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Redefault Rate on Mortgage Mods 55% Within Six Months
Naked Capitalism ^ | 12/22/08

Posted on 12/23/2008 3:12:16 AM PST by TigerLikesRooster

Monday, December 22, 2008

Redefault Rate on Mortgage Mods 55% Within Six Months

Proponents of mortgage modifications contend that the cost of even a deep principal reduction still puts the lender ahead of foreclosure, and experience in past real estate downturns would bear that contention out.

So why is this time different? Data from the Office of the Comptroller of the Currency show that 55% of mortgage mods redefault within six months. Even more discouraging, the three month re-default rate was higher for loans modified in the second quarter of 2008 than the first.

It is hard to know for certain without digging further into the data. With housing prices down nearly 30% nationwide, and foreclosure costs averaging $50,000, banks could afford significant principal reductions and still come out ahead. However, borrower advocates contend that many mods in fact reduce interest, but unless the principal is cut, the reduction in payments is insufficient to make enough difference with many borrowers. Without mining the data further, it is hard to know where the truth lies.

(Excerpt) Read more at nakedcapitalism.com ...


TOPICS: Business/Economy
KEYWORDS: mortgage; redefault
http://www.occ.treas.gov/ftp/release/2008-150a.pdf
1 posted on 12/23/2008 3:12:17 AM PST by TigerLikesRooster
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To: TigerLikesRooster; PAR35; bamahead; AndyJackson; Thane_Banquo; nicksaunt; MadLibDisease; ...

Ping!


2 posted on 12/23/2008 3:12:43 AM PST by TigerLikesRooster (kim jong-il, chia head, ppogri, In Grim Reaper we trust)
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To: TigerLikesRooster

No job security? Overpriced mortgages? 55% of the remods 100% liar loans? Borrowers too much in debt to begin with? TV services too high? Food too high? etc? etc? etc?


3 posted on 12/23/2008 3:59:36 AM PST by RSmithOpt (Liberalism: Highway to Hell)
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To: TigerLikesRooster

With housing prices down nearly 30% nationwide, and foreclosure costs averaging $50,000, banks could afford significant principal reductions and still come out ahead. However, borrower advocates contend that many mods in fact reduce interest, but unless the principal is cut, the reduction in payments is insufficient
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Housing is down 40-50% where I am ,, simply going from 6.5% to 4.5% is meaningless when you’re 100-150K or more upside down with no hope for recovery in the near term cards... unless the actual cost of “owning” approximates rental costs for the same property the current program will continue to fail.


4 posted on 12/23/2008 4:03:49 AM PST by Neidermeyer
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To: Neidermeyer

The vast majority of people who are upside down on their homes, refinancied several times, pulled out lots of money, and used it to finance their lifestyle..cars, trips, etc...just drive through any new development in Florida..I’d say that 90% of all homes with FOR SALE signs in the front yard also have a big assed SUV AND a boat in the driveway..


5 posted on 12/23/2008 5:05:10 AM PST by ken5050
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To: TigerLikesRooster

I read last night someone said that the redefault rate proves that the original default terms were to harsh and they should all be redone with eased terms.


6 posted on 12/23/2008 7:04:26 AM PST by blam
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To: blam
Would they continue to ease the term until nobody defaults? I am sure they would say no, but I can't help but suspect that is where we may end up.
7 posted on 12/23/2008 7:08:51 AM PST by TigerLikesRooster (kim jong-il, chia head, ppogri, In Grim Reaper we trust)
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To: TigerLikesRooster
"Would they continue to ease the term until nobody defaults? I am sure they would say no, but I can't help but suspect that is where we may end up."

That's where they want to go...free stuff for the right people/voters.

8 posted on 12/23/2008 7:15:52 AM PST by blam
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