Although the nation’s housing market is in dire straits, a different sort of real estate boom may be taking shape: mortgage loan modifications (“A Different Kind of Real Estate Boom: Loan Modifications,” the Ann Arbor Business Review, March 18, 2009).

New government loan modification incentives, a tight credit market, and millions of homeowners facing foreclosure have all created a huge unmet demand for private mortgage loan modification services.

In some cases the only way for homeowners to avoid foreclosure is to have their mortgages modified, said Gibran Nicholas of the CMPS Institute, a company that trains mortgage professionals, particularly in the states where property values have dropped sharply — Michigan, Arizona, Florida, California, Nevada — and where a greater number of homeowners now owe more money on their home than what their property is worth.

But when, Nick Demeester, a supervisor of the housing group at Michigan-based nonprofit GreenPath Debt Solutions, has been asked if there is an adequate supply of qualified mortgage loan modification companies and counselors to meet this demand, his response has been “Right now, no.”

Although his organization has seen an increase in lenders’ willingness to modify mortgage loans, Demeester said, “We have not seen a lot of deferring of principle,” one of the most effective ways lenders can modify a homeowner’s mortgage. Instead, he said, lenders have preferred to move homeowners from an adjustable-rate mortgage to a fixed-rate loan or to extend the length of the loan, from 30 to 40 years, for example.

Nicholas stated that the potential boom in loan modifications is largely dependent on whether lenders choose to take part in President Obama’s new voluntary loan modification plan — a strategy that rewards lenders with incentives for altering mortgage terms for homeowners.

If lenders begin participating in the president’s program, “The Obama plan is going to create a lot of work for loan modification services,” Nicholas said. The only question is which companies will be getting that business.

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