The government's $50 billion program to ease the mortgage crisis is helping only a tiny fraction of struggling homeowners, and a list released Tuesday showed which lenders are laggards.
As of July, only 9 percent of eligible borrowers had seen their mortgage payments reduced with modified loans. And the first monthly progress report showed that 10 lenders had not changed a single mortgage.
The report indicated that lenders such as Bank of America Corp. and Wells Fargo and Co. have lagged behind government expectations. Both banks received billions in federal bailout money.
BofA modified just 4 percent of eligible loans, and Wells Fargo 6 percent. Wachovia Corp., which was taken over by Wells Fargo in December, modified only 2 percent.
"We think they could have ramped up better, faster, more consistently and done a better job serving borrowers and bringing stabilization to the broader mortgage markets and economy," said Michael Barr, the Treasury Department's assistant secretary for financial institutions. "We expect them to do more."
Wells Fargo says it plans to speed up its efforts, signing up most borrowers for the Obama plan with one phone call and sending customers a trial offer within two days.
The report is "only part of the story" because the numbers do not reflect an additional 220,000 loans that Wells modified outside the Obama plan this year, a company executive said.
BofA did not immediately comment.
Meanwhile, foreclosures continue to rise. About 1.5 million households received at least one foreclosure-related notice in the first half of this year, according to RealtyTrac Inc.
"There are certainly more foreclosures going on in the country then there are modifications -- by a long shot," said Bruce Dorpalen, director of housing counseling at Acorn Housing, a nonprofit housing group. He said his group has intervened to prevent about 500 foreclosure sales in cases where borrowers wanted to be considered for the Obama plan.
A housing counselor told 36-year-old Veronica Cassella she should qualify for a loan modification, but Green Tree Servicing LLC claims she does not. Cassella, who works at a hair and nails salon in Visalia, Calif., has seen her income shrink with the economy from $35,000 to $25,000.
Her husband still works, but their income is not enough to cover the $213,000 mortgage on their home, which has lost roughly half its value.
"My life has been a standstill with these people for at least half the year," Cassella said. Green Tree, which modified 4 percent of eligible loans, did not return calls for comment.
There are 38 companies participating in the government program, and some noticeable holdouts that control 15 percent of outstanding mortgages.
HomEq Servicing, owned by Barclays PLC, and Litton Loan Servicing, owned by Goldman Sachs, have yet to join. Spokesmen for both companies said they plan to do so soon.
So far, banks have extended only 400,000 offers among 2.7 million eligible borrowers who are more than two months behind on their payments. More than 235,000 of those borrowers have enrolled in three-month trials.
But the government is partly to blame for the languid start. The administration rolled out the guidelines gradually this year. Much of the program was not finished until mid-May, and the guidelines were updated again in early July.
The White House maintains it is on track to meet its goal of helping up to 4 million homeowners by 2012. Last week, the administration extracted a verbal promise from the mortgage industry to reach 500,000 borrowers by Nov. 1.
American Home Mortgage Servicing and PNC Financial Services Group Inc. were among the companies that had a zero next to their names on Tuesday's report.
David M. Friedman, president and CEO of American Home Mortgage Servicing, explained that his company started the program on July 22, and expects to help 60,000, or about 40 percent of its borrowers.
PNC, which owns National City Bank, began the process in early July.
The best results among the large loan services came from Saxon Mortgage Servicers Inc. One in four of Saxon's eligible borrowers has a trial loan modification with a lower monthly payment to help the homeowner avoid foreclosure. Aurora Loan Services LLC, GMAC Mortgage Inc. and JPMorgan Chase all had one in five qualified borrowers in a trial loan.
"We've got feet on streets in neighborhoods where borrowers need help," said David Lowman, chief executive of the JPMorgan Chase's home lending division.
For each homeowner who makes regular payments for three months, the loan servicer collects $1,000 from the government. The company is paid thousand of dollars more if the borrower stays current for three years.
Housing advocates cite numerous cases in which companies have not followed the program's rules. And when borrowers are denied, they often are not told why. In response to such complaints, the Treasury Department says Freddie Mac will be doing random audits to see if borrowers are being improperly rejected.
AP Real Estate Writer J.W. Elphinstone contributed to this report from New York.