Anyone surprised at this?
Unclear as to why? Maybe a combination of buyers who never should have qualified, a sinking economy that's probably seeing a lot of those same people losing their jobs, owners who have little clue about who to manage their finances, and rescued owners who figure "hey, what they hell, the government saved my ass once, why not again?".
"WASHINGTON (Reuters) – More than half of mortgages modified in a bid to avoid foreclosure fell delinquent within six months, a top U.S. banking regulator said on Monday, casting doubt on a proposal to rewrite home loans en masse.
Comptroller of the Currency John Dugan said it was unclear why so many borrowers ran into trouble again so soon after getting help, and that raises questions about how policy-makers should address loan modifications.
"Is it because the modifications did not reduce monthly payments enough to be truly affordable to the borrowers? Is it because consumers replaced lower mortgage payments with increased credit card debt?" Dugan said at a housing conference in Washington organized by the Office of Thrift Supervision.
"Is it because the mortgages were so badly underwritten that the borrowers simply could not afford them, even with reduced monthly payments? Or is it a combination of these and other factors?"
The crumbling housing market is at the heart of the financial crisis that tipped the United States into recession and dragged down the global economy, and regulators are scrambling to find a way to limit foreclosures.
Sheila Bair, chairman of the Federal Deposit Insurance Corp, has been a big proponent of a home loan modification program that would encourage lenders to rework a greater number of mortgages by pledging public money to share the cost of defaults on restructured loans.
However, Dugan's figures suggested that the cost to taxpayers may be high. He said his data showed that of mortgages that were modified in the first three months of 2008, nearly 36 percent had re-defaulted after three months, and almost 53 percent were behind on payments by six months.
The OCC will release a report on mortgages later this month that will show increasing delinquencies and foreclosures on mortgages held by the largest national banks and federally regulated thrifts, the agency said.
John Reich, director of the Office of Thrift Supervision, said he had "concerns" about allocating too much federal money to loan modifications. FDIC's Bair said bank regulators needed to look at the redefault data "carefully" to figure out what caused so many borrowers to slip back into arrears.
ADMIT WRONGDOING?
Bair's mortgage rewrite proposal has picked up some proponents in Congress, where many lawmakers have been critical of the Bush Administration's use of a $700 billion financial rescue fund that has so far been tapped primarily to buy stakes in banks.
Rep. Barney Frank, the Democrat who chairs the House of Representatives Financial Services Committee, told CNBC that he would agree to release the remaining $350 billion to the Treasury Department "only if they made it very clear that they were wrong in refusing (to use) it for foreclosure relief.
"The bill was sold in part to help reduce foreclosures. Foreclosures are getting worse," he said.
The U.S. Federal Reserve has pledged up to $500 billion in money to buy securities backed by mortgages in an effort to shore up the housing market, and Fed Vice Chairman Donald Kohn said on Monday that a broad approach would be needed to stem the foreclosure tide.
"I suspect there isn't going to be any one approach that will be superior to another approach," Kohn said in response to a question at the housing forum. "Problems are deep enough, persistent enough, pervasive enough that we're going to have to attack it on many different fronts at the same time."
