Nearly 50 Percent Leave Obama Mortgage-Aid Program

Nearly half of the 1.3 million homeowners who enrolled in the Obama administration's flagship mortgage-relief program have fallen out.

The program is intended to help those at risk of foreclosure by lowering their monthly mortgage payments. Friday's report from the Treasury Department suggests the $75 billion government effort is failing to slow the tide of foreclosures in the United States, economists say.

More than 2.3 million homes have fallen into foreclosure since the recession began in December 2007, according to foreclosure listing service RealtyTrac Inc. Economists expect the number of foreclosures to grow well into next year.

"The government program as currently structured is petering out. It is taking in fewer homeowners, more are dropping out and fewer people are ending up in permanent modifications," said Mark Zandi, chief economist at Moody's Analytics.

Besides forcing people from their homes, foreclosures and distressed home sales have pushed down on home values and crippled the broader housing industry. They have made it difficult for homebuilders to compete with the depressed prices and discouraged potential sellers from putting their homes on the market.

Many borrowers have complained that the government program is a bureaucratic nightmare. They say banks often lose their documents and then claim borrowers did not send back the necessary paperwork.

The banking industry said borrowers weren't sending back their paperwork. They also have accused the Obama administration of initially pressuring them to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.

More