Story updated with additonal information.

NEW YORK ( TheStreet) -- JPMorgan Chase ( JPM) and Wells Fargo ( WFC) are refuting a study that could cost them hundreds of millions in payments from a government program that was intended keep people out of foreclosure but turned into an abject failure.

Banks are calling the study, which was released Thursday by the U.S. Department of Housing and Urban Development (HUD), as "stale and dated." The report argues that JPMorgan, Wells Fargo and Bank of America ( BAC) did not meet servicing compliance standards the Home Affordable Modification Program (HAMP). A Treasury spokesperson said all of the data was gathered and assessed for the study was during the fourth quarter of 2010 and the first quarter of 2011.

"We are formally disputing this new report with the U.S. Treasury. It paints an unfairly negative picture of our modification efforts and contradicts previous written assessments shared with us by the Treasury," a Wells Fargo spokesperson said.

The study's conclusion allows the government to withhold financial incentives for modifying delinquent loans. There have been $1.3 billion in incentive payments made through the U.S. Treasury Department for participating in the program to over 80 mortgage servicers. Both the Treasury and the banks declined to reveal the total payments that will be withheld for this quarter. A Treasury spokesperson said that Bank of America, Wells Fargo and JPMorgan recieved $24 million in payments last quarter.

"These assessments set a new benchmark by providing an unprecedented level of disclosure around servicer performance and will serve to keep the pressure on servicers to more effectively assist struggling families," said acting Treasury Assistant Secretary for Financial Stability Tim Massad in a statement.

"The bank respectfully disagrees with the assessment. We have made significant improvements since the modifications that Treasury reviewed and continue to work hard to keep improving our processes and controls," a JPMorgan spokesperson said.

HAMP was created in 2009 and was designed to help millions of financially struggling homeowners avoid foreclosure by modifying loans to an affordable. There have been 700,000 borrowers that have saved $6.3 billion in the program, according to the study. JPMorgan and Wells Fargo were two of the first banks working with the HAMP program and have worked through 40 changes to the requirements, which were meant to improve the process.

"We realize that continued improvements are needed, but this report does not fairly reflect our leading role in making loan modifications," said a Wells Fargo spokesperson.

We acknowledge improvements must be made in key areas, particularly those affecting the customer experience," said a Bank of America spokesperson. " We believe future reviews will confirm that progress. We meet regularly with HAMP officials to review performance and address any concerns, and will continue that process."

The program came under fire earlier this year after a report by the Special Inspector General for Treasury's Troubled Asset Relief Program (TARP) said HAMP "has been beset by problems from the outset and, despite frequent retooling, continues to fall dramatically short of any meaningful standard of success."

--Written by Maria Woehr in New York.

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