Mortgage Re-Default Statistics After Loan Modification

By
Real Estate Broker Owner with Broadpoint Properties Cal BRE #01324959

 

Short Sale ExpeditorSome folks are not interested in statistics. Personally, I am fascinated by the successes and failures of the HAMP and HAFA programs (the government’s loan modification and short sale alternative programs). I speak with so many people that ring me at the eleventh hour when their loan modification has been declined or when they have already paid someone thousands to help with the modification and are seeing the modification going nowhere fast.

Of course, everyone who is having trouble making ends meet probably wants to keep their home. Sadly, however, sometimes it is hard to make the mortgage payments—even after being approved for a loan modification.

On February 4, 2011, dsnews reviewed a Moody’s report on “the dynamics of re-defaults” in loan modifications. Here’s the skinny.

In this report, Moody’s calculated the six-month re-default rates on approximately 78,000 loans that were modified between early 2009 and mid-2010 by eight of the major loan servicers.

Here is 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% 

In plain English this means that 33% of those who obtained loan modifications through Bank of America have since re-defaulted on their loans. Eeeeeeek!

Moody’s also made note that there has been some improvement in the performance of modifications since servicers started aggressively reducing borrower payments in 2009. “The average six-month re-default rate on loans modified in the first half of 2010 improved to 25 percent from 31 percent for loans modified in 2009.” 

Additionally, Moody’s arrives at an interesting conclusion: “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.”

What will happen to these mortgages down the road is anyone’s guess. Perhaps they will result in foreclosure (more REO listings for you), deed-in-lieu, or even a short sale (another great listing opportunity). In a few years, we can all stand around the proverbial water cooler and chit chat about the results in between comments about Dancing with the Stars or Chrstina Aguilera’s next big snafu.

 

 

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Comments 11 New Comment

Rainmaker
219,682
Jim Gilbert
The Golden Homes Team
Samson Properties

The purpose of HAMP and HAFA is to get votes. Same thing with the Community Redevelopment Act that started so much of this.

February 10, 2011 04:04 PM
Rainmaker
904,292
Bill Gassett
Metrowest Massachusetts Real Estate
RE/MAX Executive Realty

It really is amazing when you look at the stats. You would think some of these folks would realize even with the loan mod it won't work for them.

February 11, 2011 08:13 AM
Rainmaker
107,829
Mark Peek
Peek Real Estate Group - Roseville CA Real Estate
Roseville Rocklin Real Estate - Keller Williams

I fully expect the re-default rate to increase as prices decline further.

February 12, 2011 03:21 PM
Rainmaker
790,787
Gail Robinson
REALTOR, GRI, e-PRO, Fairfield County, CT
William Raveis Real Estate

Once that contract is broken, people begin to think.  While once they would have done anything to remain in their homes, they begin to look at how upside down they are and the fact that the lender has added to the back end of their loan rather than reducing the principal.  Right now the banks completely have the upper hand, but people are getting fed up with it.  We will start to see the rise of aggressive foreclosure strategies as the anger  grows.  It is a fact that only 1.3% of the TARP money dedicated for mortgage modifications has been spent.  Our taxpayer dollars bailed out Wall Street, but the lenders don't feel any obligation to turn around and help out Main Street.

February 15, 2011 08:53 PM
Rainmaker
361,152
Kevin Kueneke
San Diego Mortgage Banker
Carlsbad CA Mortgage Banker, Mann Mortgage

Hi Melissa - I had heard that the post-loan mod default rate was over 50%, but 1 out 3 is still pretty high.  Once someone stops paying their bills, whether it be a mortgage or a credit card, it is hard to get back on track regardless of how low the modified payments may be.  Thanks for the information.

February 20, 2011 12:01 AM
Ambassador
1,063,500

Melissa Zavala

Broker, Escondido Real Estate, San Diego County
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