The main reasons are as follows
1) Banks receive a monthly servicing fee based on the outstanding balance.
2) Banks charge borrowers in default fees tacked on monthly.
3) Banks charge interest from the time the servicer collects income from the borrower until it turns payment over to the mortgagor.
4) Banks receive income from investment interests in the pool.
To summarize, Banks have a selfish interest in not modifying the loan quickly or in most cases look to not modify it at all. Banks have no incentive to modify so the end result is the homeowner suffers by falling further behind and risking foreclosure.
