A new study by the Federal Reserve of Boston concludes that lenders are not offering loan modifications, despite the lenders statements to the contrary. Why? Because the lenders aren't making money on them.
The interesting part, I think, is that the senior economist who coauthored the report believes that the government is better off giving hte money to consumers. From the Boston Globe: "One of the study’s coauthors, Boston Fed senior economist Paul S. Willen, said the government would be better off giving the money directly to struggling borrowers to help them with their payments, rather than to lenders that are averse to working out the troubled loans."
So, the government has been spending tons of money trying to get banks to re-write loans. That has been a failure. The money should be going to consumers. Any economist will tell you that makes more sense. Hopefully the government will listen to the advice from the Boston Fed!
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