Borrowers with mortgages modified under the federal government's foreclosure prevention program are more likely to stay current than those with other modifications, a report Wednesday showed.
Fewer than 17 percent of home loans modified under the Obama administration's $75 billion Home Affordable Modification Program had missed at least one monthly payment, while fewer than 8 percent had missed two months of payments, according to a first-quarter study released by the Office of the Comptroller of the Currency and the Office of Thrift Supervision.
That's better than the industry as a whole. Almost a quarter of all kinds of loans modified in the last three months were 30 days past due and more than one in 10 were 60 days delinquent, the study said.
The report attributed the early success rate of the modifications under the federal program to the program's emphasis on affordable monthly payments, income verification and trial periods. Analysts have projected that as many as two-thirds of borrowers will default again within a year after enrolling in the Obama plan.
The Obama plan reduces mortgage rates to as low as 2 percent for five years and extends loan terms to as long as 40 years. Borrowers who complete the program are saving a median of $514 a month.
Mortgage companies get taxpayer incentives to reduce borrowers' monthly payments. Borrowers must complete a trial period lasting at least three months.
However, more than a third of the 1.2 million borrowers who have enrolled in the Obama program have dropped out during that trial phase. About 340,000 homeowners, or 27 percent of those who started the program, have received permanent loan modifications and are making payments on time.
Industrywide, re-default rates remain high. A year after modification, more than half of the home loans were 60 days past due, the report said. Those loans modified last year are performing better than those altered in 2008.
Delinquency rates dropped in the first quarter for the first time since the report began in June 2008 as lenders and servicers ramp up their home retention efforts, the report showed. New foreclosure prevention measures were up 5.4 percent from the fourth quarter and 61.4 percent from a year ago.
Still, the foreclosure problem is daunting. The number of foreclosures jumped from the previous quarter as lenders and servicers exhausted all options to help seriously delinquent borrowers.
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