OCC: Loan Mods Perhaps Not the Panacea Some Believe

Sheila Bair's not going to be crazy about this. In its fourth-quarter Mortage Metrics report, the OCC indicates that 35% of borrowers who’ve received loan modifications missed three or more payments within nine months of modification. And fully 57% of modified borrowers missed at least one payment within nine months. Plus, modified borrowers are falling behind more quickly than they were at the start of the year.

Unimpressive! It’s hard not to conclude, based on numbers like this, that loan modifications aren’t the cure-all Bair and her minions seem to believe, and that, instead, they merely delay the inevitable while unnecessarily soaking borrowers for a few extra months. . . .

Mod-ites will counter that modifications that provide real relief (that result in a decrease in the borrower’s monthly payment of 10% or more, say) perform much better. Maybe.

Even there, though, 23% of borrowers were seriously delinquent within six months. . . .