Federal officials today announced a higher-than-expected rate for borrowers re-defaulting after participating in loan modification programs. (Hat tip Calculated Risk.)
More than half of the loans modified in the first quarter of 2008 became delinquent within six months, announced John Dugan, Comptroller of the Currency, based on new data.
From a press release:
“After three months, nearly 36 percent of the borrowers had re-defaulted by being more than 30 days past due. After six months, the rate was nearly 53 percent, and after eight months, 58 percent,” the Comptroller said in remarks at the Office of Thrift Supervision’s National Housing Forum today. …
A key question, Mr. Dugan said, is why is the number of re-defaults so high? “Is it because the modifications did not reduce monthly payments enough to be truly affordable to the borrowers? Is it because consumers replaced lower mortgage payments with increased credit card debt? Is it because the mortgages were so badly underwritten that the borrowers simply could not afford them, even with reduced monthly payments? Or is it a combination of these and other factors?”
That question “has important ramifications for the foreclosure crisis and how policymakers should address loan modifications, as they surely will in the coming weeks and months,” the Comptroller added.
I’ve written a bit about some of the loan modification plans — here’s my most recent story. I’m hoping to track down numbers to see how the local homeowners who’ve obtained loan mods are doing.