The FHFA released their report yesterday indicating that their loan modifications were up 3% in January from December. Not bad for a month to month gain, right? Until you compare that result with how many loans are becoming delinquent.
Let’s do some math. According to the report :
All loans 60+ days delinquent increased from 834,831 as of November 30 to 1,229,051 as of January 31, representing an increase of 47 percent over the period.
That represents a net increase of 394,220 loans more than 60 days delinquent in December and January.
The report also stated:
In January 8,953 loan modifications were completed compared to 8,688 in December.
Adding the figures this time, we find a grand total of 17,641 loan modifications during December and January.
Now correct me if I’m wrong, [Which happens a lot when I'm up this late.] but I think this means that for every loan modified by the GSEs during December and January, more than 22 loans became more than 60 days delinquent in the same time period.
Now granted, not all of those delinquent mortgages will go into foreclosure, but I think it’s safe to assume based on these numbers: unless the modification effort is dramatically ramped up, only a small percentage of troubled GSE loans will ever be modified.
Question: How will having such a small percentage of delinquent loans modified possibly, as indicated by the FHFA report, help "achieving a recovery for housing markets and the entire economy?"
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Been trying for a loan mod since feb. Husband’s income has dropped 60% since Nov of 08.
They came back with a forbearance for 3 months. This does nothing to help us keep our home. I have never asked for help and always paid my bills on time. Thanks but no thanks. My credit and my dignity is ruined.
Here’s how it will work. The GSEs know that the only way to reach a stability is for housing prices to drop to historical levels. They know we’re far from there. So they modified a few loans to make more people stop paying mortgages. For each loan modification, 30 neighbors will stop paying in hope to get in on the deal.
Of course no lender or GSEs can work out this huge number of modifications. These houses will then go to foreclosure and flood the market, leading to a price drop to equilibrium.
Problems solved!
In all fairness, we should see how the numbers flesh out in March and later after the government mod program. They will likely still be very disappointing, but not as much so as this data.
The question here: do the forbearances count as a “modification”? If not, there are a lot of those being thrown around in addition to the mods people want, albeit having limited effect. If so, the above numbers are even more discouraging.
Like everyone else, pretty “enraged” here.
monk -
“Enraged” is putting it mildly. Check this out.
” Foreclosures: Court to force lenders, borrowers to mediate”, Daily Business Review, April 23, 2009.
Stuffingmonkey-
What will REALLY be interesting are April’s numbers. Reports indicate that defaults are surging, and the foreclosure moratorium was over 3/31.
There’s no way the mods will keep up with the tsunami.