Loans Re-Default After Mortgage Modifications

Vikas Bajaj uncovers more shocking data in an article that revealed high default numbers involving distressed homeowners whose home mortgages were recently restructured are delinquent again on their mortgage payments, a top banking regulator said on Monday, raising questions about whether policy makers and mortgage lenders can successfully help them stay in their homes. Data from the OCC indicated that more than half of mortgage loans modified during the first three months of the year were delinquent by thirty days just six months after the terms of the home loans were changed, John C. Dugan, the comptroller of the currency, said at a conference in Washington.

After eight months, 58% were delinquent again.   The rate at which borrowers become delinquent on mortgage payments again — called the re-default rate — appears to be much higher than what previous studies have found. In October, a Credit Suisse study showed that about 30% of mortgage loans modified at the end of last year were delinquent by sixty days within eight months of the change.  The Mortgage Bankers Association said last week that 30% of homeowners who miss one payment end up in foreclosure a few months later.  One shocking discovery of data was that in California, 75% of homeowners who missed one payment after a loan modification ended up in foreclosure; in Florida, 65% who miss a payment do.  Read the complete post > Delinquency Problems Revisited with Loans Modifications

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