Mortgage Mayhem: Banks Doing Too Little Too Late

Editor's note: This is the last part of a series documenting the struggles of homeowners seeking a mortgage-rate modification. Part 1 reviewed how homeowners have been stranded, and part 2 exposed the opportunists taking advantage of the broken system.

NEW YORK (TheStreet) -- The banking industry has taken a great deal of time to help troubled homeowners and done a poor job by some accounts.

"We've had people who met guidelines through and through," says Charles Favor, a mortgage modification specialist with HLP Center. "They fall right into the category of every criteria that's out there and the banks are just not helping people. They string them along through the loss-mitigation department and the attorneys don't even know they've foreclosed upon the house."

Additionally, the number of people assisted by banks pales in comparison to the number who defaulted or walked away from their homes. While it's difficult to gauge the precise number of homeowners who fall into the category of "troubled," somewhere between 3% and 5% of U.S. households are delinquent on mortgage payments, according to quarterly reports from major banks, Fannie Mae (FNMA.OB) (Stock Quote: FNM) and Freddie Mac (FMCC.OB) (Stock Quote: FRE). That implies 3.4 million to 5.2 million households are now at risk of default or foreclosure, on top of the millions who have already faced the same fate.

Big banks have finally realized that the mortgage malaise won't stop spreading throughout their loan books until barrier walls are erected. They've started providing better workout solutions than those offered by the federal government, because banks have more flexibility to tailor modifications to individual borrowers' needs.

(FNMA.OB) (FMCC.OB) The question now is whether progress has come too late.

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