NEW YORK (CNNMoney.com) -- More delinquent homeowners learned last month that they don't qualify for foreclosure help in the Obama administration's program, according to federal data released Tuesday.
Fresh concerns over the housing market's health have renewed interest in the success of foreclosure prevention programs such as the president's. An increase in foreclosures, combined with the recent drop in housing sales, could send home prices plummeting again.
"There is still fragility in the marketplace," said Raphael Bostic, an assistant housing secretary, in a conference call.
Some 91,118 people in trial modifications were canceled in June, bringing the total to 520,814 since the program began in the spring of 2009. More than 60% of those who dropped out last month had been in trials for at least half a year.
Homeowners usually are kicked out of the trial program because they do not make the required payments, meet the qualifications or submit the needed paperwork. Going forward, loan servicers will gather the necessary documents and review homeowners' eligibility before entering them in trial modifications.
Once their trials are canceled, about 45% of homeowners receive alternate modifications, often one from their loan servicer. Some 8.9% had foreclosure proceedings started against them and 1.3% lost their home in foreclosure.
Only 364,077 troubled borrowers remain in the trial phase, some 38,728 of whom entered the program in June. Nearly 166,000 have been in trials for at least six months.
More people also received lasting help from the administration's main foreclosure rescue program. Some 51,205 troubled homeowners received long-term mortgage modifications in June, bringing the total to 389,198.
Some 8,823 homeowners had their permanent modifications canceled, 195 of whom paid off their loans.
Delinquency rates remain low, at least for the time being. Only 5.8% of those who received permanent modifications late last year were at least 60 days delinquent after six months.
"Early indications are the modifications are sustainable," said Phyllis Caldwell, who heads the Treasury Department's Home Preservation Office.
Launched with great fanfare, the president's foreclosure prevention plan calls for servicers to reduce eligible troubled homeowners' monthly payments to no more than 31% of their pre-tax income.
However, it has come under persistent fire for being slow to launch and for not helping enough people. Many homeowners complained that servicers continuously lost their applications and then left them hanging. Financial institutions said borrowers didn't provide the necessary documents.
"I feel like a broken record, but HAMP continues to perform very poorly," said John Taylor, head of the National Community Reinvestment Coalition, an advocacy group. "The permanent modification numbers are simply too low, while foreclosure filings continue above 300,000 for the 16th month in a row."
In recent months, the administration has stressed the wide range of housing programs it has underway, including initiatives to keep interest rates low and to provide tax credits to first-time homebuyers.
Obama officials acknowledge that the foreclosure rescue program will not help every troubled homeowner and that it may be a while before the housing market stabilizes.
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