The stock market is staging a very peppy rally on the hopes for the Obama infrastructure plan and the auto bailout, but key bits of news point to the stubbornness of some of the underlying economic stresses.
We have long advocated mortgage modifications as a remedy that banks used fairly freely in the stone ages when they held the paper. While we have also been told that the mods being offered these days are often too shallow to give the homeowners sufficient relief (ie, the bank could offer a reduction in principal, rather than the more common, and lower effective reduction of merely providing interest rate relief, and still come out ahead compared to a foreclosure). However, the latest report from the Office of the Comptroller of the Currency may put a dent in efforts to find ways to offer viable borrowers sufficient changes in terms.
Almost 53 percent of borrowers whose loans were modified in the first quarter of this year re-defaulted by being more than 30 days overdue, John Dugan, head of the Treasury Department’s Office of the Comptroller of the Currency, said today in remarks prepared for a housing conference in Washington….
The OCC’s survey represents institutions that service more than 60 percent of all first mortgages, or 35 million loans worth $6 trillion, Dugan said.
“In general, the third quarter report will show many of the same disturbing trends as other recent mortgage reports,” Dugan said. “Credit quality continued to decline across the board, with delinquencies increasing for subprime, Alt-A and prime mortgages.”