WASHINGTON — A year after lenders, servicers, and credit counselors came together at the behest of the Treasury Department to speed up loan modifications, there are ongoing doubts about how well the process works.

In particular, critics argue that servicers, overwhelmed by borrower requests, should be working more closely with third-party counselers.

"We are still seeing a large gap between the number of homeowners needing assistance and those on track for some loan workout assistance," said North Carolina Deputy Commissioner of Banks Mark Pearce. "Some servicers have told us that their time lines for processing loan workouts have increased, rather than decreased. Counselors have reported continued frustration with decision-making and follow-through time lines of some servicers."

The Foreclosure Prevention Working Group, a consortium of state officials led by Iowa Attorney General Tom Miller, collects default and foreclosure data from 13 servicers each month.

The group's last report found that 7 out of 10 delinquent borrowers were not on track to receive any kind of loan modification. It said loss mitigation departments were "severely strained in managing current workload," and that many proposed loss modifications fail to close. That was back in April but new data is expected to be released shortly, and it is not expected to show much improvement.

But the Hope Now alliance — that group the Treasury encouraged — counters that its network of counselors and servicers has helped more than 2 million borrowers avoid foreclosure with modifications or repayment plans since July of last year.

It is not clear which group is right, but Moody's Investors Service Inc. says the situation has continued to deteriorate as more homeowners have fallen behind on their mortgage payments.

"Servicers continue to be extremely challenged by the unprecedented level of delinquencies and reduction in profitability," Moody's said in a report issued in mid-July.

Industry representatives paint a prettier picture.

Michael Gross, the director of Bank of America Corp.'s loan administration/loss mitigation department, said in an interview last month that his company's capacity was "very adequate" for the current volume of modification requests.

Representatives of other major banking companies, including Wells Fargo & Co., Citigroup Inc., and Wachovia Corp., have echoed that sentiment, saying their servicing arms take 30 to 45 days to complete a modification — a time that bankers say is considered acceptable within the industry.

(JPMorgan Chase & Co. acknowledged that its workout times had increased as a result of the volume of modification requests, but it would not give details.)

But nonprofit leaders say not enough is being done. The Neighborhood Assistance Corp. of America, which proposes modifications to servicers and lobbies for their acceptance, said last week that only around 7,500 modifications have been completed so far at its 40 offices across the country. Sheri Powers, who heads the Unity Council, a nonprofit counselor in Oakland, Calif., that helps borrowers from the counties surrounding San Francisco, estimates she has secured only 30 to 50 modifications over the past year.

The holdup, she said, is with the servicers.

"There are a lot of internal processes... that make our job a nightmare, and I'm sure it's a nightmare for them, too, because they're trying to deal with capacity as much as we are. A lot of the times one department is not talking to the other," so a request "might go into the loss-mit department, and the servicing people are still sending out the notices."

It is clear servicers are increasingly relying on outside credit counselors for assistance. Wachovia recommends that borrowers seek outside help through a credit counselor. Others, like Wells and Washington Mutual Inc., are part of Hope Now, and rely on its counselors to field calls from borrowers around the country, record their information, and pass it on to servicers.

Some observers including Bob Caruso, the former head of B of A's home loan division, argue counselors and bankers must coordinate more, and let counselors re-underwrite loans.

Mr. Caruso, now an executive vice president at Lender Processing Services Inc., a spinoff of Fidelity National Information Services' mortgage business located in Jacksonville, Fla., said software exists that would allow counselors to perform modifications themselves. In fact, when the Treasury created Hope Now last year participants discussed using software with tools for counselors to complete underwriting tasks. But the counselors balked, he said.

"The idea about empowering credit counselors to do workouts was discussed, and I recall it was rejected, for some of the credit counseling agencies were concerned that it would jeopardize their nonprofit status," Mr. Caruso said.

With some exceptions, counselors do seem reluctant to complete workouts themselves. They say it could present a conflict of interest and raise doubts in the minds of consumers about who they are working for. There are "groups who advocate very aggressively for certain resolutions," said Colleen Hernandez, the president and executive director of the Homeownership Preservation Foundation, a Minneapolis nonprofit that is part of Hope Now. "We empower the homeowner to advocate on their own behalf."

Letting counselors conduct workouts was "explicitly disallowed in the American Securitization Forum guidelines," Ms. Hernandez said.

The forum's guidelines, which laid out principles on interpretation of contractual law binding servicers to investors owning home loans, do not directly forbid the outsourcing of underwriting duties. However, they do raise technical issues.

"A servicer can rely on data they receive from third parties," Tom Deutsch, the forum's deputy executive director. "But they have to have procedures in place to make sure that data is materially accurate."

That would mean checking a counselor's methods for verifying information such as income and home value, and doing periodic reviews of the data collected in the underwriting process to be sure it was accurate, he said.

Though the American Securitization Forum has warned against blurring the line between counselors and servicers in deciding what kind of modification to grant a borrower, the idea of letting counselors do more of the underwriting work has support elsewhere.

"There is no reason that I can see that servicers wouldn't enable this," said Mike Stevens, vice president for regulatory affairs for the Conference of State Bank Supervisors. "If you're really interested in loss mitigation, then this is the type of program that you ought to implement as part of your strategy."

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