Banks Fall Short on Mortgage Help

Are Banks Really Trying?

Other banks, too, say they've continued to devote more resources to mortgage modifications but such claims are met with skepticism by advocates like Ira Rheingold, the executive director of the National Association of Consumer Advocates.

Rheingold said mortgage servicers won't make real strides in foreclosure prevention until they have stronger incentives motivating them. Right now, under HAMP, servicers receive $1,000 from the government for every borrower that makes payments for three straight months. For three years of regular payments, servicers receive up to $4,500.

In addition, Freddie Mac is conducting random audits to find out whether borrowers are being improperly rejected for loan modifications.

Rheingold and others argue that struggling homeowners should have the option of having their loans modified by a bankruptcy judge -- an idea often referred to as a "cramdown."

The threat of having bankruptcy judges order loan modifications, he said, should be enough to motivate mortgage servicers to pursue more modifications on their own, early on.

"It's an incentive to get the mortgage industry off their collective rear ends and really get moving here because suddenly [homeowners] will get some leverage," Rheingold said.

For now, future reports on loan modifications will help make clear if the government's existing efforts to improve the program are working.

"The proof's going to be in the pudding," Barr said.