Released: February 03, 2009

A band-aid on the foreclosure problem?

Source: Renae Merle, Washington Post (Free Registration)

Many homeowners who have been given a break on their troubled mortgages quickly end up in trouble again, a growing problem that is bedeviling efforts to stem rising foreclosure rates.

A recent study by the Office of the Comptroller of the Currency found that more than 50 percent of troubled homeowners had missed at least one payment six months after a lender modified their loan, and lenders and other researchers report similar default rates on modified mortgages.

The high default rate on reworked mortgages is complicating efforts to address a housing crisis that is already among the worst on record. It has sent government and industry officials scrambling to find new fixes as President Obama’s administration pledges to spend $50 billion to $100 billion to help homeowners. A 50 percent recidivism rate “is an indicator that there are problems,” said John C. Dugan, comptroller of the currency, whose office regulates some mortgage lenders. “Not just that the number is high, but that it keeps getting worse each month.”

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