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I’m always asking the question: If there are so many lenders and so many programs trying to help troubled borrowers, why do the foreclosure numbers keep going up?

Well I finally found a concise explanation from Rick Sharga of the online foreclosure marketplace, RealtyTrac (yes, I know they list foreclosed properties on their site for a fee, so toss your grain of salt in, but I've confirmed this with others):

The voluntary programs to date have been doomed to failure for a couple of reasons. First, they were all voluntary, and didn’t provide lenders or loan servicers any “cover” that would allow them to get out of the contractual requirements they had in terms of foreclosure proceedings. Second, the huge pool of securitized loans really weren’t easy to do modifications or workouts on, since multiple parties had to agree to the terms (hedge fund managers, investment fund managers, etc.).

Third, the types of programs that HOPE NOW pushed initially--the loan “workouts”--generally don’t work out for homeowners in financial distress. Even the Mortgage Bankers Association estimated that over a third of the loans in workout programs would ultimately wind up back in foreclosure.

• Fannie And Freddie Fallout

And finally, as if all that weren’t enough, the sheer volume of loans in foreclosure simply overwhelmed the system’s ability to process the workouts and loan modifications. There are no blanket solutions in the process; each loan needs to be researched, analyzed and addressed individually. As the number of loans in trouble has risen exponentially, the lenders simply haven’t been able to hire rapidly enough to keep pace.

This is not to say that some people are getting the help they need. They are. But it's still not enough to stem the tide. Of course, in any necessary market correction, there will be necessary pain.

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