Defaults on Loan Mods Continue to Riseby Tim Manni
The latest statistics released today by the Office of the Comptroller of Currency (OCC) and the Office of Thrift Supervision (OTS) revealed little progress in the battle for successful loan modifications. Third-quarter statistics revealed that “The number of loans modified in the first quarter that were 30 or more days delinquent was 37 percent after three months and 55 percent after six months. The number of loans modified in the first quarter that were 60 or more days delinquent was 19 percent at three months and nearly 37 percent after six months.”
“One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months and even eight months,” said Comptroller of the Currency John C. Dugan. “This trend of increasing delinquencies underscores the need to understand why these modifications have not been more sustainable.”
Despite the continuation of poor quarterly reports regarding re-default foreclosure assistance may be gaining ground at the root: “Newly initiated foreclosures dropped by 2.6 percent from the second to the third quarter of 2008″
Loan modification continues to be the preferred recovery strategy for financial institutions socked with delinquent-home loans. According to the regulators, “The number of new loan modifications increased 16 percent in the third quarter to more than 133,000.”
We have three quarters of proof that current loan mod strategies aren’t working. There are numerous federal (FDIC, FHFA, HUD) and private (JP Morgan Chase, Bank of America) loan programs underway. How long do we let them continue before we find a better solution?