Bank of America and JP Morgan Chase executives — two of the largest money-lending institutions in the United States — today revealed during a Congressional hearing that incomplete paperwork is a major reason that their progress has been delayed on the loan modifications front.

Record-setting foreclosure statistics over the past two years crippled the national housing industry. In an effort to provide relief, the Obama administration earlier this year introduced a $75 billion program that provides mortgage lenders with financial incentives to reduce the amount that distressed homeowners owe on their principal home balances, which in turn reduces their monthly payments.

The loan modification plan is designed to short circuit the foreclosure process before it begins. However, it is currently falling short of expectations.

Bank of America executive Jack Schakett explains what they are up against:

“It is unclear why [we are having trouble converting trial modifications to permanent] has happened to such a high degree. However, several factors likely contributed to this, including ineffective communications with customers, shortcomings in document maintenance, misunderstandings about program requirements and the inability to comply by some borrowers.”

Last week, the Treasury Department warned that it would crack down on the eight largest money lenders and monitor them closely to ensure progress. It intends to publish a list of those companies that are falling short, which will hopefully motivate them to help more distressed homeowners faster.

To learn more about Making Home Affordable and determine whether or not you can modify your home loan click here. The official “Making Home Affordable” Web site can be found right here.