An additional 92,000 permanent modifications are pending. Borrowers with permanent modifications save a median of $500 a month, the government says.
The homeowner rescue effort, started with much fanfare a year ago, is one of the administration’s biggest initiatives to help the housing market and indirectly the larger economy. But it has been widely criticized for overpromising and underdelivering.
Critics saw little in the February report to change their minds.
“It’s a little bit of a help, but it’s not a big help, considering six million people are behind on their payments and at risk of foreclosure,” said Sherry Cooper, global economic strategist for BMO Financial Group.
Of the lenders participating, Bank of America has by far the largest number of eligible delinquent borrowers, nearly 1.1 million. Only 21,000 loans have been permanently modified; 22,000 more are pending. Many more are in trial modifications with an uncertain fate.
When the program was introduced, it was described as a stability initiative that would lower payments for as many as four million homeowners. But the number of trial modifications, which last three to five months, has barely surpassed a million, and the growth is slowing. In February, the number of trial modifications increased by 73,000, about half the number that signed up during the fall months.
The likeliest explanation is that the pool of borrowers who are both willing to seek and eligible for a modification is drying up. The Treasury puts the maximum number of potential modifications at 1.8 million, though it may be smaller.
Some borrowers who got a temporary modification but did not qualify for a permanent one have said they ended up worse off financially.
Alan M. White, an assistant professor at Valparaiso University School of Law who has studied the modification program, said too many applicants “have been sold a bill of goods.”
“Although 66 percent of them have made all their payments, fewer than 25 percent have been converted to permanent modifications,” Mr. White wrote in an e-mail message. “They are making payments but remaining in limbo or, worse, having their modifications canceled for lack of paperwork.”
A Treasury Department spokeswoman said the percentage of trial modifications converting to permanent status would rise over the next few months.
The Treasury is being accused of moving the goalposts a bit. It now says its intention was merely to offer help to those four million borrowers, not to make sure they actually got it. By this standard, the February report says the program is from 34 percent to 45 percent toward the goal.