One in Five Mortgages Default Again After Modification – Irvine Real Estate – Irvine Homes for Sale

by Robert Mack on February 1, 2011

in Buyers, Latest News, Sellers

One in five U.S. homeowners whose loans were modified under a federal government program to help reduce foreclosures were at least 60 days late in their payments a year after their mortgages were reworked.

The re-default rate for the Making Home Affordable Program averaged 20.4 percent after 12 months, 15.9 percent after nine months, 10.7 percent after six months and 4.6 percent after three months, according to a report released today by the Treasury Department.

The program has been criticized by housing advocates, lawmakers and watchdog groups. The number of active, permanent modifications reached 521,630 as of Dec. 31 under the program, which originally was intended to help 3 million to 4 million homeowners save their properties from being seized by lenders.

“While we cannot prevent every foreclosure, it is important to remember that these programs have helped to create more options for affordable and sustainable assistance than have ever been available before,” Tim Massad, acting assistant Treasury secretary for financial stability, said in a statement today.

In a Jan. 25 report, Neil Barofsky, special inspector general for the Troubled Asset Relief Program, or TARP, called the loan-modification program “anemic” and “remarkably discouraging.” He said permanent loan modifications “pale in comparison” to foreclosure filings. A record 2.87 million properties received notices of default, auction or repossession in 2010, according to RealtyTrac Inc., an Irvine, California- based real estate data company.

Ninety Days Late

After one year, 15.8 percent of permanent modifications are at least 90 days late in the Treasury program, the department said today. That compares with a 29.8 percent rate after one year for all loan modifications tracked by the Treasury, according to a Dec. 29 report. Those loans, including ones modified by private institutions, were reworked in the third quarter of 2009.

In December, 30,030 homeowners newly qualified for permanent modifications that reduce home payments to 31 percent of gross income, the department said today. A total of 58,020 permanent loan modifications have been canceled since 2009.

For the first time, the Treasury Department today released demographic information about borrowers who received loan modifications.

via for the complete article

This is just sad! I actually thought the re-default rate after a loan modification was a bit higher, but nonetheless, it seems that doing a loan modification is just delaying the end result. Short sales still seem to be the way to go to put this mess behind us….

Posted on Irvine Orange County Real Estate Market News

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