Posted on 12/23/2008 9:07:58 AM PST by Graybeard58
Mortgage modifications meant to keep borrowers from losing their homes fail within six months more than half the time, U.S. bank regulators said Monday.
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 Monday.
"Re-default rates increased each month and showed no signs of leveling off after six months," said Comptroller of the Currency John Dugan. "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. Monday'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 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.
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."
Monday's report follows one issued last week by the National Association of Consumer Bankruptcy Attorneys, which found that half of November's loan modifications increased monthly payments, and a similar amount added unpaid fees and interest to the loan principal.
The modifications boosted mortgage balances by an average of $10,800, and only one-third resulted in lower monthly payments, according to the Washington-based group.
Many bought houses they never intended to make payments on.
“I know I can't afford it and I will miss some payments, but I'll take it. I like the digs.”
People who can’t manage their money can’t manage their money.
Banks and government. Some people shouldn’t get loans.
This huge crisis has been created out of a misguided crusade to help minorities at lenders’ expense. This plan is essentially vote buying like the Dims always engage in. But it also have something to do with redistricting.
I have a feeling that a lot of Christmas shopping is being done on the assumption that they will be able to default on their credit cards once the bill comes due.
Forever.
First time, second, or twelfth.
And this happened because bankers could sell the mortgage if the chump - mark - person - make 3 payments.
This mess sits at the door of bankers.
I expect they'll just eventually give these houses away.
* Definition of stupidity.
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