The number of borrowers dropping out of a government program to help struggling homeowners rework their mortgage grew in June at almost twice the pace of those getting a permanent modification, the Treasury Department said on Tuesday.

About 91,000 borrowers dropped out of the program in June, putting the total number of dropouts at 530,000.

At the same time, about 49,000 borrowers received a permanent modification in June, bringing the number of total active permanent modifications to 389,000.

That means more than 40 percent of the roughly 1.3 million borrowers who have started in the program since its March 2009 inception have since dropped out, while just over 30 percent have received permanent new terms for their loan.

Banks repossessed a record number of U.S. homes in the second quarter, but slowed new foreclosure notices to manage distressed properties on the market, real estate data company RealtyTrac said last week.

Banks took control of 269,962 properties in the second quarter, up 5 percent from the prior quarter and a 38 percent spike from the second quarter of last year, according to RealtyTrac.

The Obama administration has set aside $50 billion of the $700 billion bank rescue plan for its Home Affordable Modification Program (HAMP).

The HAMP program has been widely criticized as ineffective as less than $200 million has been spent so far on loan modifications.

"As long as the administration continues to sidestep the larger issues such as job creation and how they intend to deal with Fannie Mae [FNM  0.5125  0.0065  (+1.28%) ] and Freddie Mac [FMCC  0.3307  -0.0043  (-1.28%) ], subsequent misadventures into the mortgage market will continue to be an exercise in good money after bad," said California Republican Representative Darrell Issa, the top Republican on the House Committee on Oversight and Government Reform and a vocal critic of the administration.

Obama administration officials acknowledged the difficulties the program is facing as they pointed to the benefits it has provided for some borrowers.

"Our initiatives continue to offer responsible homeowners the chance to avoid the often painful process of foreclossre," said Herb Allison, Treasury assistant secretary for financial stability.

As a percentage of the 3.1 million eligible loans, the number of permanent modifications dropped to just 13 percent.

Of the 530,000 dropouts, about 9,000 were borrowers who had already received a permanent modification and could not keep up with the new payments.