Government officials patted themselves on the back last
week, announcing that the mortgage modification plan
implementedearlier this year through
Fannie Mae (NYSE: FNM) and
Freddie Mac (NYSE: FRE) is totally, 100%,
killing it.
More than 500,000 mortgages are now in a trial
modification plan, one month ahead of the half-a-million goal
marker. "We believe we are absolutely moving in the right
direction and have reached an important turning point in our
modification effort," said Housing and Urban Development
Secretary Shaun Donovan.
Great success!
These numbers might look encouraging. Struggling
homeowners are getting aid. Expensive mortgages are being
reduced. Bubbles are being slain. Help as arrived.
But remember the old saying, Fools: quality over
quantity.
One week before the government praised itself for the
volume being cranked out, it released a report showing just
howthese modifications are performing.
As was
the caseearlier this summer, mortgage modification
re-defaults -- modified loans that fall back into default --
are quite high. And not just a little high ... not just
annoyingly high ... but
horrifyinglyhigh:
Modification Date
30 Days Delinquent,
3 Months After Modification
6 Months After Modification
9 Months After Modification
12 Months After Modification
First Quarter 2008
40.3%
53.6%
60.7%
65.9%
Second Quarter 2008
46.4%
59.0%
63.9%
67.0%
Third Quarter 2008
49.6%
60.3%
65.3%
--
Fourth Quarter 2008
45.2%
55.8%
--
--
First Quarter 2009
42.7%
--
--
--
Source: Office of Thrift
Supervision, Office of the Comptroller of the Currency,
September 2009.
Within three months of modification, more than 40% of
borrowers found themselves back in delinquency.
Now, I know what you're thinking: OK, but that's just the
30-day delinquency rate. How about longer-term, actual
defaults? It's just as scary:
Modification Date
90 Days Delinquent,
3 Months After Modification
6 Months After Modification
9 Months After Modification
12 Months After Modification
First Quarter 2008
13.1%
26.3%
36.8%
45.9%
Second Quarter 2008
16.8%
32.9%
43.7%
49.0%
Third Quarter 2008
17.9% Continued... |