WASHINGTON - Less than 5 percent of homeowners whose mortgage payments were cut under an Obama administration aid plan have received a permanent reduction, the Treasury Department said on Thursday.

The new data raised questions about the Home Affordable Modification Program's effectiveness. It showed that just 31,382 of the 728,408 active loan modifications at the end of November had been made permanent, or 4.3 percent.

The number of active modifications under way rose 11 percent from October's figure of 650,994. But new data in the November report also showed that 30,650 modifications that had been started were no longer classified as active.

The low conversion rate reflects difficulties that servicers are having in verifying borrowers' income and collecting other documents needed to make the modifications permanent. The Treasury said in a statement that most borrowers whose loans had been modified were making their reduced payments.

Borrowers in the modification program, which provides cash incentives to loan servicers to slash monthly payments, were saving an average of over $550 per month on their monthly mortgage payments.

Given the sheer size of this undertaking, and the fact that a lot of the borrowers are still not able to provide all the proper documentation, it's no surprise to me that they have only converted 4 percent, said Jesse Litvak, a managing director at Jefferies & Co. in New York.

U.S. Treasury Secretary Timothy Geithner told a bailout watchdog panel earlier on Thursday that the Treasury was pressuring lenders and mortgage servicers to do more to ease the harm from rising home foreclosures, especially by pushing them to make more permanent modifications in mortgage loans.

We are using a tremendous amount of force and persuasion to try to make sure we get those conversion rates up to a reasonable level, he told the Congressional Oversight Panel. They need to do a better job and they have the ability to do that.

The total number of trial modifications offered to borrowers rose to 1.03 million in November from 919,965 in October, according to the Treasury report.

(Additional reporting by Al Yoon in New York; Editing by Kenneth Barry)

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