Why Loan Modification Does Not Work

In simple terms loan modifications are not effectively solving the two most important issues for homeowners in need:

REDUCED INCOME

NEGATIVE EQUITY (UNDERWATER)

Most distressed homeowners have experienced a significant reduction in household income and the value of their home has declined substantially so that they owe more than their home is worth.  Less income to survive with and little or no equity left to fight for.  Loan modification, in most cases, does not reduce the loan balance and does not reduce monthly payments enough to be effective.  Sadly,  many loan modifications actually result in an increased monthly payment!  3 - 8 months of work to get a loan modification that results in a higher monthly payment!  Does this sound like effective relief? Unfortunately it is the reality.

IF LOAN MODIFICATION IS WORKING THEN WHY ARE MOST HOMEOWNERS RE-DEFAULTING?