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updated 8/20/2010 1:12:02 PM ET 2010-08-20T17:12:02

Nearly half of the homeowners who enrolled in the Obama administration's flagship mortgage-relief program have fallen out.

A new report issued Friday by the Treasury Department said that approximately 630,000 people who had tried to get their monthly mortgage payments lowered through the effort have been cut loose through July. That's about 48 percent of the 1.3 million homeowners who had enrolled since March 2009. That is up from more than 40 percent through June.

The report suggests foreclosures could rise in the second half of the year and weaken the ailing housing market, analysts say.

Another 421,804, or 32.3 percent of those who started the program, have received permanent loan modifications and are making their payments on time.

Many borrowers have complained that program is a bureaucratic nightmare. They say banks often lose their documents and then claim borrowers did not send back the necessary paperwork.

The banking industry said borrowers weren't sending back their paperwork. They also have accused the Obama administration of initially pressuring them to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.

Obama officials dispute that they pressured banks. They have defended the program, saying lenders are making more significant cuts to borrowers' monthly payments than before the program was launched. And some of the largest mortgage companies in the program have offered alternative programs to those who fell out.

The Obama plan was designed to help people in financial trouble by lowering their monthly mortgage payments. Homeowners who qualify can receive an interest rate as low as 2 percent for five years and a longer repayment period.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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