Despite the enthusiasm for loan modification expressed by the President and other political leaders as a way out of the housing crisis, the numbers suggest otherwise. Both the July 11 issue of The Economist and Alan Abelson's column in the July 13 Barron's marshal statistics showing that the vast majority of delinquent borrowers granted loan modifications nonetheless end up defaulting again within a year. Given this experience, it is not surprising that lenders remain heavily inclined towards foreclosing early rather than later, when property prices may have declined yet more.
Indeed, The Economist piece cites a study indicating that about 33% of borrowers who fall into delinquency manage to get current again with their payments within a year. Accordingly, in such cases lenders would hurt themselves by agreeing to modifications that would reduce their income.