Oct. 9 (Bloomberg) -- The group Congress created to oversee the U.S.’s $700 billion financial bailout said the government needs to increase its efforts to help struggling homeowners modify their mortgages.

A split Congressional Oversight Panel said in a report issued today that it has doubts that the Treasury Department’s $50 billion loan-modification program will help prevent an estimated 3 million to 4 million foreclosures. The group’s two Republican members dissented from the Democratic appointees’ findings.

“Rising unemployment, generally flat or even falling home prices and impending mortgage-rate resets threaten to cast millions more out of their homes,” the report said. “The panel urges Treasury to reconsider the scope, scalability and permanence of the programs designed to minimize the economic impact of foreclosures and consider whether new programs or program enhancements could be adopted.”

Republican member Jeb Hensarling, a congressman from Texas, issued a dissent, which noted that “instead of focusing its attention on taxpayer protection and oversight, the panel’s majority report implies that the administration should commit additional taxpayer funds in hopes of helping distressed homeowners -- both deserving and undeserving -- with a taxpayer subsidized rescue.”

The five-member group was set up to oversee the Troubled Asset Relief Program. It issues monthly reports critiquing the Treasury’s rescue policies.

Yesterday, Treasury Secretary Timothy Geithner said the department’s mortgage-modification program has reached a goal of aiding 500,000 households on Oct. 6, a few weeks ahead of the administration’s target date.

“We’re still living with some risk that housing is going to be a source of weakness for the broader economy,” Geithner told reporters.

While the pace of loan modifications now exceeds that of new foreclosed loans, a “large number of families” remain at risk of losing homes they might be able to afford if they could change their mortgage terms, Geithner added.

Treasury spokesman Andrew Williams said the department welcomes the panel’s “constructive feedback.”

To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net

Last Updated: October 9, 2009 00:01 EDT