The reasons for modifying mortgages are obvious. If you can keep the owner in the house you can help him, and at the same time bolster real estate prices which have been hammered by foreclosures. A report Monday from the Office of the Comptroller of the Currency and the Office of Thrift Supervision shows that a surprising number fall behind again.
The report showed that nearly 40 percent of homeowners who had their monthly payments cut by 20 percent or more last year were delinquent again within a year. The reason is simple. A loan modification may help in the short term, but your financial status may continue to degrade.
Mortgage holders participating in the White House's loan modification program have offered trial loan modifications to 760,000 eligible borrowers since it was launched in March. As of November, however, only 31,000 of them had been made permanent. A permanent modification requires the borrower to make at least three on-time payments as well as prove income. Meanwhile, nearly the same amount of homeowners had dropped out of the program or had been found to be ineligible.
The mortgage modification program was designed to help bottom out housing prices by lessening the effect of further foreclosures. Recent statistics show that a record 14 percent of homeowners are either behind on their mortgage payments or in foreclosure.
The report had some other information, some good and some bad. For one, mortgage issues rose during the third quarter. 6.2 percent of all loans were seriously delinquent (which is 60 days or more past due) and an additional 3.2 percent of all loans in the process of foreclosure. Additionally, delinquency among prime mortgages, which is the largest and highest-quality mortgage category, rose sharply.
The most recent loan modifications, those made during the second quarter, show a lower initial rate of re-default than prior modifications. That could mean either that lenders are making bigger adjustments in the loans, to make payment more likely, or that the economy is picking up and those who were jobless are picking up work.
92 percent of loans owned or insured by Fannie Mae or Freddie Mac are performing. This is down from 93 percent in the second quarter.
Only 83 percent of loans guaranteed by the FHA or Veterans Benefits Administration are now listed as "performing." This is down from 85 percent in the second quarter. Overall, the report stated that 87 percent of all US home loans are performing.
Written by Michael Santo
HULIQ.com
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