Thursday, October 1, 2009

New Report: 90 Day Re-Defaults on Modified Loans Are As High as 45% at 9 Months After Loan Modification; Re-Default Rate Drops If Payment is Reduced.

On PDF page 31 of new Mortgage Metrics report HERE a table and graph shows that the 90 Day re-default rate on modified loans is as high as 45% at 9 months after loan modification (this re-default rate is for loans modified in 3rd quarter of 2008, the most recent quarter where information is available).

However, on page 34 of the Mortgage Metrics report a table and graph show that for loans 60 days delinquent 9 months after loan modification, the re-default rate drops to 30.4% IF they payment has been reduced by 20% or more.

High Re-default Rates on Loan Modifications Will Push Lenders Toward More Foreclosures/Fewer Loan Modifications.
Since the re-default experience with previously modified mortgages is a key component of a lender's decision to permit additional future loan modifications to occur, continuation of this high default trend would push more lenders to use foreclosure instead of loan modification. (Boston Federal Reserve paper HERE previously projected that low "cure rates" for defaulted loans were a primary factor pushing lenders away from loan modifications).

Originally created and posted on the Oregon Housing Blog

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