Banks participating in the Home Affordable Mortgage Program (HAMP), announced a year ago this week by President Obama, have been slow to turn temporary loan modifications into permanent ones.

“The overaraching sense is that the loan modification process has not worked that well,” said Bert Ely, an independent banking consultant.

Still, the program is expected to show better progress when data from January is released after a strong push by Treasury Department officials to get banks to make more of the modifications permanent. For example, Bank of America, said recently it had increased the number of permanent loan modifications to 12,700 in January from 3,200 in December, 2009. B of A also said that an additional 13,700 permanent modifications were in their final stage. But that’s a drop in the bucket considering B of A holds about 1 million loans that are at least 60 days delinquent.

Trial loan modifications have kept many of these loans outof foreclosure, but by the end of this year, 2.4 million borrowers are expected to lose their homes. That would be up from 2.1 million foreclosures and short sales last year.

A report last week by Moody’s Investor Services called the Abama administration loan modification program’s impact “underwhelming.” Officials noted that not all homeowners are eligible; the program is only for owner-occupied homes and excludes a variety of loans, including jumbo loans. And the administration continues to make changes, including a requirement added last month requuiring homeowners to document their income before a trial modification is granted.

The program continues to draw criticism. Banks have complained they’ve had trouble getting homeowners to provide the necessary documents. Frustrated homeowners have complained of bureaucratic runarounds from their lenders. And Federal watchdog agencies have criticized the program. The final verdict is out.

The L.A. Times reports on October 27th that a national housing nonprofit organization is launching an educational campaign to combat loan modification scams. The nonprofit, NeighborWorks, is starting the campaign in Southern California which has been hit hard by the foreclosure crisis.

So-called loan modification consultants — often attorneys, mortgage bankers, or real estate agents — often ask for up-front fees ranging from $1500 to $3000 from troubled homeowners to help them reduce their mortgage payments. These consultants promise to negotiate with the lenders to work towards a loan modification. Meanwhile, these services are provided to free for federally approved nonprofits, such as NeighborWorks.

Besides paying up-front money, troubled homeowners also lose valuable time which could be better spent with free nonprofit agencies.

“California Atty. Genl. Jerry Brown’s office has reported receiving more than 2,500 complaints against loan modification consultants and businesses through Oct. 14th of this year, up from 163 in all of 2008,” the newspaper reports.

Eileen Fitzgerald, from NeighborWorks, says that these frauds often target Seniors, Latinos, African Americans, and Asian Americans.

For the first three weeks of November, community organizers and volunteers with NeighborWorks and its local affiliate, Los Angeles Neighborhood Housing Services, will be distributing marketing materials to warn people about loan modification fraud.