Principal forgiveness on average is becoming more prevalent percentage-wise among top nonagency market participants, according to a recent Standard & Poor’s report.
“Among the top five servicers for nonagency loans, we’ve noted that principal forgiveness as a percentage of average modifications performed on a monthly basis has increased about 200% since the latter half of 2011,” the company’s researchers said in the report.
“We attribute part of this to the $25 billion settlement in February 2012 with 49 state attorneys general and these same five servicers.”
The company’s report also notes that under the Home Affordable Modification Program’s principal reduction alternative, “borrowers have received approximately $9.6 billion in principal forgiveness as of March 2013” and, “interestingly, servicers have ramped up their use of principal forgiveness on loans that don’t necessarily quality for PRA assistance.”
S&P added, “Although
The company, which on Tuesday introduced a new residential mortgage-backed securities recovery analytics tool at a meeting in New York, has maintained since June of last year that principal forgiveness is “more likely to keep U.S. mortgage borrowers current than more commonly used modification tools.”
S&P said in its report that the aforementioned data gathered since then “support this view” as well as “demonstrate servicers’ growing adoption of this form of loss mitigation.”
