'Re-Defaults' as High as 60%
Washington-Re-defaults of newly modified loans are "remarkably high," according to the Office of the Comptroller of the Currency, which released data showing that 36% of restructured loans are 30 days past due after three months.
"After six months, the rate was nearly 53% and after eight months, 58%," comptroller John Dugan said at an Office of Thrift Supervision housing forum.
The comptroller openly questioned using government money to modify mortgages, wondering whether creating new jobs for struggling consumers might be a better idea.
Using first-quarter 2008 data, the OCC also found that 35% of modified loans were 60 days past due after six months.
"Not all re-defaulted mortgages go to foreclosure," Mr. Dugan said. The OCC is beginning to ask servicers why the re-default is so high.
The comptroller also gave a preview of the third-quarter OCC/OTS report on loan workouts and foreclosures that was being released as this publication went to press.
He noted that loan modifications have nearly doubled since the first quarter and foreclosure starts fell 2.6%. Foreclosure starts totaled 288,740 in the second quarter.
"In general, the third-quarter report will show many of the same disturbing trends as the other recent mortgage reports," Mr. Dugan said.
"Credit quality continued to decline across the board, with delinquencies increasing for subprime, alt-A and prime mortgages - and the greatest increase in percentage terms was in prime mortgages," he said.
Speaking at the same forum, Federal Deposit Insurance Corp. chairman Sheila Bair defended the concept of government involvement in loan modifications.
Ms. Bair said the OCC study offers no "granular" detail on borrowers going delinquent after having their loans modified. She said the OCC study offers no information on debt-to-income ratios, borrower income and other metrics.