Modified Loans Default Again 20% of the Time, Says Comptroller
As the housing crisis wears on, lots of discussion on how to manage the glut of impending foreclosures seems to rely on modifying existing and troubled loans to enable strapped borrowers to make payments.
And while the tactic seems to work in most cases, a recent report indicates that about one in five of those modified mortgages are back in crisis mode within a year. Within the year, to be precise, 20% of the modified mortgages were in excess of 90 days delinquent as per the US Comptroller’s “Mortgage Metrics” report.
In a statement addressing the findings, the government body indicated more to come:
“Foreclosures may continue to increase in future quarters as a large number of foreclosures work through the process and alternatives to foreclosure are exhausted,” the Comptroller, a division of the U.S. Treasury Department, said in a statement.
In August, delinquency notices jumped up 33% over the previous month as growth stagnates and the ‘jobless recovery’ continues to feed a roughly 9% rate of unemployment across America.
In the second quarter, “total loan modifications and alternative payment plans for delinquent borrowers” moved down to just over 456,000, a 19% decrease over the same quarter in the year prior, according to the mortgage report from the Comptroller’s office. The Home Affordable Modification Program granted 70,000 new payment plans during the same quarter, down 35% over the same period last year.
The decreased number of modifications in the quarter still outnumbered the 121,000 completed foreclosures, and lenders seized fewer homes during the period. Total forfeiture of homes- foreclosures, deeds in lieu of foreclosure and short sales included- fell 22% to about 180,000.