Half of rescued mortgage holders default anyway

[nichomachus]

Half of people whose mortgages were rewritten are in trouble again

WASHINGTON, D.C. -- More than half of delinquent homeowners whose mortgages were modified earlier this year ended up redefaulting within six months, a top bank regulator said Monday.

Some 53% of borrowers with loans modified in the first three months of 2008 and 51% of those with loans modified in the second quarter could not keep up with payments within six months, according to U.S. Comptroller John Dugan, who spoke at a housing conference.

The report, which will be released in full next week, covers nearly 35 million loans worth a total of $6 trillion -- or 60% of all primary mortgages in the United States.

The high redefault rate raises concerns about the long-term effectiveness of loan modifications, which many are pushing as a key solution to the nation's financial crisis.

Dugan said the Office of the Comptroller of the Currency is asking servicers for more details on these loans to determine what went wrong.

"These answers are important, because they have important ramifications for the foreclosure crisis and how policymakers should address loan modifications, as they surely will in the coming weeks and months," Dugan said.

Other regulators speaking at the conference questioned the quality of the loan modifications, saying that early efforts to restructure loans were not very effective. Many simply tacked on the missed payments and penalties to the end of the loan.

"The quality of the modifications are not what they should be," said FDIC Chairwoman Sheila Bair, a vocal proponent of adjusting loans by reducing interest rates, extending loan terms and deferring principal.

[tigereye]

1. 60 per cent!

that's just incredible! :wow:


We bought a really cheap house back in the mid 90s and just paid it off lately. I feel bad for all the folks who were encouraged to bite off more than they could chew. I don't see why some of those bankers aren't being prosecuted for fraud... :wtf:

[Cleita]

2. Did you forget the link on this?

I am very suspicious that those lenders really want the foreclosures to open up a market for cheap real estate. Could it be that those rescue mortgages were set up in order to fail again on purpose? I believe FDIC Chairwoman, Sheila Bair, is on to something.

[nichomachus]

3. No -- but I spelled "link" wrong in the html tag and didn't preview -- thanks

Should be fixed now

[Cleita]

5. I knew there was something fishy about those rescue mortgages and here

it is:

Other regulators speaking at the conference questioned the quality of the loan modifications, saying that early efforts to restructure loans were not very effective. Many simply tacked on the missed payments and penalties to the end of the loan.

"The quality of the modifications are not what they should be," said FDIC Chairwoman Sheila Bair, a vocal proponent of adjusting loans by reducing interest rates, extending loan terms and deferring principal.

They were set up to fail. Government needs to take over and do this right. Throwing money at these foxes in the hen house will not solve anything.

[On the Road]

9. Believe Me, the Lenders are Not the Ones

who want their houses foreclosed on. They lose out big time.

The ones who make out are the real estate speculators. NTTAWWT. But there are some unbelievable deals floating around right now.

[Mojorabbit]

4. Perhaps this is the money quote of the article?

"The quality of the modifications are not what they should be,"

[ColbertWatcher]

6. Looks like lots of people are out of work and that we're in a recession. n/t

[Cleita]

11. I've been through a lot of recessions. I was born at the end of the Great

Depression and my mother, who lived through it, told me about it and this is looking like more than recession to me but the beginning of a depression. I don't remember any of the others being this bad. This time, it seems that people whose work kept them recession proof are also losing their jobs now.

[amdezurik]

7. get a modified loan, lose your job because

your company can't get credit and default again...

[geckosfeet]

8. Two questions: 1. How many had decent jobs? 2. How many would have defaulted

had they not been helped?

My guess is that those who defaulted simply could not pay due lack of income.

And that closer to 100% of them would have defaulted had there been no help.

[mdavies013]

10. As someone who is in the process of filing bankruptcy...

The reason that people default is that the modifications are minor and do not improve your situation. Typically they are trying to incease the amount that you owe to make sure that you can't get out of the house with any equity.

I would consider my family lucky. We owned 3 homes. One primary...two investment. We got hit with a 1,2,3 punch. First I am a realtor...income down 80%. Second our investment homes went vacant. Third we had to replace a transmission, my wife had dental surgery, and I racked up $8,000 in medical bills to save my toes after a moving accident.

Again, we are lucky. We are not going to lose our primary home. We had to sacrifice our other homes as the bank would not negotiate at all. They would not offer a lifeline...other than modifying the loan with a very similar payment. I saw there offer for what it was and decided to spend my money seeking relief.

It has been tough making the decision...but it was our only option to end the calls, etc and prevent the bank on the investment home from trying to take our primary residence.

If anyone is facing similar circumstances and does not know what to do...I am happy to provide my 2 cents.

[Cleita]

12. What you are describing sounds more like what is really going on.

Well, we at DU knew that the money shouldn't have been given to the banks with no oversight. We knew the government should have nationalized the banks to fix the mortgage crisis by giving real money help to the home owners and a mortgage rescue plan so that they could keep their homes and get the banks back into business profitably, like France did.