Interthinx is Your Blueprint for Quality._id1342
in News > Mortgage Servicing
print the content item
Two new reports have cast doubts on the long-term effectiveness of loan modification programs.

In "Loan Modifications Can Provide A Short-Term Cure, But Few Achieve Permanent Success," Standard & Poor's (S&P) used loan-level non-agency residential mortgage-backed securities (RMBS) data available through CoreLogic to analyze first-lien loans issued between 2000 and 2007 that were modified between 2007 and 2010. S&P found that over 1 million non-agency loans were modified between 2007 and 2010, and approximately 19% of these loans currently outstanding have received at least one modification. In the first 12 months after a modification cured a loan that was seriously delinquent (i.e., 60 or more days past due), borrowers made an average of 7.8 additional payments.

S&P determined that although loan modifications can provide additional loan payments for investors - as well as a reprieve to borrowers from foreclosure proceedings - those benefits were usually short-lived.

"At 24 months following modification, the payment statuses of modified loans showed no significant improvement compared with the month before they were modified," says Diane Westerback, managing director. "Similarly, 80 percent of loans that a modification cured defaulted again within 24 months."

Separately, according to new data issued by Fitch Ratings, 36,500 mortgages received modifications through government and private-sector servicing programs in December 2010. This represents a 57% drop from the April 2009 peak of 86,500 loans. Fitch found that other loss mitigation efforts - including short sales and deed-in-lieu offers - have increased slightly: As of December 2010, 53% of prime, 34% of Alt-A and 32% of subprime liquidations were not by real estate owned sale.

However, Fitch warned that between 50% and 60% of prime loans and between 60% and 70% of subprime and Alt-A loans that received loan modifications are expected to experience another round of default within a year.

“The combined efforts of HAMP and other mortgage loan modification programs have made little more than a dent in the large volume of outstanding distressed loans,” says Managing Director Diane Pendley. "Based on current and expected inventory, it will take four years to remove the backlog of properties and return the market to balance."

SOURCES: Standard & Poor's, Fitch Ratings




Latest Top Stories

CFPB Selects Vendors And Lenders For Its Mortgage E-Closing Pilot

Five technology firms and seven lenders will participate in the CFPB's e-closing pilot, which will explore the viability of developing a standard process for closing mortgages using technology.


BofA To Pay Nearly $17 Billion To Resolve Mortgage Bond Probe

The agreement with the U.S. Department of Justice eclipses the $13 billion settlement JPMorgan Chase reached with federal and state authorities over similar allegations last November.


FHFA Seeks Feedback On Proposed Single Security For GSEs

The agency is requesting feedback from mortgage industry professionals on all aspects of the proposed single security structure and in particular, issues regarding the transition from the current system to a single security.


Ellie Mae To Buy AllRegs For $30 Million

"With the acquisition of AllRegs, Ellie Mae will expand its customer base and add a broad array of content and services that complement our portfolio of product offerings," says Sig Anderman, CEO of Ellie Mae.


Survey Shows ATR/QM Rules Are Negatively Affecting Approvals

In a survey of loan officers commissioned by the Federal Reserve Board, more than half said the CFPB's ability-to-repay/qualified mortgage rule has reduced approval rates for certain types of mortgages.

LenderLive_id1241
Hse SandyHook
Industry Resource
Play for Pink
FedHomeLoan_id1341
NAMFS_id1321
Safeguard_id1322
SWBC_id1313