The Treasury Department-initiated plan to fast-track loan modifications would save only 3% of at-risk homes from foreclosure, according to a report the Center for Responsible Lending released Monday.
The consumer group said that even though the plan would prevent 118,222 foreclosures, for every loan modification made by a lender, seven times as many foreclosures are initiated. For subprime adjustable-rate mortgages, foreclosures outnumber modifications 13 to 1, the report said.
There are 3.7 million outstanding subprime ARMs.
The group based its report on recent foreclosure and modification industry analysis, including reports by the Mortgage Bankers Association, Bank of America Corp., UBS AG, and Moody's Investors Service Inc.
Lawmakers often have latched on to the group's data, including a 2006 report that found 2.2 million people would lose their homes as a result of the subprime crisis.
In Monday's report, the center questioned the industry's commitment to modifications, given the plan's voluntary nature and limited reach. "The Treasury's plan will be a welcome relief for those it helps, but given the magnitude of today's economic woes, the plan won't help nearly enough to avoid further widespread economic damage from foreclosures."
