The Obama administration’s mortgage relief plan has helped only about 16 percent of borrowers who signed up since its launch last year, while hundreds of thousands of homeowners remain in limbo.

The Treasury Department says that as of last month, about 170,000 homeowners had completed the application process and had their loan payments reduced permanently. That compares with nearly 1.1 million homeowners who have enrolled since the plan started.

The program is designed to lower borrowers’ monthly payments by reducing mortgage rates to as low as 2 percent for five years and extending loan terms to as long as 40 years. To complete the process, homeowners need to make three payments and provide proof of their income, plus a letter documenting their financial hardship.

About 90,000 homeowners have dropped out so far.

Homeowners in two California metro areas – Los Angeles and Riverside – have received the most help, with a combined 18,000 homeowners receiving permanent modifications.

But only 3,900 borrowers in Las Vegas had completed the program, a dismal showing in a city hard-hit by the foreclosure crisis.

Many analysts have been warning for months that the majority of borrowers will not complete the process because they are found to be ineligible during the trial phase. Housing counselors complain that many homeowners are waiting many months for a decision.

Meg Reilly, a Treasury Department spokeswoman, said lenders are double-checking calculations on denied applications, and that has led to delays.

Nevertheless, dissatisfaction with the program is widespread. There have been behind-the-scenes talks in the nation’s capital about how to get it back on track.

The best solution, many analysts say, is an effort to reduce the outstanding balance for borrowers who owe far more on their homes than the properties are worth.

The head of the Federal Housing Administration is warning that boosting the minimum down payment borrowers must provide to qualify for home loans backed by the agency could threaten the housing market.

FHA commissioner David Stevens said at a House hearing Thursday that his agency would insure 300,000 fewer loans per year if the mandatory down payment was hiked from the current level of 3.5 percent to 5 percent. That’s a 40 percent drop.

The result would a potential “double-dip in housing prices,” because fewer people would qualify for loans, Stevens told lawmakers.

The FHA does not make loans, but offers insurance against their default. It has been insuring roughly 30 percent of new loans, and is the largest backer of mortgages to first-time buyers.

The agency said in January it would raise fees and tighten lending standards to shore up its strapped finances in hopes of avoiding a taxpayer bailout. The government agency, which has faced rising losses from foreclosed homes, has seen its reserves sink below the minimum level required by Congress.

The agency, however, is facing pressure on both sides. Democrats fear that hiking standards too much will cut off many borrowers – particularly minorities – from being able to buy homes. Republicans, however, are pushing for even tighter standards than the agency has proposed – such as the 5 percent down payment requirement.

“The question now is: Have we gone far enough?” said Rep Scott Garrett, R-N.J.

Under the proposed changes, many of which need to be approved by Congress, homebuyers would pay an upfront mortgage insurance premium of 2.25 percent of the total loan amount. That’s an increase from the current level of 1.75 percent. A borrower taking out a $200,000 mortgage would pay a $4,500 fee, for example, rather than the current fee of $3,500.

Credit score requirements also will be hiked. Many FHA lenders already require a higher score, but there had been no standard requirement across the program. Borrowers with a score lower than 580 now would need a down payment of at least 10 percent