About 4.4 million households are in severe default on the mortgages on their homes, although in many cases formal foreclosure proceedings have not yet begun, according to an article in today's edition of The New York Times by David Streitfeld and Binjyamin Appelbaum.

"Fewer than 500,000 households have gotten modifications through the Treasury program, which offers incentives to lenders to participate. An additional 700,000 or so homeowners enrolled in modification programs but did not emerge with a new loan. In September, 35,000 borrowers enrolled in the program, " the article stated, adding that

"only 28,000 defaulting borrowers received permanent loan modifications in September,", the lowest number since last fall when the program to help struggling homeowners stay in their homes was just getting started.

"Even as banks, borrowers and regulators battle over how much faulty documentation by lenders should impede foreclosures, fresh evidence came Monday that the housing market remained very wobbly," the article said.

According to separate reports from CoreLogic, a housing data company, and the National Association of Realtors, home sales continued to fall sharply from 2009 levels and prices started to drop again after a period of equilibrium.

"The data from the government's signature effort to help homeowners get new mortgages - formally called the Making Home Affordable Program - shows a program whose effects are, at least for the moment, dwindling. The program was 'oversold as a silver bullet,' said Edward Delgado, a former executive with Wells Fargo Home Mortgage. 'It helped some owners, but the numbers pale in comparison to those facing foreclosure,'" the article said.

In the report on mortgage modifications, the article continued, 'the government stressed the good news that only 11 percent of those who had received permanent modifications later defaulted," adding that "most of these borrowers remain heavily in debt, however, paying more than 63 percent of their monthly gross income for their house, car, alimony and installment loans. Some analysts believe the redefault rate will increase sharply over time."

"Paul S. Willen, a senior economist at the Federal Reserve Bank of Boston, said Monday that the series of government programs aimed at helping borrowers avoid foreclosure," the article said, "amount to 'three years of failed policy.' Mr. Willen, speaking in Virginia at a housing policy conference organized by the Federal Reserve and the Federal Deposit Insurance Corporation, said it was unlikely that banks could be persuaded to modify loans voluntarily. Banks, he said, continue to pursue foreclosures in most cases because they regard modifications as expensive and ineffective. Mr. Willen sees two possible solutions: Require banks to modify loans, basically imposing the cost on them; or pay banks to modify loans, imposing the cost on taxpayers."

The article said that at the conference "Sheila C. Bair, chairwoman of the Federal Deposit Insurance Corporation, suggested that banks should be allowed to foreclose more easily in cases where they could show that they had offered to reduce the monthly payment."

Housing sales in September were 19 percent lower than in September 2009, the National Association of Realtors reported. Two months earlier, in July, sales dropped 26 percent from the previous year. It would take 10.7 months to sell all the homes on the market now, which is about twice as long as in a normal market. The sales and inventory rates, while slightly better than they were during the summer, foreshadow a drop in prices this winter.

CoreLogic, the housing data company, said Monday that housing prices fell 1.5 percent in August from August 2009. It was the first year-over-year drop in the index in 2010.