The administration is applying pressure to banks to get moving on its home loan modifications program. A recent report from the Treasury Department shows poor results when it comes to the foreclosure prevention program. The numbers suggest that just a small percentage of eligible borrowers entering the program. In addition, of those that are entering the program, a tiny fraction are following through the entire plan.

To this point, many lenders have either been unwilling or unable to draw from the $50 billion in federal dollars that the administration made available to banks last spring. The purpose of the funds was to slow the growing number of foreclosures. Through November, only 23 percent of homes nationwide that are delinquent and eligible for the modifications have entered the program. That means that around 760,000 of nearly 3.3 million homes have entered trial modifications.

Of those trial modifications only 31,000 have actually made it through the program to the point where they have a permanent home loan modification arrangement.

Home lenders claim that the reason these results are so poor is that many homeowners either fail to turn in their paperwork in a timely fashion, or that others have lost their jobs since applying to the program and now no longer qualify.

The Making Homes Affordable program used $50 billion in TARP funds to try to get banks to restructure home loans that were in immanent risk of foreclosure. A homeowner can qualify for the modification program if over 38 percent of their gross household income is dedicated to a mortgage, they can’t afford their monthly home loan payments and if they’re at a risk for foreclosure.

The home lender then agrees to write down the mortgage until the monthly payment is equal to 38 percent of the gross income. If they do, the federal government then subsidizes an additional write down of the home loan to 31 percent. In addition, the government pays banks $1,000 for each loan that is modified, and an additional $3,000 if the loan goes all the way through the program and remains modified. Borrowers also get an incentive of $1,000 per year toward their loan for staying current.

While banks claim that the abysmal rates have to do with borrower issues, many borrowers report being confused by the program, and have had lackluster response from lenders. It’s unclear just what will be necessary to get the program moving in the right direction.

Photo via BinaryApe