Lenders Ramp Up Modifications.

Washington -- Mortgage companies will become more aggressive in restructuring loans for struggling homeowners, even borrowers that are six months behind in their payments, according to a bankruptcy attorney who works with major lenders and servicers.

Tripp Scott director John Bianco said his clients no longer expect to achieve decent recoveries on sales of foreclosed properties. So now they are voluntarily reaching out to borrowers and modifying the loans to get them back to performing status.

"It is a change of course," Mr. Bianco said. "But you are seeing it out of necessity."

In the next 30 to 60 days, some national outfits will launch pilot programs in Florida and other "hot states," the Tampa attorney said.

If the borrowers are behind in their payments, servicers will "capitalize the arrearage or place it at the back of the loan," Mr. Bianco said. When the arrearage is capitalized, it is added to the principal balance of the loan.

They will offer to extend the term of the loan from 30 years to 40 years to make the payments more affordable and reduce the interest rate, if necessary. They will also ...