Home > Mortgages > More Consumers Are Defaulting Again on Modified Mortgages

Comments 2 Comments

The federal government has been trying for several years to help consumers with underwater home loans to rectify these problems with a number of initiatives, but new research shows that a large number of those who have received such assistance are now falling behind on their bills once again.

Through the end of March, a large percentage of the consumers who received mortgage alterations through the federal Home Affordable Modification Program in the final six months of 2009 had redefaulted on those loans, according to new data from the Special Inspector General for the Troubled Asset Relief Program’s report to Congress. In all, 46.1 percent of those who received such modifications in the third quarter of that year had redefaulted, and the same was true of 39.1 percent of those who did so in 2009’s final three months. Both rates were up from those observed in 2010.

However, despite this major problem for the program (which was designed to help more than 4 million consumers modify their home loans as a means of making them more affordable), only about 862,000 nationwide have been able to get their modifications made permanent, the report said. That number could continue falling, however, as long as redefault rates remain anywhere near their current levels. Since the program’s inception, some 312,000 borrowers who received permanent HAMP modifications have redefaulted on their mortgages.

Potentially more worrying for the federal government, though, is that there is almost no data on what is causing these redefaults to happen, because the U.S. Department of the Treasury does not require mortgage servicers to collect this data, the report said. As such, SIGTARP is recommending that more be done to develop an understanding of why and how these incidents take place, as the Treasury is already keeping tabs on what makes HAMP modifications successful. Various aspects of the program won’t expire until as late as 2020, and as such, getting a better handle on what makes its efforts both succeed and fail may be vital going forward.

HAMP and other federally-run mortgage relief programs have been criticized in the past for not doing enough to help as many consumers as they theoretically could, due in part to rather stringent qualification standards that many experts have said can lead to rejections for even the most troubled homeowners.

Image: iStockphoto

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • http://frugalguruguide.com/articles/ Jenny @ Frugal Guru Guide

    It seems to me that a program that merely extends the agony of someone who is going to default isn’t just useless, it’s downright counterproductive. Either people need to be in truly affordable loans or they need to default quickly rather than being dragged down for several more years. As it stands, the program is actually HURTING people by keeping them in an untenable situation longer.

  • Yve

    Getting consumers lower rates on their mortgages can be a big help if they take advantage of it. The 50 to 100 dollars a person gets monthly as a result of a lower payment on their mortgage should be budgeted even if it puts $50 more dollars in their pocket. The mortgage holder also has to have paying the mortgage as a high priority in their life to realize the savings.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team