The Making Home Affordable Program reached its loan modification goal ahead of schedule, according to remarks from Treasury Secretary Timothy Geithner.
He told reporters over the phone half a million families across the United States are participating in loan modifications that are resulting in substantially lower housing costs.
Geithner noted that about 40 percent of the 1.2 million homeowners deemed eligible for a loan modification under the government program have received one.
The Obama Administration had previously set a goal of 500,000 loan modifications by the end of October, a number that seemed unlikely back at the start of summer.
By the end of June, only 50,000 home loans had been modified according to Treasury estimates, but it appears mortgage lenders and servicers have finally gotten the kinks out.
The problem, of course, is that nasty re-default rate on loan modifications, which appears to be getting worse, not better.
Fortunately, more recent loan modifications are actually lowering the monthly mortgage payments for struggling homeowners, instead of keeping them unchanged or increasing them.
Ideally, this will result in fewer re-defaults in the future; recent data has shown that payments reduced by 20 percent or more cut re-default rates in half.
Unfortunately, that still means 30 percent of homeowners who receive a modification will default again, just not the usual 60 percent.
The problem is keeping severely underwater homeowners from walking, you know, the ones that are so upside down that there’s no hope of ever recouping losses.
Remember, home price depreciation is the leading cause of mortgage default, not affordability.