Tuesday, December 23, 2008

Mortgage Redelinquency Problem

This situation will keep getting worse and worse if government does not establish a price floor.

The rate of home mortgage borrowers defaulting after their loans are modified is rising and shows no signs of leveling off, U.S. banking regulators said on Monday.
The data showed that after six months, nearly 37 percent of mortgage loans modified in the first quarter were 60 or more days delinquent. After three months, 19 percent were 60 or more days delinquent or in the process of foreclosure.

"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 or even eight months," John Dugan, head of the Office of the Comptroller of the Currency, said in a statement.

The number of delinquencies rose across all loan categories, although subprime loans had the highest default rates. At the same time, nine out of 10 mortgages remain current, the joint report by OCC and the Office of Thrift Supervision said. Some U.S. lawmakers and the head of the Federal Deposit Insurance Corp have called for a more aggressive effort by lenders to modify mortgage terms to help keep people in their homes. The data, some of which was released in preliminary form earlier this month, were based on information collected from some of the biggest U.S. institutions, such as Bank of America, Citibank and JPMorgan Chase.

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