The Office of the Controller of Currency released some interesting information last week about mortgage modifications and foreclosures.  It seems that modifications, which were supposed to be increasing in number under the Obama Administration’s Making Homes Affordable plan, have actually been dropping since February.  Fewer mortgage holders have been getting mortgage modifications each month and — if that isn’t a dreary enough fact — the overall numbers are pitiful, far less than the millions projected by President Obama.

So the federal mortgage modification program is, in a word, a failure.

Meanwhile, foreclosures continue to rise, but last week brought sobering news on that front, too: the average foreclosure loses the lender 63 percent of the money they have lent on the property.  This is a testament both to the giddy levels of debt homeowners were taken to before the mortgage bubble burst AND to the obvious fact that lenders are losing a ton of money on all those foreclosures.  And right now, according to HUD, 8.9 percent of U.S. mortgages or more than four million mortgages with a notional value of $892 billion are in foreclosure.  If the loss trend for lenders continues, and there is no reason to believe it won’t, that means they face probable losses of more than $560 billion.

This is terrible news, of course, but in a season of terrible news it actually presents an almost humorous paradox, because the Obama (and previously the Bush) Administration doesn’t seem to have met a banker it didn’t like, which suggests that there will be yet another bailout of sorts for the lenders.  But this time around that can only be accomplished, ironically, by doing something for the borrowers, too.

We expect a new Obama program shortly that will somehow reset many mortgages in foreclosure through the simple expedient of lopping some large amount off the principles of those mortgages.  This is an impossible task, of course, because it will simultaneously alienate all the mortgage holders who AREN’T in foreclosure.

Look for such a new program to appear in a few days, with an extra spin cycle thrown in for good measure.

What then?  We haven’t a clue, but it should be interesting to watch.

cringely Pulse