Another month, another poor mark for the Treasury Department's mortgage modification program.

In July, Treasury booted more than twice as many people from its Home Affordable Modification Program than were granted permanent modifications, according to the latest figures released by the department.

Last month, Treasury converted 36,695 trial modifications to permanent modifications. In contrast, 96,025 trial modifications were cancelled.

The HAMP program is part of the Troubled Asset Relief Program, and pays incentives to servicers who modify the loans of homeowners who are at risk of default. Participants are initially placed in trial modifications, and ideally -- if they meet the program's criteria and make their restructured payments on time -- their trial modifications are made permanent after three months.

But for several months, the program has actually been removing more people from trial modifications than it has successfully transitioned to permanent modifications.

Herb Allison, who oversees TARP at the Treasury Department, said during a Friday conference call with reporters that Treasury is encouraging servicers to clear their backlogs of "aged" HAMP trials that have been in the program more six months or more without a decision being made.

Many of those aged modifications have remained in limbo because Treasury initially allowed applicants to seek HAMP assistance based on "stated income" rather than having their earnings fully documented. Now, it appears that many of those applicants weren't actually eligible for the program. Removing them has been a lengthy process, as checks must be  conducted to ensure eligible borrowers aren't inadvertently given the boot.

Since June 1, the program has required up-front documentation, a move that administration officials say will make HAMP more affordable.

Servicers are continuing to clear those backlogs, and cancellations can be expected to exceed new permanent modifications for the next few months, Allison said.

Since its launch in the spring of 2009, HAMP has given, 434,716 borrowers permanent modifications, compared to more than 1.3 million trials that have been started.

Those who get permanent modifications have seen their payments reduce by an average of 36 percent, or about $500 per month.

Allison defended the numbers, saying that people removed from HAMP either didn't qualify for the program, failed to make their payments, or opted out. They were not "simply dropped," he said.

Although people have been removed from the program, Allison said, they enjoyed the benefit of reduced mortgage payments for months at no cost to taxpayers. He added that most of those removed from the program received other forms of relief such as proprietary modifications from their servicers. That aid, however, is outside of the HAMP program, and although Treasury  officials tout that assistance, they reluctantly admit they don't know the level of aid it has provided.

Raphael Bostic, assistant secretary for the Department of Housing and Urban Development, said that some issues in the administration's monthly housing report have taken on "disproportionate influence" -- apparently a reference to the HAMP numbers.

Treasury and HUD officials have urged observers to focus on the health of the nation's housing system as a whole, and Bostic emphasized the country's historically low interest rates. "We are in a period where the financing environment promotes affordability, and that is quite important," Bostic said.

The administration also noted that last month, housing prices remained level after 30 months of decline.