Loan Modifications Are Getting Better

September 28, 2010 No Comments »

loan mod

It appears as if more recently completed loan modifications are performing better than their predecessors, according to the latest Mortgage Metrics Report from the OCC.

More than 90 percent of loan modifications implemented during the second quarter of 2010 reduced borrowers’ monthly principal and interest payments, while 56 percent reduced payments by more than 20 percent.

And that focus on sustainable and affordable monthly mortgage payments resulted in lower post-modification delinquency rates (much lower than that 75 percent re-default rate we we’re worried about).

Six months after modification, roughly 32 percent of the modifications made in 2009 were seriously delinquent or in somewhere in the foreclosure process, compared with more than 45 percent of loan mods made in 2008.

And the performance of modifications made this year suggests the trend is continuing.

At three months after modification, just 11 percent of the 2010 modifications were seriously delinquent, compared with 20 percent of modifications made last year and 32 percent of 2008 modifications.

HAMP Modifications Outperforming Other Loan Mods

Nearly all modifications made under the Making Home Affordable program (HAMP) reduced borrower principal and interest payments, and 78.9 percent reduced monthly payments by 20 percent or more

HAMP modifications made during the quarter reduced monthly mortgage payments by an average of $608, while other loan mods reduced payments by just $307 on average.

As a result, HAMP modifications implemented through the first quarter of 2010 had fewer re-default rates than other modifications implemented during the same period.

At six months after modification, 10.8 percent of HAMP modifications made in the fourth quarter of 2009 were 60 or more days delinquent, compared with 22.4 percent of other modifications made during that quarter.

Similarly, 10.5 percent of HAMP modifications made in the first quarter of 2010 were 60 or more days delinquent three months after modification, compared with 11.6 percent of other modifications.

So perhaps HAMP ain’t so bad after all…and maybe loan modifications actually do work.

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