LOAN MODIFICATION MAY BE WORKING - Fewer Homeowners Defaulting On Their Modified Mortgage Loans!
SOME RE-WORKED BORROWERS DO DEFAULT AGAIN, BUT THOSE DEFAULTING DOWN NEARLY 38% VERSUS LATE 2008/EARLY 2009!
Many have criticized President Obama's Home Affordable Mortgage Program for failing to bring Mortgage Loan Modifications to enough distressed homeowners this year. However, of those who have been granted modified loans, with lower rates, the percentage of those who keep up with their monthly house payments under the new terms is on the rise.
During the Second Quarter, 2009, 18.7% of mortgage loans re-structured into lower monthly payments went delinquent once again after 60 days. This compares to a staggering re-default level of 30% after three months for the previous four quarters - from the Second Quarter, 2008, through the First Quarter of this year.
As reported by Ruth Simon in the December 22nd issue of the Wall Street Journal, many of the earlier, less-successful loan mods resulted in minimum reduction of the borrower's previous mortgage payment. In a few cases, the modifications actually INCREASED mortgage payments to an even less affordable level.
During the Second and Third Quarters, 2009, however, 80% of re-worked loans resulted in a reduced payment, according to data compiled by the U.S. Office of Comptroller of the Currency and the Office of Thrift Supervision. Not surprisingly, loans where payments decreased by greater than 20% had the lowest rate of repeat default.
Of course, it is too early to see if the modified borrowers will continue to make their payments on time. But these early signs might be encouraging.
These latest numbers come against a backdrop of rising delinquencies among homeowners holding Prime Loans - those homeowners with the best credit and payment histories - during the Third Quarter, 2009. As a whole, 6.2% of all mortgage loans were at least 60 days pas due last quarter, an increase of roughly 17% versus the Second Quarter.
Of these Prime Borrowers, 3.6% of their mortgages were at least two months late at the end of the Third Quarter. That's up 3% from the previous quarter, and roughly double the segment's default rate during the Third Quarter, 2008.
The research data analyzed the 13 biggest U.S. Mortgage Servicing Companies. Together, these services represent about 64% of all outstanding mortgage loans across the country.
DEAN MOSS & DEAN'S TEAM CHICAGO
