Majority of Modified Loans Fail Again, Regulators Say (Update1)
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By Alison Vekshin
Dec. 22 (Bloomberg) -- Mortgage modifications meant to keep borrowers from losing their homes fail within six months more than half the time, U.S. bank regulators said today.
About 55 percent of loans modified in the first quarter of 2008 were 30 or more days delinquent after six months, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in a report issued today.
“Re-default rates increased each month and showed no signs of leveling off after six months,” Comptroller of the Currency John Dugan said in a statement. “This trend of increasing delinquencies underscores the need to understand why these modifications have not been more sustainable.”
Lenders and loan-servicing companies have been modifying mortgages by lowering interest rates or creating repayment plans through the voluntary Hope Now Alliance. Today’s report signals government programs and industry efforts to ease loan terms have not gone far enough to keep the mortgages affordable.
Hope Now, which includes Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp., said today it plans to double the number of borrowers getting help next year.
The group projects 950,000 loan modifications for 2008, including 208,000 for the month of November. Including repayment plans and other assistance, Hope Now estimates that about 2.2 million foreclosures will have been prevented this year, bringing to 3 million the total averted since the program began in 2007.
FDIC Criticism
Federal Deposit Insurance Corp. Chairman Sheila Bair last week questioned the OCC and OTS findings, saying the data was too vague to yield conclusions. Bair said it defines a modification as any change in contract terms and covers a period before most modification programs were adopted. She also said regulators’ experience shows many borrowers bring accounts current after falling behind.
The FDIC is changing mortgage terms for borrowers at IndyMac Federal Bank FSB, the successor of failed IndyMac Financial Corp. that the agency is running while seeking a buyer.
“We’ve been modifying loans at IndyMac and our loans at IndyMac have been long-term, sustainable modifications based on affordability requirements for the borrowers,” FDIC spokesman David Barr said today in a telephone interview. “Through the end of October, there hasn’t been a single re-default of any of our IndyMac loan modifications.”
To contact the reporter on this story: Alison Vekshin in Washington at [email protected].
Last Updated: December 22, 2008 12:38 EST
Email | Print | A A A
By Alison Vekshin
Dec. 22 (Bloomberg) -- Mortgage modifications meant to keep borrowers from losing their homes fail within six months more than half the time, U.S. bank regulators said today.
About 55 percent of loans modified in the first quarter of 2008 were 30 or more days delinquent after six months, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in a report issued today.
“Re-default rates increased each month and showed no signs of leveling off after six months,” Comptroller of the Currency John Dugan said in a statement. “This trend of increasing delinquencies underscores the need to understand why these modifications have not been more sustainable.”
Lenders and loan-servicing companies have been modifying mortgages by lowering interest rates or creating repayment plans through the voluntary Hope Now Alliance. Today’s report signals government programs and industry efforts to ease loan terms have not gone far enough to keep the mortgages affordable.
Hope Now, which includes Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp., said today it plans to double the number of borrowers getting help next year.
The group projects 950,000 loan modifications for 2008, including 208,000 for the month of November. Including repayment plans and other assistance, Hope Now estimates that about 2.2 million foreclosures will have been prevented this year, bringing to 3 million the total averted since the program began in 2007.
FDIC Criticism
Federal Deposit Insurance Corp. Chairman Sheila Bair last week questioned the OCC and OTS findings, saying the data was too vague to yield conclusions. Bair said it defines a modification as any change in contract terms and covers a period before most modification programs were adopted. She also said regulators’ experience shows many borrowers bring accounts current after falling behind.
The FDIC is changing mortgage terms for borrowers at IndyMac Federal Bank FSB, the successor of failed IndyMac Financial Corp. that the agency is running while seeking a buyer.
“We’ve been modifying loans at IndyMac and our loans at IndyMac have been long-term, sustainable modifications based on affordability requirements for the borrowers,” FDIC spokesman David Barr said today in a telephone interview. “Through the end of October, there hasn’t been a single re-default of any of our IndyMac loan modifications.”
To contact the reporter on this story: Alison Vekshin in Washington at [email protected].
Last Updated: December 22, 2008 12:38 EST
