Foreclosure Buzz

While the lending industry, through its propaganda machine called the Hope Now Alliance, brags about all the modifications they have done, the problem is their modifications usually result in redefault in six months — and they are increasingly defensive about it (see below).  The dirty truth was confirmed again by a report released this month by the Office of the Comptroller of the Currency and the Office of Thrift Supervision:

The OCC has told the lenders it regulates that they “need to review their programs” and make sure that modifications implemented in 2008 and in the future result in loans that are affordable and sustainable, Mr. Dugan said. Lenders also have been told to review the modifications they did last year and “see if there are classes of borrowers” whose modifications may be further restructured to make them more effective, he said.

“Study Buoys Mortgage Modification, Wall Street Journal, April 3, 2009

In a stunning realization the report found:

The redefault rate was just 26% after nine months when monthly payments were cut by more than 10%, compared with about 50% when the payment increased or remained the same.

For more on the study see the OCC and OTS release.  So, when the payments are increased more people fail, and when they go down, more people succeed.  This is truly amazing research, and the redefault rate is nothing new either (article).

 The HOPE Now Alliance should either step up the PR campaign or start doing things the right way because the cat is out of the bag:

Servicers have stepped up their efforts to modify loans and reduce borrowers’ payments in response to pressure to reduce foreclosures. The percentage of modifications that reduced loan payments by more than 10% increased to 37% in the fourth quarter from 26% in the third quarter. Still, roughly one in four borrowers saw their payments increase after their loan was modified.

“Study Buoys Mortgage Modification, Wall Street Journal, April 3, 2009

So far, the Alliance opts for more PR.  The HOPE Now Alliance, as detailed here, thinks it can avoid responsibility for putting homeowners in yet more bad loans and came out with a statement:

The OCC-OTS report shows that the volume of mortgage modifications increased as the economy turned downward in the second half of 2008. The data also confirms what HOPE NOW has been reporting for some time: that the mortgage industry has been increasingly utilizing loan modifications and is continuing to do so as serious economic conditions make this option the most appropriate choice to help homeowners avoid foreclosure.

Faith Schwartz, Executive Director, HOPE Now Alliance here.

Wow, that says it all.  It says that the HOPE Now Alliance either did not read the report or thought nobody else did.  How long does the Hope Now Alliance think it can continue to fool anyone?  The Alliance put people in bad loans once, and they continue to do so without shame.

Filed under: National Foreclosure News