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Mortgage Modification Re-Default Rates Are Horrible

Based on new data out it looks as if the people who were actually able to obtain a mortgage modification are still in serious financial trouble.

Moody’s released new data that showed the modified loans have not resulted in default avoidance.

“We have found that a loan that is modified and [then] reported as current is three times as likely to default over the ensuing twelve months as is a current loan that has not been modified,” Moody’s said in a report issued Friday.

“Examining the performance of loans modified in 2009 and the first half of 2010 across major servicers, we found that six-month re-default rates vary considerably, from 20 percent for Citi and Litton to 33 percent for Bank of America,” Moody’s said.

Moody’s calculated six-month re-default rates on approximately 78,000 loans that were modified between the beginning of 2009 and mid-2010 by eight major servicers. The breakdown of each company’s modification re-default rate:

  • Bank of America – 33%
  • Wells Fargo – 29%
  • American Home Mortgage – 26%
  • Ocwen – 24%
  • GMAC Mortgage – 23%
  • JPMorgan Chase – 22%
  • CitiMortgage – 20%
  • Litton Loan Servicing – 20%

You can read more here.


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Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

2 Comments

  • The problem is that modifications don’t address the actual problem, the value of the home. All they are doing is lowering the interest rate and adding the arrears (principal & interest) into the loan, now as principal.

    Even a great modified interest rate of 2% still leaves the borrower handcuffed to the home until the value comes up. The modification simply acts as a temporary band-aid and redefault rates will continue to grow unless they start addressing the principal.

  • The problem is that modifications don’t address the actual problem, the value of the home. All they are doing is lowering the interest rate and adding the arrears (principal & interest) into the loan, now as principal.

    Even a great modified interest rate of 2% still leaves the borrower handcuffed to the home until the value comes up. The modification simply acts as a temporary band-aid and redefault rates will continue to grow unless they start addressing the principal.

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