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In announcing the renewed effort, the administration acknowledged that the year-old program known as Home Affordable Modification Program (HAMP) hasn’t done enough. By the end of December, 2009, it had permanently lowered monthly payments for only about 170,000 borrowers out of the expected 3 million to 4 million it was aimed at covering through 2012.

Even so, the program and separate efforts by banks and other lenders to rework overdue loans have pushed the rate of new foreclosures down 15.4% in the final three months last year, according to a recently released federal report. But the report also sounded alarms about a potential looming tide of foreclosures. The number of borrowers who were 90 days or more past due on their mortgage payments, a key measure of future defaults, swelled 20.4% in the last quarter over the previous quarter.

Worse, the modifications, while delaying the foreclosure process, did not appear to be a long-term solution: About 52% of those with modified loans defaulted again after nine months, said the report from the Office of the Comptroller of the Currency and the Office of Thrift Supervision, which cover about two-thirds of the outstanding home loans.

The time bomb of delinquencies and repeat defaults has focused more attention on the administration’s Home Affordable Mortgage Program, which President Barack Obama launched with great fanfare more than a year ago.

At a House hearing, frustrated Democrats and Republicans labeled the program a bust so far, echoing a stinging report this week by a government watchdog. “This program is a failure and a waste of taxpayer dollars,” said Rep. Patrick McHenry, R-N.C.

Rep. Edolphus Towns, D-N.Y., chairman of the House Oversight and Government Reform committee, warned the Obama administration it needed to act quickly to fix the program. “I really do believe we can do a whole lot better than what we’re doing to keep people in their homes,” he said.

Assistant Treasury Secretary Herbert M. Allison admitted that modifying mortgages has been more difficult than administration officials had anticipated.

“Certainly we’ve seen a lot of frustration with this program since its inception,” he told lawmakers. “We did not fully envision the challenges we would encounter.”

Among the changes to take effect June 1, 2010 is a prohibition on mortgage servicers from starting or continuing foreclosure proceedings on a borrower who enters the Home Affordable Modification Program.

Companies servicing mortgages also must screen every borrower who has missed two or more payments to determine whether the borrower is eligible for the program. If so, the servicer “must pro-actively solicit those borrowers” to participate. Those companies also are required to make quicker decisions about eligibility and to process documents quickly.

In addition, Allison said, the administration was preparing to move forward with an initiative to modify second mortgages after four of the largest mortgage servicers—Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co.—agreed to participate.

That initiative would be part of a greater administration push to have lenders reduce the amount of principal owed on delinquent loans, an action analysts said is a key to limiting foreclosures.

Administration officials will announce greater incentives for servicers to write down mortgage principal as well as to allow jobless homeowners in the program to skip three months of payments, according to an industry executive who requested anonymity because the changes had not been made public.

“Principal reduction is probably the last remaining significant vital step that needs to be taken in loan modifications in order to make those modifications stick,” said Stuart A. Gabriel, director of the Ziman Center for Real Estate at University of California-Los Angeles.

Many analysts believe the problem of negative equity—about a quarter of U.S. homeowners with mortgages owe more than their homes are worth—will make it difficult for modifications to succeed, since even a slight economic setback could cause those borrowers to abandon their loans and homes.

First American CoreLogic, a Santa Ana, Calif., real estate research firm, estimated that the typical homeowner who is under water won’t see home value rise above the loan amount at least until late 2015.

In some extremely depressed markets, such as Las Vegas, Detroit and parts of Florida, it might take until 2020 or later for those borrowers to regain any ownership stake in their homes, the research firm said.

Trying to address that issue, Bank of America said that it would offer to reduce $3 billion in principal over a five-year period for certain borrowers with adjustable-rate mortgages from Countrywide Financial Corp., the former No. 1 mortgage lender that Bank of America acquired in 2008. The bank said it hoped its effort would serve as a model for other mortgage servicing companies.

Such efforts may be too little, too late, according to analysts at the financial research firm Institutional Risk Analytics in Torrance, Calif., who said the latest refinements of the government’s anti-foreclosure efforts show little prospect of success.

“This is a ‘kick the can down the road’ action at best,” said Institutional Risk Chief Executive Dennis Santiago. “It defines a series of procedural hoops that need to be jumped prior to allowing foreclosure to complete. Yes, it will keep people in their homes longer. However, there remain no provisions for relief of the debt.”

The Home Affordable Mortgage Program, which was launched last spring, got off to a slow start. By the end of February, just 168,708 mortgages had been permanently modified. Allison said more than 1-million three-month trial modifications have been started, but conversion to permanently reduced payments has been difficult amid complaints from homeowners about delays, lost paperwork and bureaucratic runarounds by lenders who process the modifications.

“NAHB’s website that provides information about the home buyer tax credit, www.FederalHousingTaxCredit.com, has received more than 8 million visits,” said NAHB Chairman Bob Jones, a builder and developer in Bloomfield Hills, Mich. “We are doing everything we can to make sure home buyers are informed about this outstanding opportunity to benefit from buying a home before it expires April 30.”

Some of the more commonly-asked questions, and the answers, include:

1. How does a home buyer claim the tax credit?

The credit is claimed when the home buyer files or amends their federal income taxes. For qualifying homes purchased in 2009 or 2010, the taxpayer must complete IRS Form 5405 and attach a copy of the settlement statement. In most cases, the settlement statement is a properly executed Form HUD-1.

In circumstances where a HUD-1 is not provided, such as purchasing a mobile home or a newly constructed home, the IRS will accept an executed retail sales contract (mobile homes) or a copy of the certificate of occupancy (new homes).

