The Obama administration came out with a score card on its anti-foreclosure program last week, and there's just one word for it: Minimal.

Of roughly 1 million financially-distressed home owners who've been given mortgage payment reductions through three month “trials” under the HAMP program, that's the Home Affordable Modification Program, just 116,000 have ended up with permanent loan modifications from participating lenders.

At the same time, sixty thousand borrowers who entered trial payment plans have flunked out or been kicked out for a variety of reasons.

Contrast these numbers with the bold predictions from the Treasury Department and President Obama nearly a year ago, when they said the foreclosure avoidance efforts would help three to four million homeowners over the coming couple of years.

The administration itself appears to recognize that the report card doesn't look great. Assistant Treasury Secretary Michael Barr acknowledged to the Associated Press that “we were attempting to set realistic expectations, but I think we failed to do so.”

Among the complications bogging down HAMP efforts so far:

• The original design of the program allowed homeowners to request three month trial modifications with relatively little documentation of their situations, including incomes. Many of them managed to get through their trial periods, but then haven't been able to satisfy program requirements that they document their incomes to their lenders.

• Though the program can reduce payments to 31 percent of monthly incomes, it cannot deal with increasingly common situations where job losses have eliminated or sharply curtailed household incomes. Many of those borrowers, housing analysts say, are likely to end up in foreclosure.

• The program is limited to monthly payment reductions, not actual cuts in the principal balances owed by borrowers. While that formula works for some distressed homeowners, it doesn't do anything for the estimated 15 million plus owners who are underwater on their mortgages, stuck with houses valued less than the mortgage balance.

Critics of the administration's plans have argued for months that foreclosures cannot be averted on a massive scale until lenders and investors agree to permanently write off a portion of the borrowers' principal debts.

As Sedona, Arizona homeowner Kevin Miller, who's underwater on three properties including his main home, told Realty Times last week: “Someone's got to recognize that it was not just buyers who made a mistake (on pricing and timing.) Lenders did too.

They share part of the blame because they lent out money on real estate that often wasn't worthy anywhere near what they thought.

“They need to lower people's principal before we all walk away.”

Published: February 22, 2010

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.