Brian Grow reports in How Banks Are Worsening the Foreclosure Crisis posted on February 12 on BusinessWeek.com how the financial industry has fought for the last two  years to prevent Congress from imposing government mandated loan modifications.  The Hope Now Alliance that was formed to supposedly organize lenders to make voluntary loan modifications was actually a purposeful delaying tactic.  Now we learn that 53% of the modified loans have defaulted within six months of modification, and lenders are actually increasing payments, not reducing them, in more cases than they are reducing them!

"Federal banking regulators reported in December, 2008 that fully 53% of consumers receiving loan modifications were again delinquent on their mortgages after six months. Alan M. White, a law professor at Valparaiso University, says the redefault rates are high because modifications often lead to higher rather than lower payments. An analysis White did of a sample of 21,219 largely sub prime mortgages modified in November 2008 found that only 35% of the cases resulted in lower payments. In 18%, payments stayed the same; in the remaining 47%, they rose. The reason for this strange result: Lenders and loan servicers are tacking on missed payments, taxes, and big fees to borrowers' monthly bills."

The article describes the sequence of event that led to the formation of the Hope Now Alliance of mortgage lenders and servicers to forestall Senator Chris Dodd's failed effort to have Congress pass a forced modification bill.  It also explains how the industry titans watered down the Hope For Homeowners program passed by Congress in October, 2008 as part of the bill that put Fannie Mae and Freddie Mac into government conservatorship and created TARP.  Due to mortgage industry efforts the Hope for Homeowners program, which was supposed to help 400,000 borrowers refinance with lower principal and payments, has had a grand total of merely 25 homeowners refinance under it.

Until Congress, or the President acting under his emergency economic power, adopts a plan like The AllStreets Bailout Plan, the crisis will only get worse.  The article reports that there have been 1 million residential foreclosures since 2006, and that an astounding 5.9 million more are expected in the next four years.