Half of U.S. Home Loan Modifications Default Again

[The Northerner]

Source: Bloomberg

March 25 (Bloomberg) -- More than half of U.S. borrowers who received loan modifications on delinquent mortgages defaulted again after nine months, according to a federal report.

The re-default rate of loans modified in the first quarter of 2009 was 51.5 percent by the end of the year, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in a joint report today. The figure, which measures payments at least 30 days late, climbed to 57.9 percent for changes made in the prior 12 months.

U.S. homeowners are struggling to make payments as depressed housing prices leave them owing more than their properties are worth. About 24 percent of properties with a mortgage were underwater in the fourth quarter, First American CoreLogic said last month. The median price of a U.S. home was $165,100 in February, down 28 percent from its peak in July 2006, according to the National Association of Realtors.

Modifications are “clearly not working well and it’s not a surprise,” said Sam Khater, a senior economist at First American CoreLogic in Tysons Corner, Virginia. “It’s pointless to rewrite these loans because they’re underwater.”

The number of homes with mortgage payments at least 60 days late climbed 2.39 million in the fourth quarter, up 13.1 percent from the prior three months and 49.6 percent from the year earlier period, the quarterly Mortgage Metrics report said.

Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aVYxPZ56vjys&pos=5

[Mithreal]

1. The fundamentals of the economy are strong.

[Seedersandleechers]

2. If about half are able to make it

I say, "good for them". Must be horrible to pay more for a house then it is worth - especially with all the jobs going south.

[sweetloukillbot]

3. The loan mod my wife and I were offered wasn't any better than our sub-prime.

Sure, it looked better on paper - they offered us a 5% fixed, but they also tacked about 30K in fees, interest and late charges onto the principal, the effect of which was we would be paying $200 less a month and 4 times what the house was worth. We told them no and are currently negotiating a short sale - at 1/5th what we paid for the house in 06.