With all the government money they’re getting, why aren’t lenders modifying mortgages?

The short answer, as always, is profit. Your lender makes more money from making you suffer through the lengthy delinquency and foreclosure process than he does from modifying your loan. How could this be?

1. The foreclosure process is long and delays the point at which the lender has to declare a loss – and since so many lenders are carrying so many bad loans on their books, this delay can be worth a lot.
2. Modifications take more time and effort than foreclosures and therefore cost more.
3. Lenders make more profit from late fees, penalties and other charges than they do from on-time mortgage payments. So the longer they can string you out, the more they make. It’s for this reason lenders will often pretend to be working on a modification for you when their real intention is eventual foreclosure. Even if you end up being able to pay nothing, they’ll just roll all the fees and penalties into the sale price at the foreclosure sale and the next owner pays them. They have nothing to lose.
4. The government incentives came with no strings attached – so there’s nothing that requires the lenders to participate in the program. And if they can make more money by not modifying loans, why would they?

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