Just over 31,000 homeowners have received permanent loan modifications under the Obama administration's mortgage relief plan, a big setback for the government's embattled effort to stem the foreclosure crisis.
Lenders blame the low success rate — only about 4 percent of the nearly 760,000 borrowers who have signed up — on borrowers who don't return the necessary paperwork to complete the process.
Bank of America Corp., for example, had only completed 98 modifications at the end of November, far fewer than several smaller rivals.
GMAC Mortgage completed 7,100, the most of any lender in the program, which was launched in March.
Under the program, eligible borrowers who are behind or at risk of default can have their mortgage interest rate reduced to as low as 2 percent for five years.
They are given temporary modifications, which are supposed to become permanent after borrowers make three payments on time and complete the required paperwork, including proof of income and a financial hardship letter.
But a watchdog report this week said the government effort "appears capable of preventing only a fraction of foreclosures" and said that only $2.3 million out of a potential $75 billion government commitment had been spent.