Lenders try to help homeowners in trouble but is it too little, too late?

As foreclosure numbers break records, politicians and banks scramble for a solution.

Banks are helping a broader array of homeowners struggling with their loan payments, but the sheer number of bad loans is overshadowing their efforts.

Experts say lenders and loan servicers are now willing to work with financially strapped borrowers even if they are current on their loans. During the housing boom, banks generally modified home loans only after borrowers missed at least one payment and thus dinged their credit, sources said.

One reason banks have changed their tune: record foreclosures.

Credit counselor Lohrenz said after years of working with people with credit problems her thinking has shifted on government intervention in the housing market.

"I personally feel the bottom line is we can't bail out all these people," Lohrenz said. "Then you just have the same problems again. I think we have to let them fail for the market to correct itself. I know there is a lot of pain in people's lives, and we do what we can."

But others disagree.

Kurt Eggert, a law professor at Chapman University who has followed the mortgage industry, said government needs to find a way to mandate loan modifications.

"The challenge is to figure out what the leverage should be," Eggert said.

One possibility would be to revive a previously rejected congressional plan that would allow bankruptcy court judges to order loan modifications. That would motivate loan servicers to work with borrowers to avoid the borrower filing bankruptcy, he said.

"The purpose of loan modifications is too mitigate losses to the investor by keeping the borrower in the home," Eggert said. "It's not like it's charity to the borrower."

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