The solutions to the foreclosure fiasco under discussion involve some sort of modification, either by mediation or some other vehicle. If we see a nationwide settlement between top banks and mortgage servicers and all state attorneys general, we're likely to see more banks being pushed harder down this road.

The obvious Catch-22 is that modifications are hard and often just don't work. Way too many modifiers end up right back in a nonpayment situation. There's a huge disconnect within banks and servicers of the these efforts.

Bloomberg notes that there are thousands of people who get foreclosed upon while they are in the middle of a modification effort. Talk about mixed messages. It makes sense to help people make payments, by cutting interest rates for up to five years and extending repayment horizons to 40 years. Still, "about half the 1.4 million temporary or trial modifications granted since the program's March 2009 inception have been canceled, according to Treasury Deptartment data. Only 466,708 borrowers have received permanent modifications," according to Bloomberg. "About one in five of the canceled modifications is either in foreclosure or bankruptcy."

On top of all this, the paperwork for a modification can make a foreclosure look simple and efficient. Banks should clean up their act on the process front. But the only thing that will make modifications the answer to the foreclosure mess is a significant boost to the economy. That is coming; we're just not sure when.

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