A new report from the U.S. Treasury shows Citigroup Inc. (C), Wells Fargo & Co. (WFC) and a loan servicer still owned by bankrupt Lehman Brothers Holdings Inc. (LEHMQ) made quick progress in September modifying mortgages for delinquent borrowers under a government foreclosure-prevention program.

The Treasury has been pressing loan servicers to modify mortgages under the government's Home Affordable Modification Program, which the federal government launched last February to stem the rising tide of foreclosures nationwide. Foreclosures can hurt neighborhoods and regions by depressing home values.

Under its HAMP initiative, the Treasury pays borrowers and loan servicers - including some affiliated with banks that have received large sums of government support - that agree to loan modifications.

According to the report, Citi Mortgage has now started trial modifications for 33% of its delinquent borrowers that the government estimates are eligible. Through August, Citi had modified loans for 23% of its HAMP-eligible borrowers.

Aurora Loan Services, the long-time loan servicer and originator for Lehman Brothers, is still owned by the bankrupt holding company. But uncertainty over Aurora's future ownership hasn't stopped it from modifying loans for nearly 24,000 borrowers, or 33% of its eligible pool. Aurora had modified loans for 22% of its applicable borrowers through August.

Wells Fargo has modified 62,989 loans under HAMP through September, or about 20% of its eligible delinquent borrowers. Wells Fargo's latest rate is nearly double what it reported at the end of August, when it had modified 33,172 loans, or 11%.

Wachovia's loan servicer, which is now owned by Wells Fargo, continues to lag most servicers, having modified 3% of its eligible borrowers' loans. A large bulk of Wachovia's borrowers are tied to Pick-A-Pay, or option-adjustable rate, mortgages. Many of those Pick-A-Pay borrowers can't qualify for the government program because they often can't afford the higher payments of a conventional mortgage.

-By Marshall Eckblad, Dow Jones Newswires; 212-416-2156; marshall.eckblad@dowjones.com