Mortgage workouts should have more kick

As foreclosure numbers keep growing nationwide banks are facing more pressure to make home loan modifications, or workouts, more meaningful. Up to now their efforts have mostly been half measures from the homeowners's perspective, backed by recent stats that around half of modified home loans re-default within six months. That surely isn't helping the ravaged real estate market to recover, something everyone ought to strive for, and thus help the entire economy get back on track.

The companies operating between distressed homeowners and the investors who have bought their underlying mortgages usually are the servicing firms. They are the key players, work under contract for the investors and naturally first look for what's good for them. And that means modifying as little as possible. For loan modifications to have more bite the contract terms need to be adjusted or otherwise the whole exercise is largely wasted. Foreclosures would keep rising, home values head further south and at the end the investors would suffer even bigger losses when their deeply discounted, foreclosed property is at last disposed of.

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