With fresh evidence that voluntary mortgage modifications aren't working, a national lawyers' group is urging the government to let the courts fix bad loans.

"Court supervision of loan modification is needed, and unlike so many of the responses to the foreclosure crisis so far, there will be no cost to the taxpayer," Henry Sommer of Philadelphia, president of the National Association of Consumer Bankruptcy Attorneys, said Thursday.

A study in November of mortgage-servicer reports to investors by Valparaiso University School of Law Professor Alan White showed that of 3.5 million subprime and slightly less-risky Alt-A mortgages examined, 10 percent were in foreclosure and 10 percent more were delinquent.

Of the 21,000 of these delinquent loans modified, two-thirds saw an increase in principal, called "negative prepayment," which added an average of $11,000 to loans of $210,000, White said.

Only two of 43 servicers - Litton Loan Servicing L.P. and Acqura Loan Services L.L.C. - significantly reduced the principal of the loans they modified, he said.

"There is a tremendous variation in the number and quality of modifications, and the chance of getting one depends on the servicer," White said, adding that the monthly payments on 45 percent the 21,000 loans modified actually increased.

"Many of these 'modifications' sound more like loan 'workouts,' where the debt, including default amounts, fees and fines, are simply re-allocated over the life of the loan," which, in effect, raises the payments, said Rick Sharga, chief economist at RealtyTrac, which follows foreclosures nationally.

"The lack of a meaningful solution from the government is baffling," said Alys Cohen of the National Consumer Law Center in Washington. She said most economists have recognized that "the financial crisis can be resolved only by dealing with its root cause – the escalating millions of mortgage foreclosures."

Requests for comment from the Mortgage Bankers Association, which support voluntary modifications, went unanswered.

While the Philadelphia region's foreclosure-filing rate remains lower than the national average, housing counseling agencies are seeing an increase in numbers of those seeking help with problem issues, especially among low and moderate income people.

In a year-to-date report Thursday, the Philadelphia-based Consumer Counseling Service of the Delaware Valley said it held 18,000 counseling sessions this year - an average of 1,500 per month - 50 percent more than in 2007.

Requests for housing counseling rose 100 percent year over year, with 700 appointments in both October and November, according to executive director Patricia Hasson, with an average 2,000 calls a week being logged in those months.

In response, the agency had to move to larger space, increased staff to 66 from 48, and opened offices in Norristown and in Salem, N.J.

Contact real estate writer Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.