Here’s one study that is likely to get a lot of attention: The Federal Reserve Bank of Boston reports in a new paper that lenders aren’t modifying many loans for homeowners at risk of foreclosure because it’s not profitable for them.

Surprising? It is if you believe many of the experts and homeowner advocates who have been saying that foreclosing on a property is much more costly and time-consuming for a lender than renegotiating a loan.

But what I find more startling is this tidbit tucked in the paper’s conclusion: 30 to 45 percent of borrowers who had loans modified end up falling behind on their loans again within six months.

“For this group, the lender has simply postponed foreclosure, and, if the housing market continues to decline, the lender will recover even less in foreclosure in the future,” the Fed researchers write.

That’s a risk that most lenders aren’t going to be eager to take.

Read the full report: Fed Real Estate Loans

Source: Warren Group

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