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Banks Working Within HAMP's Limitations

Mortgage-modification statistics released this week have made it clear that banks can't take all the blame for shortcomings of a federal program to help homeowners stay current.

WASHINGTON (

TheStreet

) -- Mortgage-modification statistics released this week have made it clear that banks can't take all the blame for shortcomings of a federal program to help homeowners stay current.

Of the 5.6 million borrowers who are 60 or more days late on their mortgage payments, 3.9 million of them aren't eligible for the Obama administration's Home Affordable Modification Program. More than a quarter of the ineligible homeowners have inadequate income, and another 700,000 have mortgages that are serviced by non-participating companies.

Others have mortgages supported by Federal Housing Administration or military programs, mortgages that are worth more than the property, or other types of ineligible debt like jumbo loans, or loans originated after HAMP's cut-off date. The rest relates to property that is vacant or not occupied by the owner.

In fact, some big banks have gone beyond HAMP, providing alternative options to homeowners who didn't meet the criteria. They've been doing this for months.

For instance,

Wells Fargo

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has helped 350,000 through its own non-HAMP workout programs, more than double the 145,000 HAMP trial modifications it has begun since the start of 2009.

Bank of America

has helped over 460,000 borrowers in addition to the 238,000 involved in B of A's HAMP trials.

And even within HAMP, the Treasury Department said on Wednesday that servicer performance has accelerated: About 1.3 million delinquent borrowers received offers for HAMP workouts, of roughly 3.4 million eligible homeowners. Banks boosted trial offers by 9% over the month of January alone, and have more than doubled the number of offers extended since the start of October.

Two servicers --

Citigroup's

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CitiMortgage and GMAC Mortgage - have already enrolled half of their 312,000 eligible borrowers into trial or permanent modifications.

JPMorgan Chase

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and Wells Fargo aren't too far behind, with 38%. Bank of America, which has the largest pool of eligible borrowers, has helped the most, but still has a long ways to go, with just 22% enrolled in HAMP mods. Other big servicers participating in the program, like

PNC

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and

U.S. Bancorp

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, fall somewhere within that range.

But Wells Fargo provided some telling data on HAMP-eligible borrowers, which provides a window into how effective the program will actually be. The company expects only about 50% of the 92,000 borrowers who successfully completed a trial modification to make it into a permanent one. Wells thinks the rest will either be ineligible after documents have been reviewed, or that they won't have all of the documents required by the Treasury Department to make it happen.

Taking a step back from the big bundle of mortgage-mod data, it becomes clear that the problem doesn't lie with servicers alone. Even once banks hired enough staff to handle the wave of refinancing requests, and became more aggressive in reaching out to borrowers, some of those customers still can't afford the loans or aren't eligible to be part of the HAMP program.

Combine banks' initial reluctance with Treasury requirements, homeowners' lack of understanding and the still-struggling economy and you've got a few million homeowners

still left out in the cold.

-- Written by Lauren Tara LaCapra in New York

.