WASHINGTON — Two federal agencies delivered a lump of coal to lenders earlier this week, releasing a third quarter report that says loan modifications aren't working for a significant percentage of borrowers.
For the first time, the report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision tracked re-default rates on modified loans. Thirty-seven percent of 30-day past due loans modified in the first quarter were delinquent after three months, and 55% were delinquent after six months. The numbers were slightly better for loans 60 days past due at the time of modification: three months later, 19% were delinquent, with that number rising to 37% six months after modification.
"One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months and even eight months," said Comptroller of the Currency John C. Dugan.
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"This trend of increasing delinquencies underscores the need to understand why these modifications have not been more sustainable."
The number of new loan modifications increased 16% in the third quarter to more than 133,000. Despite a 2.6% drop in newly initiated foreclosures from the second quarter, delinquencies, foreclosures in process, and other actions leading to home forfeiture were all up last quarter.
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