Modified Mortgage Show Alarming Default Trend
Posted by: kateg 5 years, 5 months ago
Across the news lately, everyone has been talking about the improved real estate market being driven by a lack of inventory. There are multiple offers on most listings in San Diego.
However, an article released today on marketwatch.com, shows another emerging trend: Defaulting modified mortgages.
When the government bailed out the banks in the US, the banks were forced to do loan modifications in high default areas. The loan modification programs (known as loan mods) were designed many different ways, including principal reduction, reduced interest rates, and/or extended terms, with the goal of converting toxic loans to performing loans.
According to the marketwatch.com article, "The oldest permanent modifications made through the federal Home Affordable Modification Program, which launched in 2009, were re-defaulting at a rate of 46.1% as of March 31, according to the report from the special inspector general overseeing the Treasury Department’s efforts to shore up the U.S. financial system. HAMP’s permanent modifications from 2010 have re-default rates ranging from 28.9% to 37.6%."
Furthermore, the article goes on to say, "Looking at Treasury’s use of funds from the Troubled Asset Relief Program, which was designed to shore up the U.S. financial system, less than 2%, or about $7.3 billion, has been spent on homeowner-relief programs, such as HAMP, as of March 31. Meanwhile, Treasury has spent 75% of TARP funds on rescuing financial institutions, the report said."
The information is definitely alarming, and is increases the concern over whether the TARP funds helped the homeowners that it was supposed to help, or if it just rescued the banks.
To read the full article, visit Marketwatch.Share on Twitter Share on Facebook
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