Update (12/19): A press statement on the FHA’s Web site says that the program has helped 33,000 so far, and is on pace to reach 53,000 by the end of the year. That’s a far cry from the 266 Reuters is reporting; see this post for follow up. Reuters covers the early returns on the much-ballyhooed FHASecure program announced by President Bush in August to help troubled subprime borrowers — and it’s safe to say the word “dud” might best describe activity so far. Only 266 borrowers have been aided by the program since September, according to HUD data combed over by Reuters. For a program that was touted as eventually helping 240,000 troubled borrowers, that’s an incredibly slow start. Perhaps too slow. Not that the FHA is giving up, of course. It says the program is moving forward despite its “bureaucratic hurdles:”

FHA Director Brian Montgomery said the program was off to a slow start but is overcoming bureaucratic challenges and gaining momentum even as the national mortgage crisis worsens … “We stand by our estimates, at the end of the day. These numbers (of borrowers) are increasing every week. Not quite doubling but close to it.” Officials at the U.S. Department of Housing and Urban Development note many of the 3,200 delinquent borrowers who have applied for a new loan since September but have not won final approval may yet be accepted.

For the record, that means that in a span of 90+ days, more than 3,200 borrowers have applied and only 266 have been approved for the program. The FHA’s Montgomery can cite hurdles all he wants, but with stats like that, it sounds like the biggest hurdle is the fact that borrowers simply can’t meet the criteria to qualify for the program. Recent legislation by the Senate may help somewhat here, by raising FHA lending limits to match the conforming limits set at Fannie Mae and Freddie Mac — but in states like California, even a bump to conforming levels is likely to be of little significance. But I’d expect plenty of officials to point to the pending legislation nonetheless as reason for optimism. Not that the FHA lending limit, in my opinion, is the real issue at play here. One of the key criteria for FHASecure is that borrowers be able to document sufficient income to make the refinanced mortgage payment under the program. If fraud is as rampant as most sources — even outfits like Fitch Ratings — now acknowledge, I doubt many borrowers will be able to successfully clear this hurdle.