The federal mortgage modification program is mired in trouble, with just 12% of the 3 million eligible loans in the process of modification, the "servicers" that helped create the problem tasked with helping to untangle it, and the Treasury Department falling down on the oversight job. In one case, a McClatchy investigation found, a North Carolina couple had their rate adjusted downward only when state officials got involved—after a CitiFinancial rep showed up in the husband's hospital room.
"The mortgage industry has responded to this crisis with a series of half steps based on a notion that a turnaround in the housing market was just around the corner," says an assistant attorney general in Iowa, who warned in 2007 that the system was stacked in favor of foreclosure rather than refinancing. And the GAO blasts the Treasury Department, saying it "cannot identify, assess and address risks associated with servicers that lack the capacity to fulfill all program requirements."
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