Homeowners Helped by Mortgage Modifications Have Re-defaulted

[Dec 12, 2008.]

 

It looks like many of the homeowners who were helped earlier this year through mortgage modification programs are in trouble again, according to a report by the Office of the Comptroller of the Currency.

In the first half of 2008 mortgage lenders helped about 200,000 borrowers by modifying the terms of their mortgages. The report says more than half of those people have missed at least one monthly payment. That means those borrowers are again at risk of foreclosure.

"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%, and after eight months, 58%,” said Comptroller of the Currency John C. Dugan, who was at the Office of Thrift Supervision’s National Housing Forum this week.

Of course a lot of folks are looking at this report and revisiting the debate about whether or not mortgage modification programs really work. Modification programs can vary depending upon the mortgage lender. Some borrowers were given lower payments, while others were given another chance to make existing payments.

Dugan's remarks indicated surprise that so many people are re-defaulting. But you don't have to be an Ivy League economist to know that many of the people who were helped by mortgage lenders are still battling the same issues that got them in such a mess in the first place, like high credit card debt and the inability to sell their homes.

Since those modifications have been made, the economy has taken a severe nosedive, so there's a good possibility that many of those borrowers are now dealing with job losses, plunging investment accounts, and a continuing decline in housing values. And let's not forget the cost of food and health care, among other expenses.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.