This post will discuss the future of the once budding loan modification industry who's future is definitely in question. While there are no doubt some legitimate LM companies and attorneys in the midst of hundreds of thousands if not millions of Loan Modifications Nationwide the big question still remains…… how long will the recycled “MODIFIED” loans remain current?

According to statistics released by www.loanworkout.org, about half of all modified mortgages fall back into arrears within six months.  There is also disagreement over whether mortgage modifications are effective in minimizing losses for investors.http://loanworkout.org/2009/02/loan-modification-lawsuits-looming-in-the-near-future/. This is primarily because the loans should never have been made in the first place and the LTV’s are so upside down that it will take years for the loan to ever pencil thereby dramatically reducing the incentive and desire for the homeowner to keep the home.

When Or Will We See Mortgage Principal Write Downs aka "Cram Down"?  After spending the past few years studying the subject, it is my personal opinion that the final solution will rest in the governments hands.  As much as I hate to say it and as much as I’m against all the government intervention and literal takeover of the “American Free Enterprise System” I feel the only way this mess will ever sort itself out is when the FED mandates a principle and interest write down across the board.

Is The Investor The Elephant In The Room.  Most importantly, however, many folks fail to realize that all these lenders no matter how big or how small have one thing in common…..“INVESTORS”.   Therein lies a very significant problem.

The main reason principal and even interest LM’s are not being done in the volumes that all these LM companies and RE attorneys and scams had hoped they would is because the INVESTORS that all these lenders are beholding to are not budging.  In fact, they’re threatening major law suits against the lenders if they even think about messing with the principle.

That’s why it will eventually have to be mandated by “BIG BROTHER” at some point. So in conclusion I will simply state that the entire LM concept is in question and should be held to great scrutiny by RE practitioners as a whole. 

If the subject comes up with your clients, which it surely has and will continue to do, good advice would be to simply tell them to seek legal council from an experienced RE Attorney or try to solicit help from the myriad so called FREE government sponsored LM programs currently in place.   Frankly, I wouldn’t even recommend referring anyone directly.  It may just come back and bite you right in the shiny hiney someday. So be very careful.