2009-04-03 — bloomberg.com
Mortgages modified in the third quarter failed at a faster pace than those revised in the first, and the delinquency rate on the least risky loans doubled, signs of deteriorating credit quality, U.S. regulators said.
Loans modified in the first quarter to help borrowers keep their homes fell delinquent 41 percent of the time after eight months, and second-quarter loans had a 46 percent default rate, the Office of the Comptroller of the Currency and Office of Thrift Supervision said in a report today. Third-quarter trends “are worsening,†the agencies said.
There are two major problem here. The first is that most "modifications" are just forbearances, perhaps temporary interest rate reductions, that simply put the borrower back where they were after not too long. The second problem is that the economy is getting worse, so overall, people's incomes aren't going up.
What is needed are principal reductions. Why? Because the houses were overvalued! That problem cannot be "solved" without adjusting values downward.
Also note:
Prime mortgages that were delinquent after 60 days more than doubled in the fourth quarter, to 2.4 percent from 1.1 percent in the first, and rose significantly from the third quarter to the fourth, the report showed. Prime mortgages, considered the least likely to fail, account for two-thirds of all mortgages.
Again, this is because the economy continues to worsen.
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