The Congressional Oversight Panel says in a report released Wednesday that the administration projects only one million families will end up with lower monthly payments as a result of the program. The report says six million families are more than two months behind with their payments, and 200,000 more families receive foreclosure notices each month.
Additionally, one quarter of all U.S. mortgages are underwater, meaning the value of the home is less than the money owed on the loan, reports CBS News business and economics correspondent Rebecca Jarvis.
A year and a half after launching the program, "Treasury is still fighting to get its foreclosure programs off the ground," Elizabeth Warren, who heads the independent panel set up by Congress, told reporters Tuesday.
The Treasury program is in its sixth iteration, reports Jarvis, with desperate homeowners still in need of assistance.
Warren warned that borrowers who have their monthly payments lowered as a result of the program still could lose their homes because the payments remain high and many Americans are facing new financial strains.
"Redefault signals the single worst form of failure" by the Treasury Department, said Warren, who is a professor at Harvard Law School. "Billions of taxpayer dollars will be spent and families will nonetheless lose their homes."
The main program gives money to mortgage investors and collection companies that reduce borrowers' monthly payments.
Treasury highlighted the panel's finding that the administration has continued adjusting and expanding the program as the crisis deepens.
"We strongly agree with the (panel's) assessment that foreclosures are at an unacceptable high rate, which is why this program has been designed to prevent avoidable foreclosures," Treasury spokeswoman Meg Reilly said in a statement. She said the program was not designed to prevent every foreclosure, and "we cannot help those who simply bought a home they could not afford."
The report comes a day after top banking industry executives expressed skepticism about a new plan designed to help troubled borrowers by forgiving a portion of their debt.
The executives told lawmakers on Tuesday they are reducing the amount that troubled borrowers owe on their home loans only in limited cases. That's because consumers who are paying their mortgages on time are likely to see such reductions as unfair, they said.
Such programs "could raise issues of fairness," said Sanjiv Das, Citigroup's top mortgage executive, who appeared in front of the House Financial Services committee with top executives from Bank of America, Wells Fargo & Co. and JPMorgan Chase.
David Lowman, chief executive of Chase's mortgage business, told lawmakers that large-scale mortgage principal reduction "could be harmful to consumers, investors and future mortgage market conditions."
Chase estimates that reducing home loan balances so that no homeowners would owe more than the value of their homes would cost up to $900 billion, with $150 billion of that borne by the government.
Many homeowners aren't satisfied. After the hearing was over, dozens of activists from the Boston-based Neighborhood Assistance Corp. of America chased Lowman through the marble-floored hallways of the Rayburn House Office Building, pressing him to do more to help troubled homeowners.
He did not respond to their requests for a meeting and eventually left the building with the assistance of police.
The four mortgage companies represented at the hearing are the largest in the country and have come under fire for not doing enough to help borrowers as part of the Obama administration's $75 billion mortgage relief program.
Through March, more than 230,000 homeowners have completed loan modifications. That's about 21 percent of the 1.1 million borrowers who began the program over the past year, the Treasury Department said Tuesday.
Last month, the administration expanded the program, launching a plan to reduce the amount some troubled borrowers owe on their home loans and give jobless homeowners a temporary break. But the details of those programs are expected to take months to work out.
President Barack Obama's housing secretary, Shaun Donovan, said in a speech to a group of mortgage bankers Tuesday that administration did not foresee how much effort it would take for the mortgage industry to launch the program.
Many mortgage companies, he said, "were too slow to make the investments in systems and staff needed" to put the program in place. But he noted that many families are getting relief.
Republicans, however, say the Obama administration should abandon the effort and focus on creating jobs.
"The market needs to find its own footing free of government intervention and manipulation so we can revive our economy and get on with a full housing market recovery," said Rep. Spencer Bachus of Alabama, the committee's senior Republican.