New Overdue Home Loans Swamp Effort to Fix Defaults

That is probably true. But what is also true, and probably more relevant to this phenomenon, is that nationwide efforts to increase the real incomes of Americans are failing.

Actually, there are no such efforts, which is even more problematic.

Last month's 54 percent ``cure ratio'' among defaulted mortgages compares with 80 percent a year earlier and 87 percent in March. Comparisons with previous months may not be valid because one lender changed the way it calculated defaults and cures reported to the insurers.

The lender switched to defining defaults as 60 days overdue rather than 90 days for its April data. Because loans are less likely to return to good standing after falling three months behind, the switch to a 60-day threshold probably boosted the number of cures disproportionately to the increase in defaults, Stelmach said.

And sure enough, our worst nightmares of the financial structuring are coming true:

Part of the problem is that so many of the loans were securitized, making it difficult to determine who has the legal authority to modify them, or even who owns them, Fishbein said.

About 90 percent of subprime loans have been bundled into securities, according to Inside Mortgage Finance, a Bethesda, Maryland-based industry newsletter. Borrowers with subprime mortgages, which were available to those with poor credit histories, are behind in their payments at more than five times the rate of prime mortgage borrowers, according to the Washington-based Mortgage Bankers Association.