Protecting the American Dream ... sort of

In addition to an image of Arnold Schwarzenegger as Mr. Freeze, the picture below from Getty Images also comes up when you do a Google image search on "loan modifications", an initiative that held such promise a year ago, but one that now seems to be in deep trouble.
Here's the story that went along with a very proud Senator Reid above:

OCTOBER 03, 2007: Senate Majority Leader Harry Reid, (D-NV) listens to fellow members of Congress speak during a news conference at the U.S. Capitol October 3, 2007 in Washington, DC. Democratic leaders of Congress gathered at the news conference to urge the Bush administration to provide emergency funding for foreclosure prevention counseling, press for loan modifications and temporarily lift portfolio caps on Fannie Mae and Freddie Mac.

So how are those loan modifications going? Not so good.

This report at CNN/Money provides the details:

Half of rescued borrowers default anyway

More than half of delinquent homeowners whose mortgages were modified earlier this year ended up redefaulting within six months, a top bank regulator said Monday.

Some 53% of borrowers with loans modified in the first three months of 2008 and 51% of those with loans modified in the second quarter could not keep up with payments within six months, according to U.S. Comptroller John Dugan, who spoke at a housing conference.

The report, which will be released in full next week, covers nearly 35 million loans worth a total of $6 trillion -- or 60% of all primary mortgages in the United States.

At first you might think that the program is too new, lacking sufficient data to clearly assess the results, but this covers more than half of the entire mortgage market - 35 million loans!

Can that even be right?

And if it is, what does it mean if 18 million loan modifications made over the last year have already failed?

The word gobsmacked is appropriate here.