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58% RE-default on "modified mortgages"

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SoCalDem Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 02:18 PM
Original message
58% RE-default on "modified mortgages"
http://www.housingwire.com/2008/12/08/redefaults-a-prob... /

Redefaults a Problem, OCCs Dugan Says
By PAUL JACKSON
December 8, 2008

As if you couldnt see this one coming a mile away: more than half of the loans modified in the first quarter of 2008 had redefaulted within six months of modification, according to statistics released Monday by the Office of the Comptroller of the Currency. After three months, nearly 36 percent of the borrowers had re-defaulted by being more than 30 days past due, Comptroller John Dugan said in a statement. After six months, the rate was nearly 53 percent, and after eight months, 58 percent.

In other words, recidivism rates are right where they historically have been, despite growing pressure to do something about a growing number of foreclosures. Dugan characterized the results, however, as surprising for regulators. Dugans remarks came during a panel discussion with Office of Thrift Supervision director John Reich, Federal Reserve Board chairman Donald Kohn, Federal Deposit Insurance Corp. chairman Sheila Bair, and Federal Housing Finance Agency Director James Lockhart.

Dugan suggested that regulators werent sure why redefault rates were so high. Is it because the modifications did not reduce monthly payments enough to be truly affordable to the borrowers? Is it because consumers replaced lower mortgage payments with increased credit card debt? Is it because the mortgages were so badly underwritten that the borrowers simply could not afford them, even with reduced monthly payments? Or is it a combination of these and other factors?

snip....

paul.jackson@housingwire.com .


________________________________________________

Here's a HINT... No matter HOW low the "interest rate is". a $15 hr wage CANNOT pay for a $300K house..

This does not even include insurance & taxes

$1,432.52
Monthly Payment

Loan Amount:
Interest Rate:
Term of Loan:
$300,000
4.000%
30 years (fixed)

even a loan that's been "modified" down to 4% will eat up at least $400 per week of a takehome paycheck (with taxes & insurance)..That $400 out, has to leave enough for the payment of utilities, food, gasoline, car insurance, cay payments, child care, medical expenses, phone, etc.

IF a $15 an hour employee HAD a 40 hour week, their check would be around $600 BEFORE taxes..


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derby378 Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 02:21 PM
Response to Original message
1. Looks like banks are getting into the real estate business after all
Increasing their portfolios, one evicted family at a time.
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Idealism Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 02:29 PM
Response to Reply #1
2. They've been in the real estate business since their inception
They have always foreclosed on properties and tried to sell them back, or get homeowners to take out a 2nd or 3rd mortgage to get them to pay off the banks 1st mortgage
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SoCalDem Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 02:33 PM
Response to Reply #2
5. I could never understand why they did not just rent the place to the "foreclosed" would-be buyers..
It's a win-win..

Instead of an empty vandalized house, they have people staying in the house and paying SOMETHING..and those folks would have to go somewhere.. It's a vindictive move, to punish naughty people who did not/could not keep paying..

Banks need to just "take over" the mortgage..they actually already "own" it anyway, if the terms of the mortgage are broken..and just be landlords until the market improves
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Idealism Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 02:37 PM
Response to Reply #5
8. Profits usually would be the reason
Especially during the late 1990s and earlier this decade, home prices skyrocketed so out of control that a bank could foreclose on a property and still sell the house at a profit compared to what they paid for it. This made more money than renting, especially when you could get a HELOC or 2nd mortgage out of the homeowners. It was just diabolical really
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sandnsea Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 02:39 PM
Response to Reply #5
10. If the people could afford the "rent"
they could afford the mortgage. I can't quite figure out why people assume rent is cheaper than a mortgage payment. It's not. The problem now is that people are losing their jobs. Many people who were making $20-$40 in construction are now losing the homes that they could easily afford 6 months ago. The help was too little too late.
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skeewee08 Donating Member (434 posts) Send PM | Profile | Ignore Mon Dec-08-08 02:30 PM
Response to Original message
3. When my husband plants closed the Mortgage Company
tried to put us on a loan modification, my husband was like "the payments are higher than the original loan" and to make it worse they make you come up with a balloon payment twice the amount of the mortgage, not everyone that got a loan did it the wrong way like us, my husband plant closed, we put the house on the market 2 years letters it hasn't sold and the mortgage company refuses to give us a set interest rate, they are not trying to work with us.
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TexasObserver Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 02:32 PM
Response to Original message
4. Amen. Refinancing won't fix fundamentally unsound debt obligations.
If you don't have the job to produce the dollars to at least pay current interest on the debt, you cannot stay current on any kind of rework. Lenders made a bunch of terrible loans, many of them for amounts far in excess of the reasonable payment many borrowers could pay.
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skeewee08 Donating Member (434 posts) Send PM | Profile | Ignore Mon Dec-08-08 02:39 PM
Response to Reply #4
9. My husband did find another job 10 months after the plant closed
but the mortgage company was like you have to go on this loan modification, my husband was like you can have this house, if you are not willing to help out honest people that lost their job to plant closure.
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TahitiNut Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 02:36 PM
Response to Original message
6. Breaking News: Mortgage Defaults Reduced by Over FORTY PERCENT by Modifications
Edited on Mon Dec-08-08 02:36 PM by TahitiNut
Fascinating. :shrug:
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sandnsea Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 02:36 PM
Response to Original message
7. Many houses are $150,000-$200,000
and the people can afford them if the payment is right. The problem is that people are now losing jobs. They didn't act quickly enough and strongly enough.
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