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RISMEDIA, June 25, 2010—(MCT)— More borrowers dropped out of the Obama administration’s foreclosure prevention program last month than were added, but many of those homeowners found private help from their mortgage companies, according to recently released data.

The number of mortgages with permanently reduced payments under the Home Affordable Modification Program increased 15% in May 2010 to 340,459. The pace of temporary three-month modifications started in May slowed, with an increase of just 2.5% to 1,244,184.

But cancellations of mortgage modifications continued to grow. Cancelled trial modifications rose 55% in May from April. More than a third of all trial modifications started since the program began last year—429,696—now have been canceled. Cancellations of permanent modifications also were up sharply, rising 70% to 6,357 in May from April.

But overall, homeowners with permanently reduced mortgage payments have fared better in the program. The cancellations amount to just 1.8% of all the permanent modifications offered since it began last year.

The administration’s report said that at the eight largest mortgage servicers, including Bank of America, CitiMortgage and JPMorgan Chase, nearly half of homeowners whose temporary government modifications were cancelled received an alternative modification.

Of the 194,056 total cancellations for those servicers under the Obama administration’s plan, just 7% resulted in foreclosure actions. An additional 2% resulted in a short sale.

The Los Angeles-Orange County area continued to account for the most active trial and permanent modifications under the administration program, with 52,119, or 6.4% of the national total. The New York City area was second with 6.1%.

The $75 billion Home Affordable Modification Program offers mortgage servicers cash incentives to reduce mortgage holders’ payments. The goal is to modify the mortgages for 3-4 million people by the end of 2012. The median payment reduction in permanent modifications has been about $500 a month.

But the program has been criticized for not helping enough homeowners and for slow participation and bureaucratic runarounds by major mortgage servicers.

Administration officials increased pressure on mortgage servicers in December to make more of the modifications permanent.

As part of that process, the administration reviewed cases in which some servicers denied mortgage modifications. Officials agreed with most of the decisions, but in 3.9% of the cases, reviewers disagreed with the servicer’s decision and ordered the firms to hold off on foreclosure action until the cases were re-evaluated.

(c) 2010, Los Angeles Times.

Distributed by McClatchy-Tribune Information Services.