Cleveland Federal Reserve researchers found that between May 2008 and May 2009, less than 40 percent of Ohioans looking for loan help got their lender to cut their monthly payment. After the spring of 2009, when the Obama administration started up the Making Home Affordable Program, Fed researchers found the number of lenders willing to cut monthly mortgage payments for late borrowers slowly went up. By mid 2010, 80 percent of troubled Ohio borrowers asking for a modification got a reduced monthly payment. Researchers aren't exactly sure why lenders have become more willing to cut payments for late borrowers, but they do say that fewer Ohio loan modifications are going bad. The problem is, says Fed researcher Francisca Richter, relatively few loans are being modified and there are more troubled loans in Ohio's pipeline now than two years ago.
Francisca Richter: While we're seeing this nice improvement in the performance of modified loans, still there's a large number of seriously delinquent loans that are not accessing for one reason or another this process.
Richter and fellow researcher Lisa Nelson concluded that loan modification efforts aren't helping those in the most dire need. After loan modifications and workouts, the researchers recommend that lenders and foreclosure counselors also look to helping borrowers get out of their loans completely, either through short sales or deeds-for-lease, which lets former owners stay in their houses as renters.