Modified Loans Do Little to Help Homeowners

This doesn’t surprise me at all. It did surprise the Comptroller of the Currency, though. I guess he hasn’t been paying attention. My guess is that some of the original loans were so terribly conceived (poorly underwritten) that even with a reworked loan it was still too much for borrowers to bear. From the Wall Street Journal:”The results, I confess, were somewhat surprising, and not in a good way,” Comptroller of the Currency John C. Dugan said in a speech in Washington, D.C. on Monday. Mr. Dugan said it wasn’t clear whether the low success rate reflected the fact that the modifications weren’t reducing monthly loan payments enough to be truly affordable, whether the mortgages were so badly underwritten that they weren’t affordable, even with lower payments, or if both factors were at work.The high redefault rate raises questions about the effectiveness of current efforts to work with troubled borrowers and comes at time when the federal government is facing increased pressure to do more to reduce foreclosures. And from the Associated Press (via the Washington Post):A top House Democrat threatened Monday to tie up the remaining half of the $700 billion financial industry rescue money unless the Bush administration provides some of it for borrowers facing foreclosure.”They’re not going to get the (money) unless they get very serious about the foreclosure modifications and showing us how we’re going to get some lending out of the banks,” Rep. Barney Frank, D-Mass., told reporters after speaking at a housing industry conference in Washington. “At this point I don’t see that happening.” Terrible, terrible economy. And, terrible, terrible underwriting to begin with.