Banks in the state and nationally are slowly helping more struggling owners stay in their homes, according to several reports released Wednesday, although the mounting toll of defaults, foreclosures and "under water" homes continues to raise serious concerns.

Three groups - Hope Now Alliance, a coalition of banks; California's Department of Corporations, which is tracking Gov. Arnold Schwarzenegger's agreements with banks; and the California Reinvestment Coalition, which surveyed nonprofit housing counseling agencies - weighed in Wednesday with updates on loan modifications and other plans to help borrowers.

All three said they saw some progress, although the two industry-based reports portrayed growth as significant, while the Reinvestment Coalition said the improvement was slight and largely temporary.

The reports came out the same day that the California Legislature sent to the governor a bill that would require more lender communications with homeowners before foreclosure.

Hope Now, the national industry group backed by the Bush administration and covering two-thirds of the U.S. mortgage market, said it helped save 170,000 homes in May. Of those, 70,000 households received loan modifications, such as freezing interest rates, considered the most effective long-term solution. The remaining 100,000 agreed to repayment plans to catch up on their arrears.

"Hope Now has modified just under 531,000 mortgages in its almost one year of existence from July 2007 to May," said Mark Zandi, chief economist with Moody's Economy.com. "That's measurable, that's meaningful, that's helpful - but obviously it's getting overwhelmed by the magnitude of the problem." Another 1.17 million mortgages received repayment plans in the same period, Hope Now said.

This year, about 3 million first mortgages will go into default, the initial step of the foreclosure process, Zandi predicts. About half of them will result in owners losing their homes to foreclosure. That's about double the number of defaults and foreclosures in 2007.

"That's unprecedented," he said. "Obviously it's a big weight on the economy; a huge problem for other homeowners. These foreclosures properties are sold at huge discounts that drive down prices for everybody. It's a significant problem for the financial system because it just can't digest all the losses related to these defaults."

Across the United States, 9 million households, or 17 percent of all homes, now have zero or negative equity, he said.

Despite its administration pedigree, Hope Now has come under fire from not only consumer advocates but the U.S. comptroller of the currency for data that is too broad to give a meaningful picture and for not being aggressive enough.

"I think it's as good as can be expected for a voluntary plan," Zandi said. "I really don't think we're going to do much better. ... Some mortgage servicers are really convinced that a repayment or modification is not in their best interest; that a foreclosure may be a better thing. You can't blame them, they have their own fiduciary responsibility."

The California Department of Corporations said loan modifications are increasing among 10 lenders that signed an agreement with Schwarzenegger to streamline the workout process for California homeowners. Those lenders account for about half of the subprime mortgages in California.

The 10 lenders modified loans for 8,686 customers in May and 9,448 in April, up from 5,812 in January. Most of those involved freezing or reducing the interest rate. About one-fifth involved forbearance, in which borrowers are given time to catch up on missed payments. The same lenders foreclosed on 13,622 homes in May and 12,618 in April, compared with 12,964 foreclosures in January.

Mark Leyes, a spokesman for the Department of Corporations, said the figures are encouraging, particularly the fact that a bigger percentage of loans received loan modifications in recent months. "The reason that's key is that loan modifications are the best kind of workout - a permanent revision of the terms of the mortgage made more favorable for the homeowner," he said.

Foreclosures still dwarf the number of workouts. However, Leyes said another encouraging factor is that loan modifications - at least for the 10 banks in the survey - are rising at a faster pace. The number of loan mods rose by 49 percent from January to May, while the number of foreclosures increased 5 percent from January to May.

Lenders in the agreement include Countrywide, GMAC, OCWEN and Option One. Big national players such as Bank of America, Wells Fargo or Wachovia are not included.

A persistent criticism of the California survey is that it does not break out specifics for individual banks so advocates can assess which ones are most helpful to struggling homeowners. Leyes said that is unlikely to happen because the lenders want to maintain confidentiality.

The California Reinvestment Coalition said it found lenders remain reluctant to make mortgages more affordable for troubled borrowers, according to a survey of 42 nonprofit counseling agencies in the state.

"There is incremental progress, but not substantial progress," said Kevin Stein, associate director of the coalition.

"There was more evidence that loan modifications are happening, but in the grander scheme of things, they're not happening to the extent that anyone would want. ... Any improvement is dwarfed by the increasing magnitude of the problem" even if more modifications are done, there are far more foreclosures taking place.

The coalition previously surveyed agencies about their experiences in August and December; Stein said the picture had not improved significantly over the months, even while the number of foreclosures has continued to skyrocket.

Agencies said simply trying to contact lenders remained frustrating and difficult. Outreach remained poor, according to the survey, with only 30 percent of groups saying the lending industry tries to contact borrowers before their monthly payments reset higher.

The survey also delved into the root causes of the foreclosure crisis. Housing counselors identified loans that were unaffordable when they were made as being very common.

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