Study Buoys Mortgage Modification – WSJ.com
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.
[re-default rates]It could help allay concerns that scores of borrowers whose loans are reworked will fall behind again on their mortgages, leading to higher losses for lenders and investors who hold these loans.