The Obama administration announced Thursday that its foreclosure-relief program reached a key milestone sooner than expected.
Call it a small victory in what could be a long war on foreclosure. Federal policies are helping to ease strains in the US housing market, but the challenges remain formidable.
Consider Thursday's news: Half a million at-risk homeowners have had their mortgages modified since this spring, making them less likely to default, the Treasury Department said. That's ahead of target, since the agency's aim had been for the Home Affordable Modification Program (HAMP) to hit that mark by the beginning of November.
But in the year's second quarter alone, more than 500,000 homes went into foreclosure, and more than 4 million mortgages were 60 days or more delinquent in mortgage payments. By those measures, drawn from the Center for Responsible Lending, there's still a long way to go before the foreclosure wave recedes.
In releasing the HAMP progress report, the Obama team acknowledged as much.
"The Administration believes that more can and should be done to assist struggling homeowners and to stabilize the housing market," the Treasury said in a brief press release. Officials plan to meet with loan-servicing firms, the statement said, "with discussion focused on improving servicer efficiency and responsiveness to borrowers during the modification process."
Healing the housing market would help restore consumer confidence, economists say, and the foreclosure problem is an important piece of the puzzle. Loan defaults add to a glut of houses on the market, putting downward pressure on prices.
Still, one lesson of borrower relief efforts is that many defaults aren't preventable. Often borrowers agree to new loan terms, only to default a few months later. The best foreclosure prevention may be by indirect means, some housing analysts say. Nothing would slow defaults like improving the job market, or stabilizing home prices.
In that light, some other federal policies may be playing a big supporting role for the housing market:
• The Federal Reserve has been buying mortgage-related bonds, helping to keep interest rates low. By increasing the buying-power of people shopping for homes, that makes home prices higher than they'd otherwise be.
• An $8,000 tax credit for first-time home buyers has spurred demand, and Congress is now considering whether to extend that program into 2010.
"Once the tax credit expires, demand will take a hit," Patrick Newport, an economist at IHS Global Insight, told a congressional hearing Thursday. "Our view is that home prices will drop another 5 percent from current levels, hitting bottom in 2010."
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