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1 in 5 Eligible Mortgages Apply for Modification Aid

One in five eligible homeowners has taken advantage of the $50 billion mortgage modification program endorsed by the White House, a Treasury Department report said, but the majority of the borrowers are on plans not finalized.

More than 650,000, or 20 percent, of the eligible borrowers by Oct. 31 had registered for trials of up to five months, the report said Tuesday. The modifications trim mortgage payments to less expensive amounts.

The changes only become permanent after the borrowers complete a large amount of paperwork and provide proof they are able to pay on time. By Sept. 1, only about 1,700 modifications had become permanent. “We’re seeing some early indications that the servicers haven’t done enough to get all the documents in,” Assistant Treasury Secretary Michael Barr said.

Updated data from the Treasury Department is expected in late November.

The plan was launched amid great attention in March. After a slow start, however, the number grew to nearly 920,000 offers for loan modifications sent to more than 3.2 million eligible homeowners. Most modifications result in reduced monthly payments. However, some bring lower principal amounts.

About 130,000 homeowners in California enrolled in the loan modification plan since it was introduced in February by President Barack Obama. That means participation of about 19 percent of the homeowners there who were either two payments behind or in foreclosure as of Oct. 31, the Treasury Department reported.

Arizona had 22 percent and Nevada had 18 percent rates of assistance. Due to the high numbers of investor-owned properties that don’t qualify to participate in Florida, another hard-hit state, its rate was only 12 percent.

Government officials say they have been pushing mortgage companies to have better performances in the program.

Regardless, some critics have been disappointed with the plan and contend permission for loan modifications continues to be challenging. Some economists have reservations that the president will hit his goal of helping 3 million to 4 million mortgage borrowers within three years.

At least one banker expects more business in the overall mortgage market. JPMorgan Chase & Co. will hire 1,200 loan officers to handle this segment by the end of 2010. That’s a 60 percent jump in its current sales force.

The employees are essential to help the company as it becomes more aggressive in getting new home mortgage business as well as customers who want to refinance home loans. The firm has raised its loan capacity with organizational changes and putting additional systems in effect, said David Lowman, CEO of Chase’s Global Mortgage business. The company originated $37.1 billion in mortgages during the last quarter.

The new employees will be added to branches in 23 states such as California, Florida and Texas, and major cities that include New York, Boston and Chicago.