Loan modifications, great in theory but lenders still need some practice

Do loan modifications work?  The short answer is yes and no.  A better questions is what kind of loan modifications work and that's an easy one to answer.  Loan modifications that reduce a borrower's monthly payments far and away are more successful than any others.

You might be asking "don't all loan modifications reduce payment?"  Nope, the overwhelming majority of loan modifications performed by lenders in a report by the Office of the Comptroller of currency and Office of Thrift either left the payments the same or increased them.

Yep, 32% of loan modifications actually increased the borrowers payments.  Only 29% of loan modifications were found to have significantly reduced a borrower's payments.  That mean 71% of loan modifications either raised the payment or left in unchanged. 

Here's the kicker nearly 50% of loan modifications that were left unchanged or increased borrower payments re-defaulted aft six months. 

Guess what?  The number of re-defaults on loan modifications where the payment was reduced came in at less than half that number 22.7%.

So, do loan modifications work? Yes, if the lenders are performing the right kind of modifications they are highly successful. 

That begs the question, why aren't lenders performing more of theses types of loan modifications?  If you can answer that question then maybe you can come up with government plan to stem the foreclosure crisis that actually works.