Statistics show that only 9% of homeowners who apply for loan modifications actually receive one. Of the borrowers who actually receive loan modifications, many become delinquent anyhow. At the end of 2008, it was reported that 37% of borrowers who received loan modifications became delinquent in their payments after three months. After six months, 55% of homeowners who received loan modifications became delinquent. Banks know these statistics which is a big factor in their decision in granting modifications.

Another reason why loan modifications are routinely rejected is pure and simple - they are rejected due to "balance sheet economics". When a borrower does not make their monthly payments, the loan becomes "non-performing". A non-performing loan is a liability on a lender's balance sheet. A "modified loan" does not help the bank - it is still a liability, but one of a lesser kind.

By foreclosing and obtaining a judgment for the amount due on the note, it is better for the bank since it turns a non-performing loan liability into two different assets. One is in the form of a receivable - the amount due from the borrower per the Judgment when it is foreclosed. The second is a tangible asset - the actual value of the property. Therefore, Lenders have more of an incentive to foreclose on the property than provide assistance to homeowners in the form of loan modifications.