By Alan Zibel, AP Real Estate Writer
WASHINGTON (AP) — Speaking at a high school in Mesa, Ariz., about a month after taking office, President Barack Obama launched an effort to keep as many as 9 million homeowners out of foreclosure in a major federal effort to stabilize the U.S. housing market.
So what kind of impact has this plan — backed by $50 billion from the financial industry bailout fund — had on the housing crisis during the past few months?
While outside analysts expect the program to ultimately make a difference, it's been slow to get up and running. And the impact of the plan is likely to be less significant than the Obama administration's original projections of up to 4 million loan modifications and 5 million refinanced loans.
In an effort to get things moving, the government has summoned mortgage executives from 25 companies to meetings Tuesday with top staffers from the departments of Treasury and Housing and Urban Development. Six other companies weren't invited because they just joined the program this month.
Meanwhile, government officials, lawmakers and activist groups are urging the participating companies to ramp up their efforts.
"Much more progress is needed," Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan said in a July 10 letter to the industry, arguing that participating companies should "devote substantially more resources to this program."
Here are some questions and answers about the program.
Q: How many borrowers have been helped?
A: So far, more than 55,000 borrowers have received refinanced loans and at least 200,000 were enrolled in three-month trial loan modifications, out of about 370,000 who were offered modifications by mortgage companies.
Q: What's the difference between a refinanced loan and a modification?
A: When you refinance your home loan, you sign a new contract with your lender. A loan modification involves changes to the existing contract — such as lowering the interest rate or extending the term from 30 years to 40.
A: The loan modification program requires major changes in the operations of companies that collect mortgage payments — known in the industry as loan servicers.
In normal times, those companies simply collect payments from the vast majority of borrowers who pay on time — and try to recoup what they can from those who are delinquent. But enrolling borrowers in the Obama administration's plan is much more like writing a new mortgage. That means training employees, reworking computer systems and spending a lot more time with each borrower.
Also, the initial assumptions behind the plan may have been overly optimistic, the Government Accountability Office said in a report last week. While the Treasury Department estimates that about 65% of borrowers who are at least two months behind on their mortgages will sign up, the actual rate of responses is more likely to be about 50%.