From HW:
The relief distressed homeowners get from mortgage modifications is short-lived, with most of the loans falling into distress within a year after hitting the reset button, Standard & Poor’s Ratings Services said in a new report Monday.
The New York-based rating agency said 80% of the loans cured by a modification in the time period stretching from 2007 to 2010 defaulted again within 24 months. S&P compiled its report by analyzing nonagency residential mortgage-backed securities data provided by CoreLogic.
The report titled “Loan Modifications Can Provide a Short-Term Cure, But Few Achieve Permanent Success” concluded that modifications are still acceptable market cures for lenders since they encourage more loan payments while keeping borrowers afloat.
Yet, the report says loan mods remain a short-term solution. In fact, principal reductions — which account for only 3% of loan modifications — have a better success rate in helping borrowers obtain a permanent solution, the report says.
More than 1 million nonagency loans were modified between 2007 and 2010, according to S&P. Of those loans, 19% of the outstanding accounts have already received at least one loan modification. After a modification is made on a loan delinquent for 60 days or more, borrowers generally make 7.8 additional payments before hitting a rough patch again, the S&P report says.
“At 24 months following modification, the payment statuses of modified loans showed no significant improvement compared with the month before they were modified,” said Managing Director Diane Westerback, who worked on the S&P report.
yes, because the problem is being underwater, not the payments per se.
If they’re not underwater, they just sell; no problem.
If they are underwater, they’re stuck in that house no matter the consequences.
Maybe homeownership at 0 down loans isn’t the answer? No, never.
Chuck
This is shocking news, I’m stunned.
Deadbeats continue to not pay mortgages that have been modified.
Who could have known? Oh yes…EVERYONE!
“Artificial intelligence is no match for natural stupidity”
The only way to solve this is to let people walk away from their loans. Trash their credit for 7 years. The banks absorb the losses. Let some of them fail. Rich people go nuts. A few foreign govts. fail. We teeter toward WW III, but…people soon realize it’s just money (most of printed out of thin air) and most of the people who lost it deserve to lose it. You can’t scare us twice.
USA creeps toward a new normal. Jim the Realtor survives, prospers and becomes the new standard for realtors.
I like it!
But how many homeowners who actually lost money? Only those who bought at the very peak with smaller down payments, 10% to 20%.
The rest bought with little down and/or refinanced out several hundred thousand dollars and got 1-2 years free rent. They did well, and in 7 years will be eligble to do it again.
If we (USA) will learn the one lesson, let’s learn it here, and have it stick:
Either you have substantial skin in the game when you buy (20% down payments), or you pay heavy mortgage insurance to cover all losses.
Also–The larger the down, the lower the doc’s. 50% or more down, good FICO, no verifications.
Old habits are hard to kick. These people can’t change their habits overnight.
There had to have been months-worth of free rent, which must be intoxicating. They can’t live without it!
It’s a testimony of this society – live for today.
6.Also–The larger the down, the lower the doc’s. 50% or more down, good FICO, no verifications
And better interest rate too – that would get them.
Deadbeats will be deadbeats. Go figure.
Maybe selected principal reductions actually are the answer for the banks. If the value of a house is down 50%, it’s a good deal for the bank if they can get a loan mod with a 25% principal reduction to stick.
Retail sales are up! I see no direct correlation here.
Our friends are applying for a loan mod. While they wait for an answer they bought a purebred dog (several k’s) and a brand new car, for $30,000.
So um, how about spending less money. I want to shake them when they complain about the loan mod process.