Mortgage Studies

By
Real Estate Agent with CENTURY 21 Anne Arnold

Cutting financially troubled borrowers' monthly mortgage payments by more than 10% reduces the chances that they will fall behind again after their loan is modified, a study found.

While modifications that result in lower payments are increasing, nearly half of all loan workouts still result in the same or higher payments, the study found.

The report, released Friday by the Office of the Comptroller of the Currency and the Office of Thrift Supervision, comes as mortgage companies are preparing to modify loans under the Obama administration's foreclosure-prevention plan, which provides financial incentives to encourage mortgage companies and investors to reduce borrowers' mortgage-related payments to 31% of income.

Cutting financially troubled borrowers' monthly mortgage payments by more than 10% reduces the chances that they will fall behind again after their loan is modified, a study found.

While modifications that result in lower payments are increasing, nearly half of all loan workouts still result in the same or higher payments, the study found.

The report, released Friday by the Office of the Comptroller of the Currency and the Office of Thrift Supervision, comes as mortgage companies are preparing to modify loans under the Obama administration's foreclosure-prevention plan, which provides financial incentives to encourage mortgage companies and investors to reduce borrowers' mortgage-related payments to 31% of income.

Some borrowers fall behind again because of job loss or other problems, but whether or not the borrower gets payment relief also appears to play a role in the outcome. 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.

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