The foreclosure rate is down, home prices are up, and the government is finally getting tough with mortgage companies, according to the nation's top housing official.

"We may be seeing the light at the end of the tunnel," Shaun Donovan, Secretary of the U.S. Dept. of Housing and Urban Development, told an audience of housing pros at the New York Housing Conference on December 10.

But before we emerge into daylight, Donavan will have to persuade banks and mortgage companies to do more. Many of these companies have resisted calls to modify the terms of troubled home loans through the government's Making Home Affordable plan, even though millions of homeowners are still threatened with foreclosure. At the start of this summer, months into the program, only 50,000 homeowners had begun the process with temporary modifications to their home loans.

"Some servicers have stepped up their efforts, others clearly have not," says Donovan.
The government now reports that 728,000 homeowners have had their loans temporarily modified to make their payments more affordable. But that's just the start of the process - most of those borrowers are still at risk of foreclosure. Loan servicers have only made 31,382 loan modifications permanent.

So can't the government force lenders to act faster? Twist their arms a little?

"We already are," Donovan told HousingWatch. Officials now plan daily oversight of the process of finalizing loan modification through the government program, with fines for lenders that drag their feet. "They made commitments," Donovan said. "They have to deliver."

In the meantime, Making Home Affordable is already having a positive effect on the number of foreclosure filings. "Don't forget, those people that had those temporary modifications are already benefiting," says Donovan. Borrowers with modified loans are saving an average of over $550 per month and most borrowers with modified loans are meeting their responsibilities to make their payments, according to HUD's reading of servicer reports.

According to HUD, 375,000 borrowers with temporary modifications are scheduled to receives permanent loan modifications by the end of the year and the Making Home Affordable program is is on track to meet its goals to prevent millions of foreclosures over the next several years.