The industry’s performance varies by lender, he said, adding that the Treasury Department is conducting “targeted, in-depth compliance” reviews of lenders participating in the government’s foreclosure prevention program. Some firms could lose the incentive payments they earn for helping borrowers if their performance does not improve, he said.

“None of this is acceptable. We are committed to making sure that servicers hold up their end of the bargain,” Geithner said during a hearing of a Senate Appropriations subcommittee.

So far, the federal program, known as Making Home Affordable, has helped about 200,000 borrowers get a permanent loan modification. But the government is far short of helping the 3 million to 4 million homeowners it initially targeted. In the meantime, millions of homeowners are expected to fall into foreclosure over the next few years.

“I want to be clear that we do not believe [mortgage] servicers are doing enough to help homeowners, not doing enough to help them navigate the difficult and often frightening process of avoiding foreclosure,” Geithner told the committee. “They are not responding to the needs of responsible and increasingly desperate homeowners.” DinSFLA: So there are IRRESPONSIBLE ones?? Clarification, please Mr. Geithner…Who are the irresponsible ones “SIR” who got us in this Shit Hole of a mess??

Industry officials argue that they have helped millions of borrowers avoid foreclosure already, many outside the government program. “While we share the secretary’s continued frustration with anecdotes about lost paperwork and mistaken foreclosures, I don’t think blanket indictments of an entire industry are helpful,” said John A. Courson, president of the Mortgage Bankers Association. “Nevertheless, the industry is continuing to try and streamline and improve the loan modification process.”

Last month, the Treasury Department announced it was revamping the federal program, including by encouraging lenders to forgive a portion of a borrower’s mortgage debt if more is owed on the loan than the home is worth, a situation known as being underwater. Under the changes, lenders are now required to offer temporary mortgage relief to unemployed borrowers for at least three months.

But the government program is largely voluntary, and some lenders have already balked at the prospect of widespread use of principal forgiveness in which they would slash the mortgage balances of millions of homeowners. Also, housing advocates have argued that the help being offered to unemployed borrowers may not go far enough because it could take many much longer than three months to find a job.

“These changes won’t be implemented until the fall, maybe too little, too late,” said Senate Majority Whip Richard J. Durbin (D-Ill.).

Geithner also faced questions from committee members about the status of its bailout of the automakers, including General Motors and Chrysler. In a recent television ad, GM touted that it had repaid billions of dollars in government loans ahead of schedule.

But Sen. Susan Collins (R-Maine) said that the commercial did not mention that taxpayers still own 61 percent of the company’s shares. “This is so frustrating to me because I believe the public is being misled,” Collins said.

Geithner said he was aware of concerns over GM’s claims in the commercial. “We still have substantial equity investments left in those companies, and as a result, some risk of loss, although a fraction of what we feared,” he said.

The administration wants to divest its interest in the automakers as soon as possible, Geithner said. There is a reasonable chance that all of the bailout funds given to the industry could be recovered.

“Nobody at GM has claimed victory. We know we have more work to do,” Greg Martin, a GM spokesman, said in an e-mail. “But early repayment of our loans is a milestone for the company and a clear sign that our plan is working, and a critical step toward returning GM to profitability and public ownership.”