A new report from the U.S. Treasury shows that delinquencies and foreclosures of home mortgages continue to climb, but, most alarmingly, even modified loans are increasingly delinquent.
Mortgage modifications grew more quickly than other loss-mitigation strategies, as financial institutions worked with borrowers to keep them in their homes while minimizing financial losses.
The number of new loan modifications increased 16 percent in the third quarter to more than 133,000, according to the Treasury.
“One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months and even eight months,” said Comptroller of the Currency John C. Dugan.
“This trend of increasing delinquencies underscores the need to understand why these modifications have not been more sustainable.”
The ratio of loans modified in the first quarter that were delinquent a month or longer was 37 percent after three months and 55 percent after six months. The ratio of loans modified in the first quarter that were 60 or more days delinquent was 19 percent at three months and nearly 37 percent after six months.
The federal report provides loan-by-loan data in a standardized format for 35 million first-lien mortgages — worth more than $6.1 trillion — held or serviced by national banks and thrifts.
The generally gloomy economic news is dramatically raising the stakes for President-elect Barack Obama, and for the future of capitalism.
"Whatever Obama may have thought when he began this journey, at a time when the war in Iraq was foremost in many voters' minds, whatever his campaign promises, his presidency will be judged on how he handles the economic crisis that now envelops the United States and the world," writes Fareed Zakaria, editor of Newsweek International.
"For Obama to be remembered as a great president, he has to do nothing less than rescue capitalism."
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