The Associated Press

PORTLAND — A state program to help prevent foreclosures has struggled to efficiently distribute more than $220 million in federal taxpayer money to Oregon homeowners, the Oregonian newspaper reported.

The Oregon Homeownership Stabilization Initiative awarded $1.7 million to 242 homeowners who were later determined to be ineligible for the program. The state has made no effort to recover the money, the Oregonian reported Sunday.

The program also paid $750,000 to a private company headed by former Portland City Commissioner Erik Sten to help homeowners refinance their mortgages. While the program shows promise, only 11 mortgages have been refinanced after more than a year.

More recently, a U.S. Treasury review completed in April “indicates that there is more work to be done” for Oregon.

Margaret Van Vliet, who oversees the anti-foreclosure program, says the agency is slowly getting its act together. Gov. John Kitzhaber installed her in October to fix the agency.

“It’s been a pretty big learning curve,” said Van Vliet, director of Oregon Housing and Community Services. “We didn’t have the staff or the systems in place. It was a pretty ugly set of circumstances that overwhelmed the agency.”

Oregon is one of 19 states nationwide to receive money from the U.S. Treasury’s Hardest Hit Fund. First announced in February 2010, it was another attempt by the Obama administration to provide meaningful foreclosure prevention assistance.

Oregon got $220 million of the Treasury’s $7.6 billion fund.

Compared to many of the other states, Oregon has been dishing out money, second only to California. As of March, the state has distributed $49.8 million to 4,579 homeowners, the Oregonian reported.

The state adopted a streamlined underwriting process that later proved to be a major mistake.

Officials later determined that some of their new customers actually were not eligible. The state terminated 242 homeowners from the program. By that time, the state had extended them more than $1.75 million in assistance.

There was little doubt the applicants were in financial straits sufficient to qualify for the program, but they lacked documentation necessary to prove it, agency spokeswoman Karen Tolvstad told the Oregonian.

For that reason, the state felt it was “inappropriate” to pursue the money, Tolvstad said, adding that U.S. Treasury officials agreed.

As state officials attempted to fix their in-house programs, a more challenging undertaking was launched to help homeowners who owe more on their mortgage than their home is worth.

Sten’s Further Development was hired to develop a loan refinance program for underwater homeowners. The company proposed the Loan Refinancing Assistance Pilot Project that is available only in Deschutes and Jackson counties.

After months of back and forth, Sten said the U.S. Treasury and the state finally signed off on the program in January and February. Since then, Further has closed 11 deals.

Sten argues that as the kinks get worked out, volume will quickly increase. But at this point, Further has received $750,000 for just 11 deals.

“If they can make this work, it could be huge,” Van Vliet said. “But I don’t have the luxury of paying a flat fee.”