Millions more Americans are facing financial security as a result of stabilizing home prices, Treasury Secretary Tim Geithner said Sunday, even though only about 66,000 people have benefited from permanent mortgage loan modifications aimed to prevent foreclosure, a figure that has resulted in a House panel investigation.
Geithner said the mortgage modification program has helped 750,000 Americans so far to lower their monthly payments substantially even though he tacitly acknowledged that many of the temporary, verbal agreements have not been made permanent.
"This program is providing very, very substantial cash flow relief right now to more than 750,000 Americans. And we believe we're still on a path to be able to reach many, many more American households. And of course, we're going to make sure that those temporary modifications translate into permanent modifications," he told ABC's "This Week."
"We're absolutely committed to make sure that translates into what we said it would, which is for eligible Americans, they're getting permanent modifications that substantially lower their monthly payment," he added.
Under the $75 billion mortgage modification plan, called the Making Homes Affordable program, President Obama last year pledged that lenders who participated would be required to reduce payments to no more than 31 percent of a borrower's income, enabling as many as 3 million to 4 million homeowners to modify the terms of their mortgages to avoid foreclosure.
House Oversight and Government Reform Committee Chairman Edolphus Towns, D-N.Y., on Saturday announced that his panel is investigating the Treasury Department's home mortgage modification program after he heard concerns about the ability of the Making Homes Affordable program to assist homeowners on the verge of default.
"While I applaud Treasury's efforts, numerous concerns have been brought to my attention regarding the effectiveness and efficiency of the MHA program and the extent to which it has assisted struggling homeowners," he said.
Towns said among the complaints he has received are that loan servicers have been slow to modify loans, are inconsistent in their application of the program and are not clear about the plan's requirements with eligible homeowners.
In a letter Towns wrote Geithner last Thursday, he asked for specific data on the program. He also noted that Treasury's accountability and transparency have been nothing to brag about.
"It is my understanding that Treasury has thus far refused to reveal in detail how it defines 'net present value,' one of the key criteria for homeowner participation in the mortgage modification program. Moreover, if a homeowner is denied a permanent mortgage modification, the specific reasons for the denial are not revealed. Finally, Treasury has not established a process for homeowners to appeal the denial of a permanent mortgage modification," he wrote.
According to Towns' committee, the home foreclosure rate is rising faster than the modification program by a 2 to 1 ratio, and several financial institutions have made "dismal progress in modifying loans, even though they service a large number of homeowners potentially eligible for modification."
But Geithner said the temporary deals have translated into "hundreds and hundreds of dollars every month" in real benefits to struggling homeowners, and claimed the program has resulted in stopping house prices from "falling off the cliff" they were tumbling down a year ago.
"People thought house prices might fall another 20 percent, 30 percent. And we've had six months now of early signs of stability in house prices. So what that means is, millions and millions of Americans, middle-class families across the country, are now seeing more stability in what is a basic source of financial security for all Americans.
Those programs were enormously effective in helping, again, pull a housing market that was in near collapse back to the point now where you're seeing the signs of stability," he said.
Geithner added that the administration's efforts to stabilize the big banks -- many who participated in taking big risks on housing loans -- have brought America back from the brink of collapse.
"This was like nothing anybody in public office today, or in the last few decades, have ever faced. It was the gravest, most dangerous moment since the Great Depression of the United States. Again, remember, we had a -- we were in a situation where people were no longer sure they could safely keep their money in the strongest American banks. It was catastrophic.
"And we were very, very effective -- because of the leadership of the president -- moving very quickly with enormous care and force to bring stability. And those policies have got this economy growing again. And as I said, we've been able to put out this financial fire at much, much lower cost than anybody anticipated."