Home Affordable Trial Loan Modification Re-Default Rate Near 27 Percent

December 7, 2009 No Comments »


More than a quarter of trial loan modifications executed under the Making Home Affordable program are already delinquent, according to testimony from a Treasury official.

Assistant Treasury Secretary Herbert Allison told a congressional oversight panel that over 73 percent of borrowers with trial loan mods are current, which after seeing other re-default numbers, seems pretty good.

But that still leaves 27 percent delinquent, and that’s after only three months; trial modifications were originally intended to become permanent after 90 days of on-time mortgage payments.

However, last week the Treasury extended the trial period of loan mods to five months so borrowers would have more time to gather required paperwork, at least that’s the story.

Since the program got underway earlier this year, banks and loan servicer have carried out 650,000 trial loan modifications.

And 375,000 are scheduled to become permanent by year-end, assuming borrowers are able to provide necessary documents and prove the new loans are sustainable.

Later this month, Treasury is expected to announce just how many of the those trials made it to permanent status, a telling number with regard to the success of the program.

As part of the push to make loan mods permanent, participating loan servicers will also face possible monetary penalties and/or sanctions if they fail to meet performance obligations.

(photo: jontintinjordan)

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