2. Does the home buyer have to sell their current home in order to qualify for the $6,500 repeat home buyer tax credit?

A home buyer does not need to sell their current home in order to be eligible for the repeat buyer credit. They can continue to own both homes, and rent or use their former home for something else, as long as it no longer serves as their principal residence. The taxpayer is required to use the new home as their principal residence, and live in it for at least 36 months, or they will have to repay the credit.

3. Do married couples both have to meet the eligibility requirements in order to claim the credit, even if they file taxes separately?

Both spouses must fully meet all the eligibility requirements for either the $8,000 first-time home buyer tax credit or the $6,500 repeat buyer tax credit, regardless of if they file joint or separate tax returns. However, if an unmarried couple purchases a home and only one person qualifies, the eligible person may claim the full credit.

4. Do all home purchases need to be completed by April 30, 2010, in order to be eligible for the credit?

There are two exceptions to the April 30 deadline. If the buyer enters into a binding contract by the deadline, they have until June 30, 2010, to complete the purchase. The deadline has been extended a year, to April 30, 2011, for members of the uniformed services, Foreign Service or employees of the intelligence community who have been on qualified extended duty outside the United States for at least 90 days between January 1, 2009, and April 30, 2010.

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“We are likely seeing the beginning of the end of the unprecedented wave of mortgage delinquencies and foreclosures that started with the subprime defaults in early 2007,” said Jay Brinkmann, chief economist of the Mortgage Bankers Association, in a written statement.

The delinquency rate for mortgages on one- to four-unit residential properties was a seasonally adjusted 9.47% of all mortgages outstanding in the fourth quarter, down from 9.64% in the third quarter and up from 7.88% in the fourth quarter of 2008, according to the MBA’s quarterly delinquency survey.

Delinquencies include mortgages that are at least one payment or more past due but not yet in foreclosure.

Meanwhile, 1.2% of outstanding mortgages entered the foreclosure process in the fourth quarter, down from 1.42% in the third quarter and up from 1.08% in the fourth quarter of 2008. The percentage of mortgages at some point in the foreclosure process at the end of the fourth quarter was 4.58%, up from 4.47% in the third quarter and 3.3% in the fourth quarter of 2008.

The MBA survey covers about 44.4 million loans on one- to four-unit residential properties, or about 85% of all first-lien residential mortgage loans that are outstanding in the country. No doubt, the foreclosure nightmare isn’t over yet.

The percentages of loans 90 days or more past due and loans in foreclosure process set record highs in the fourth quarter, according to the report. Many of those loans more than 90 days past due are in loan modification programs, and some of them have been seriously delinquent for months waiting for modifications to get finalized.

But the good news is there are fewer problem loans actually entering delinquency—likely a result of fewer layoffs, Brinkmann said. “We normally see a large spike in short-term mortgage delinquencies at the end of the year due to heating bills, Christmas expenditures and other seasonal factors. Not only did we not see that spike but the 30-day delinquencies actually fell by 16 basis points from 3.79% to 3.63%,” he said. He added that the non-seasonally adjusted 30-day delinquency rate has only dropped three times in the past between the third and fourth quarter—”and never by this magnitude.”

Depending on the fate of seriously delinquent mortgages—whether they are cured with modifications or ultimately enter foreclosure—the percentage of mortgages somewhere in the foreclosure process could start to see a gradual decline in the second half of the year, he said during a conference call with reporters.

If normal seasonal patterns hold, there could be a bigger drop in the 30-day delinquency rate in the first quarter of 2010, Brinkmann said. That would be a positive sign for the months and years ahead. “The continued and sizable drop in the 30-day delinquency rate is a concrete sign that the end may be in sight,” he said. “With fewer new loans going bad, the pool of seriously delinquent loans and foreclosures will eventually begin to shrink once the rate at which these problems are resolved exceeds the rate at which new problems come in. “It also gives us growing confidence that the size of the problem now is about as bad as it will get,” he said.

According to the MBA data, Florida was the most problematic state, in terms of delinquencies. Twenty-six percent of Florida mortgages were one payment or more past due at the end of the year, and 20.4% of mortgages in the state were 90 days or more past due or already in the foreclosure process.

Speaking from Henderson, Nev., Obama spoke about the nation’s fiscal difficulties, and the many homeowners who have been hit by unemployment and foreclosure. According to the White House, the $1.5 billion will be doled out to state housing finance agencies who will in turn take the lead in developing programs that will be most helpful to homeowners in their states. Possible programs will assist homeowners currently in negative equity, help unemployed homeowners or address issues with second mortgages.

There aren’t a lot of details about the additional aid yet. The Department of the Treasury will announce the rules of the program and how much each state will receive in the next two weeks.

What’s certain is that homeowners in cities like Henderson certainly face challenges. Henderson is the second-largest city in Nevada and is part of the Las Vegas metropolitan statistical area. According to Zillow’s Real Estate Market Reports, home values in Henderson have fallen 52.5% since the market peaked in May 2006. The median home value then was $353,000. At the end of 2009, it was $167,800. This graph of Henderson’s Zillow Home Value Index gives you an idea of how home values within the area have changed over time.

As is typical in cities and towns where home values decline rapidly, many of the homeowners in and around Henderson also owe more on their mortgage than their home is worth. In the greater Las Vegas metropolitan statistical area, Zillow data shows 81.3% of all owners of single-family homes with mortgages were underwater at the end of 2009.

More details on these programs are sure to emerge in the coming weeks, and we’ll be sure to stay on top of them. To see how cities and towns near you have fared, check out local home values in Zillow’s Real Estate Market Reports