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Day points to two changes that need to be made to the program in order to see greater success: It must be mandatory for lenders rather than voluntary, and it must attack the principal of the loans rather than just the interest rates. Giving bankruptcy judges the power to modify mortgages on primary residences would accomplish both, she says.
But it may also be possible for the program to succeed without those changes. Look at the track record of Ocwen Financial, a mortgage servicer that is voluntarily modifying principal payments when necessary. On Jan. 21, The New York Times reported on the success rates of mortgage companies in converting trial loan modifications for troubled homeowners to permanent ones. Bank of America (BAC) had converted less than 2%. JPMorgan Chase (JPM), 4%. Ocwen Financial (OCN), 40%.
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