December 10th, 2009 1:20 PM by Lehel S.
WASHINGTON - Only one in three homeowners who have signed up for the Obama administration's mortgage relief plan have sent back the necessary paperwork, highlighting continuing problems for the government's effort to stem the foreclosure crisis.
The poor results from the mortgage industry drew sharp criticism from House Financial Services Committee members Tuesday. Since the program was launched in March, lenders have made loan modification offers to just 680,000 borrowers, far short of the administration's goal of up to 4million.
"Taxpayer-funded foreclosure mitigation programs have been an abject failure," said Rep. Jeb Hensarling, R-Texas, at a hearing on the program. "Throwing more money at programs that do not work is absolutely insane."
Under the program, eligible borrowers who are behind or at risk of default can have their mortgage interest rate reduced to as low as 2percent for five years. They are given temporary modifications, which are supposed to become permanent after borrowers make three payments on time and complete necessary paperwork, including proof of income and a hardship letter.
On Thursday, the government plans to release the first figures on how many modifications have been made permanent.
Much of the criticism for the disappointing results is being leveled at the banks.