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And the financial trouble of many Americans homeowners prompted the Obama administration to come up with a plan to encourage banks to modify mortgages. The administration has started dolling out the first chunk of the $75 billion program. But lenders are moving slowly. Rob Schmitz of member station KQED reports on why homeowners are having such a hard time getting a modification.

Mr. LARRY REED (Los Angeles Neighborhood Housing Services): So there's no embarrassment. There's no shame, there's no guilt. Bad things have happened to good people in this economy.

ROB SCHMITZ: In a packed third-story conference room that looks out to the skyscrapers of Los Angeles, all eyes are on Larry Reed, eyes that have seen pink slips, unpaid mortgages, and notices of default, eyes that now look to Reed with a hint of desperation.

Mr. REED: Those of you who haven't figured it out, today is the first day of the rest of your financial life.

SCHMITZ: Reed is full of zingers like this. This tough headmaster approach is balanced by a teddy bear appearance. Reed's a counselor for LA Neighborhood Housing Services. He's teaching a class on how to prevent foreclosures. Next door, dozens of homeowners talk to housing counselors.

Ms. YOLANDRA McCLINTON (Housing Counselor): So your first is with Wells Fargo and your second is with Citibank?

Ms. DOROTHEA WANG (Homeowner): That's right.

Ms. McCLINTON: Okay.

SCHMITZ: Counselor Yolandra McClinton looks over Brian and Dorothea Wang's tax forms. The couple is hoping to apply for a loan modification under the Making Home Affordable plan.

Ms. WANG: Okay, so we both own two small businesses. He is a personal and private chef in Los Angeles and I'm a children's book author and I have about 80 titles in print. And the publishing industry is down. You know, people are not buying.

SCHMITZ: The Wangs haven't been able to pay their mortgage since January. They're about to default on their loan. Brian says it's been a tough year.

Mr. BRIAN WANG (Homeowner): I mean in the beginning you get really stressed out about it, and you know, when you miss that first payment, when you've never missed a payment on anything in your life…

Ms. WANG: Yeah, we kept saying we're losers, can't believe we're such losers.

SCHMITZ: The Wang's lender is Wells Fargo. They tell their housing counselor they've left messages with the bank, but nobody's returning their calls.

Ms. WANG: And we've have been calling and calling. I faxed my loan modification application six times to the two banks and everybody keeps saying, We haven't - we didn't get your application yet, we didn't get your application yet.

Ms. McCLINTON: Unfortunately that's a true story and I hear it all the time, because they're overwhelmed.

SCHMITZ: Wells Fargo just received $3 billion from the government under the Making Home Affordable program. Ed Delgado is senior vice president of default and retention operations at Wells Fargo Home Loans. Delgado wouldn't not admit that Wells Fargo is overwhelmed, but he said the lender certainly busy.

Mr. ED DELGADO (Wells Fargo): With any new program you're going to have a period in which you're ramping up and educating your resources on the specifics of an initiative, and that's where the industry as a collective is today.

SCHMITZ: Delgado says it's taking some time to roll out so-called decisioning software used to determine eligibility for the program. Other delays, he says, are caused by borrowers who aren't sending in the correct documentation.

Mr. DELGADO: A lot of that falls on the shoulders of the consumer. Remember, this program requires the production of several points of documentation.

SCHMITZ: The basic requirements for a loan modification start with living in the home you own and proving that you're spending more than 31 percent of your monthly gross income on your payment. If Wells Fargo determines you're eligible, Delgado says reducing the interest rate for a minimum of five years would be a typical outcome. Still, Lori Gay, president of LA Neighborhood Housing Services, says many lenders are too busy handling more serious matters like foreclosures to focus on loan modifications.

Mr. LORI GAY (LA Neighborhood Housing Services): Are they ready to make this a massive program yet or do they need three months to get all their systems in place? And so this is where people then get lost in the cracks.

SCHMITZ: That's what millions of vulnerable homeowners are worried about as they navigate this new federal program.

For NPR News, I'm Rob Schmitz in Los Angeles.

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