It seems like the Obama administration’s flagship program on mortgage-relief is failing. Those who were supposed to be helped by the program are falling out one-by-one. Nearly half of those enrolled have been kicked out.

The Treasury Department released a new report last Friday. It revealed that in July, around 630,000 homeowners – almost half of those who are enrolled – were cut loose from the programs. These homeowners were hoping that the program will help them have their monthly mortgage payments modified and lowered.

In the report, the Treasury Department suggests that more foreclosures are expected to happen in the latter part of 2010, hurting the supposedly recovering housing market. On the bright side, though, 32.3% - or 421,804 – of those who started with the program are now enjoying permanent loan modifications.

The banking industry says that the failure of the program can be blamed on borrowers who are not sending back paperwork. Borrowers, on the other hand, say that have been doing so but banks are just losing the documents.

Another reason for failing offered by the banks is that the administration urged them to sign up borrowers without checking any proof of income. The Obama officials came to the defense of the program, saying that they have never insisted on that kind of policy.

The administration also says that the program cannot be called a failure, with lenders now providing significant cuts to the monthly payments as compared to when the program was not yet launched. Even the largest mortgage companies are now offering alternatives to those homeowners who fell out of the program.

The Obama program, named Home Affordable Modification program, seeks to help those who are in the brink of foreclosure by lowering the monthly mortgage payments. Those who qualify for HAMP are granted interest rates as low as 2% for five years and longer repayment period.