John Dugan, Comptroller of the Currency has people thinking about the potential risks of mortgage loan modifications. Releasing data earlier this week, Dugan revealed that over 50 percent of loan workouts re-default within the first six months.
Meanwhile, FDIC Chairman Sheila Bair says, “not so fast, check your data.” Bair points to how loan are modified as the key determinate of success. For example, lowering rates drops that re-default rate to 23 percent according to Credit Suisse survey. A recent Ocwen loan modification report (a major subprime mortgage servicer) seems to confirm this argument. Allegedly many of the loan modifications surveyed by the OCC report included workouts that actually increased the monthly payment.
However, despite the debate a lot of sources are now unloading on Bair. Looks like politicians are taking the opportunity to bite back at the highly political game Bair has been playing to push her IndyMac Federal Bank loan modification mainstream.
Here is a sample of the criticism and political back-biting (curiously waged by the media by proxy):
Give me your opinion–follow me on Twitter: @billrice)
(photo credit: jkealing, courtesy KU)
About Bill Rice
One firm that I do some work with, business consulting, here in Indiana is a mortgage company that has had enough requests for assistance on loan modifications that they’ve hired an attorney to handle.
The demand is high, and so far our results have been solid when the servicer-mortgage co. agrees to a 2-5 year rate reduction. Now in our area real estate values have only fallen slightly in the last two years, so values should be able to make up any gaps quickly when the market recovers.
@daltonsbriefs It looks like the rate reduction approach is the right one. Even the OCC data seems to support that approach. Thanks for the comment!