From the “Anyone who says there’s good news in the housing sector is lying to you” department, NYT suggests mortgage modifications are a myth:

[Law professor Alan] White found that mortgage modifications peaked in February and have declined in all but one month since. While servicers modified 23,749 loans in these trusts in February, they changed only 19,041 in May and 18,179 in June. This is exactly when servicers were supposed to be responding to the government’s loan modification urgings.

Foreclosures, meanwhile, keep rising. In June, 281,560 were in process, slightly above the 277,847 in May. Last January, there were about 242,000 foreclosures in the pipeline among the Wells Fargo trusts.

“I was hoping we would see some impact in June of the government’s program,” Mr. White said. “Is ‘[Making] Home Affordable’ working? My short answer is no.”

They do suggest the data look slightly better if you consider prime mortgages, which are being modified at a slightly better rate. It’s almost like the banks have finally realized, though, that all the Alt-A, no-doc, my-assets-consist-of-a-1991-Ford-Tempo-and-half-a-pack-of-Orbit-Gum mortgages are a total wash, because no manner of adjusting interest rates downward is going to squeeze several hundred grand worth of blood from that kind of stone, especially over something like a 600sf condo on the South Side of Chicago (sorry, Corus).

Wait, you’re saying, if these loans truly are so far out of whack with property values, maybe the institutions could try to modify the principal, even if there’s no particular incentive to do so built into Making Home Affordable. Could that still be a functional approach as far as, I don’t know, Making Losses Minimal? Maybe:

But the most fascinating, and frightening, figures in the data detail how much money is lost when foreclosed homes are sold. In June, the data show almost 32,000 liquidation sales; the average loss on those was 64.7 percent of the original loan balance.

Here are the numbers: the average loan balance began at almost $223,000. But in the liquidation sale, the property sold for $144,000 less, on average. Perhaps no other single figure shows how wildly the mortgage mania pumped up home prices. It also bodes poorly for the quality of the mortgage-related assets lurking in banks’ books.

“There is 100 times as much money lost in foreclosure sales as there was in writing down balances in modifications,” Mr. White said. “That is not rational economic behavior.”

But who needs rational economic behavior when we have Too Big To Fail, right?