The Obama administration is taking steps to improve the effectiveness of its mortgage modification program, but the economy still faces millions of foreclosures even if it is a "total success", a senior Treasury official said on Thursday.

Herbert Allison, Treasury assistant secretary for financial stability, said in prepared testimony to the Senate Banking Committee that 325,000 trial modifications have been offered to borrowers under the Home Affordable Modification Program (HAMP) since its launch around five months ago.

But he said the program had limits. "Even if HAMP is a total success, we should expect millions of foreclosures, as President Obama noted when he launched the program in February," Allison said.