Floyd Norris has up a very good piece on the current state of the loan modification drive, with great insight as to why things are not going so well.
The article first reveals a problem that might surprise everyone but a banker – Many people aren’t turning in the required paperwork:
“But to make a modification permanent, the banks have to see proof of income, and the borrower has to make three monthly payments of the new lower amount. In most cases, those requirements are not being met.”
You can lead a horse to water.
Also, no matter the “success” of modification efforts, many may be the banking version of a self-licking ice cream cone: Neat, but ultimately useless.
The money quote:
“It is far from clear that some modifications being granted are really in the borrowers’ interests. Some will be able to stay in homes when they could rent a comparable house for less, and will be so far underwater that they are unlikely to be able to sell the house for years without defaulting on the new terms. It is conceivable that this process is doing more to drag out the foreclosure crisis than to alleviate it.”
Why Many Home Loan Modifications Fail [Norris, NYT]