4 million borrowers through 2012 – has been too slow to get off the ground, pointing to the low number of permanent modifications, but Treasury today reiterated that the program remains "on pace to meet" the goal.