Majority of modified loans fail after 6 months
Most U.S. mortgages modified by lenders to help keep struggling borrowers in their homes fell back into delinquency within six months, the chief regulator of national banks said. Almost 53 percent of borrowers whose loans were modified in the first quarter of this year re-defaulted by being more than 30 days overdue, John Dugan, head of the Treasury Department’s Office of the Comptroller of the Currency, said today in remarks prepared for a housing conference in Washington.
Lenders and loan-servicing companies have been modifying mortgages by lowering interest rates or creating repayment plans through the voluntary Hope Now Alliance. The group reported last month it helped 225,000 borrowers keep their homes in October. Foreclosures rose to a record in the third quarter as one in 10 U.S. homeowners fell behind on payments or were in foreclosure, the Mortgage Bankers Association reported last week.
The OCC’s survey represents institutions that service more than 60 percent of all first mortgages, or 35 million loans worth $6 trillion, Dugan said. “In general, the third quarter report will show many of the same disturbing trends as other recent mortgage reports,” Dugan said. “Credit quality continued to decline across the board, with delinquencies increasing for subprime, Alt-A and prime mortgages.”