Loan Modifications - Helpful or Just Another Scam?

I have watched many of my clients (mortgage and real estate) see their clients and peers get involved in Loan Modificaiton programs/companies/scams and would love to get your take on this activity.

If you need to modify your terms to help you stay in your home (lowering the interest rate, resetting the payment to show current and adding the arrearage to the end of the note, lowering the current principle balance, etc.) I see this as a good thing. I am happy to see Fannie Mae, Bank of America, and others trying to step in to help homeowners stay in their home.

I also have seen perfectly good people intentionally wreck their credit by slow paying their mortgage to be "Eligible" for a loan modification (or so they think.)

The most confusing part is that different programs have different guidelines (which are not easy to find) and usually disqualify someone anyway. I have also seen clients get a nice 1099 for the "forgiven" principle (turning into taxable income) when they needed it least.

I am not sure about any of this. It seems that there should be some kind of consistency and transparentcy to all of this.

As more people have worse and worse credit histories, it removes them from being able to borrow. This disenfranchises them from buying or refinancing for the next 2-4 years, because of how their "solutions" are reported to the credit bureaus.

How many "lost" people can the Real Estate and Mortgage Industries take?

Please share your thoughts with me to let me know your opinions.