Housing rescue plan gets slow start as loan modifications drag

— -- About 325,000 homeowners have been offered mortgage modifications since the Obama administration launched its housing rescue program in March — far fewer than the number who have fallen into foreclosure in that time, officials said Thursday.

The program has been plagued by homeowner complaints about long delays and misleading information from mortgage servicers.

The administration is prodding the 27 participating servicers to ramp up their progress by adding staff, expanding call centers and improving training. The servicers have been summoned to a meeting with top officials in Washington on July 28, and the government intends to begin publishing monthly reports on individual servicers' performance by Aug. 4.

Under the program, homeowners who are eligible for assistance are offered new mortgage terms, and if they agree, they enter a three-month trial phase to determine if they can keep up their reduced payments. If they stay current, the modification becomes permanent.

About 160,000 modifications are now in either the trial or the permanent stage. The rest — 165,000 — are in the offer stage. There are no numbers yet on how many modifications have successfully passed the trial phase.

That number is still small compared with foreclosures. There were 1,155,299 properties with foreclosure filings from March through June, according to RealtyTrac.

During a hearing Thursday before the Senate banking committee, Herb Allison, who oversees the Treasury Department's stimulus program as assistant director for financial stability, said there are more to come.

Even if (the housing rescue plan) "is a total success, we should still expect millions of foreclosures, as President Obama noted when he launched the program in February," Allison testified.

Some angry lawmakers criticized the progress. Sen. Christopher Dodd, D-Conn., the committee's chairman, said he was "frustrated" and called the pace of foreclosures "disgraceful."