The Obama administration threatened on Monday to punish mortgage lenders with fines unless they speed up efforts to give hard-pressed homeowners a permanent break on monthly payments.

With foreclosures still rising and roughly 375,000 borrowers seen as eligible for permanent loan modifications by year end, the Treasury and Housing and Urban Development departments want to make sure that banks come through on the promise of lower payments.

"Banks should be moving more rapidly and more efficiently to decisions once documents are in and we will have more detailed metrics on that in coming months," Assistant Treasury Secretary Michael Barr said during a conference call.

Some 650,000 borrowers have completed trial modifications under the Home Affordable Modification Program that was initiated by the Obama administration earlier this year.

The $75-billion taxpayer-financed program is aimed at slowing the pace of foreclosures. But there have been complaints that banks and loan servicers are slow and lose or misplace paperwork that people send in.

Industry observers offered mixed praise for the Treasury’s efforts, commenting that the administration seemed overwhelmed by the rising volume of troubled loans but at least it was trying to get the system performing better.

"It’s good they are doing this," said Thomas Lawler, founder of Lawler Economic & Housing Consulting in Leesburg, Va. "It’s hard to tell if the HAMP is delaying a horrible problem or is working."

A slumping housing sector was at the center of the financial crisis that struck in 2007, dragging the U.S. economy into a deep recession that has sent jobless rates to their highest in more than a quarter century and piled pressure on homeowners.

The Treasury and HUD want lenders to step up now to make sure trial modifications are converted into permanent cuts in monthly payments. The federal agencies are setting performance standards to make sure banks do so or explain why not.

Mortgage servicers will have to submit plans saying how they would decide whether a loan will be permanently modified. If a bank fails to meet guidelines set in an agreement with the Treasury, it would face "consequences which could include monetary penalties and sanctions," the Treasury said.

But Barr refused to offer any details on how large fines might be or what potential sanctions banks might face.

According to a report from the congressional panel that oversees HAMP, only 1,711 permanent mortgage modifications had been offered by September 1, 2009, an indication of how reluctant banks seemed to move beyond trial offers.

"We now must refocus our efforts on the conversion phase to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones," said Phyllis Caldwell, who will head Treasury’s Homeownership Preservation Office.

Caldwell said the Treasury was sending "SWAT teams" into mortgage servicers’ offices beginning this week to investigate the issues slowing down decision-making. Servicers will be reporting to the Treasury daily during December on progress in coming to decisions on permanent loan modifications.

The Treasury also said it was offering more information on a website www.MakingHomeAffordable.gov to tell would-be applicants for loan modifications how to gather and submit the documentation they need to apply to lenders for relief.

Until now, the Treasury has not published figures on how many trial loan modifications have been made permanent, but it said it will start doing so in December.

Loan servicers will have to report on the status of each modification so any situations in which borrowers are facing obstacles can be identified and handled.