For months, housing advocates have complained that mortgage servicers are wrongfully denying homeowners’ applications for the administration’s $50 billion mortgage modification program. Last week, the Treasury Department took a step to address those concerns: For the first time, it issued guidelines requiring mortgage servicers to give homeowners details about why they’ve been denied. But the required disclosure will only be partial, and housing advocates say that means servicers’ denials of loan modifications will still be shrouded in secrecy and protected from scrutiny.

Along with other outlets, we’ve documented the frustrations and confusion that have plagued the program since its launch. Neither the government nor servicers have yet released data on how many homeowners have been turned down or the reasons for those denials.

"I find it distressing that even after all this time they’re not providing for full transparency," said Diane Thompson of the National Consumer Law Center. Homeowners and advocates still won’t "get the information they need to tell whether the program is being applied correctly or not."

Typical for a program that has taken months to get off the ground, the new guidelines won’t go into effect until Jan. 1, 10 months after the government’s loan mod program launched.

At the center of the program is a business decision. Once a homeowner applies and clears the initial hurdles for eligibility, the servicer is supposed to run the submitted financial information through a formula that produces the "net present value" (NPV) of the loan under two scenarios: If it’s modified or if it’s not modified.

The NPV, which Treasury created especially for this program, essentially tells the servicer whether the loan’s owner (typically a bank or investors in a mortgage-backed security) would make more money through modification. If so, the servicer is required to modify the loan. If not, the servicer can opt not to. The main strategy of the program is to provide servicers and investors with thousands of dollars in incentive payments for each modification in order to tip the scale toward modification.

Yet, as we’ve reported, this all-important government-mandated formula has remained a secret, drawing sharp criticisms from advocates. The Treasury Department’s new requirements, detailed in a Nov. 3 letter to mortgage servicers, only partly address those criticisms.

Servicers now must inform borrowers why, in general terms, they’ve been turned down. If it’s because of the NPV test, servicers will be required to provide a selection of some of the inputs used in calculating the NPV — such as the borrower’s monthly gross income and FICO score, among others — and give homeowners the opportunity to see what numbers were used for those select inputs.

But key inputs can still remain a secret. Crucially, servicers don’t have to disclose their estimate for the current market value of the home. According to Thompson,  servicers often get the estimates wrong.

If one of the numbers produced by the servicer is wrong, homeowners will then have the chance to say so. But that’s where a homeowner’s alternatives end. Homeowners will not have an opportunity to appeal if they think that a servicer is using the wrong values. And as we reported earlier, Freddie Mac has been contracted to audit servicers, but still seems stuck at Square 1.

A Treasury spokeswoman declined to respond to criticisms of the new guidelines. Thompson said Treasury officials have told housing advocates that they fear that forcing a servicer to divulge its estimate of the home’s value would result in an excessive number of challenges by homeowners.

The lack of transparency means the process is likely to remain an often bewildering one for homeowners.

Deborah Sherman, of Oakland, Calif., isn’t sure that she qualifies for the program, but she does know that Chase Home Finance’s reasons for turning her down don’t make sense. Back in June, we profiled Sherman as typical of struggling homeowners who’ve been waiting months for an answer to her application. Sherman finally got that answer at the end of September: She was declined.

The reasons, as given in a one page letter (pdf), were that she had too little income and too much equity in her home – neither of which, on its own, is a legitimate reason for a servicer to decline the modification. Both income and equity are among the inputs considered in the NPV calculation, but all that matters is the result of the test. The inputs should not be considered in isolation.

Below is an excerpt of the rejection letter:

The Chase case manager handling Sherman’s case wrote her in an e-mail that she could have no more than 20 percent equity in her home to qualify (Sherman’s second mortgage wasn’t considered in the analysis). Since the formula gives no limit – or minimum – for equity, Chase seemed to be using its own criterion for evaluating Sherman’s application.

Tom Kelly, a spokesman for Chase, disputed that, and said that, when evaluating an application, its representatives simply "plug the numbers into the formula and see what happens." The Chase case manager who handled Sherman’s case "might have been mistaken," he said, about the existence of an equity limit, but he would not discuss the specifics of Sherman’s case.

Debi Pelletier of Port St. Lucie, Fla., had a similar experience with CitiMortgage. After applying for a modification, she was told on the phone by a Citi employee that her problem was that she had just a little too much equity, that she was "right on the edge," but that she was denied. (Like Sherman, Pelletier also has a second mortgage. The administration’s program currently applies only to first mortgages.) A later phone call with another Citi employee brought another reason, she said: She had to draw more on her savings before she could hope for a modification. Another Citi employee later told her that wasn’t the case.

Mark Rodgers, a spokesman for Citi, declined to comment on Pelletier’s case, but said Citi does not reject homeowners simply based on the amount of equity.

Homeowners who hear from their mortgage servicer after January shouldn’t expect much more information.

"I’m getting scared about losing everything," said Pelletier, whose income was reduced when she lost her job earlier this year. She eventually found another job, though it’s lower paying, and has been struggling to stay current on her mortgage. She still doesn’t understand why her application was denied. She said she thought the program "was for people on the edge, who’d lost money, who were on the edge of foreclosure."