Mortgage modifications a savior for some, but 60 percent fall behind again
(CBS News) A report Thursday on America's fragile housing market said that 60 percent of homeowners who had their mortgages modified fell behind again on their payments within a year and a half. But for many others, the modifications can be a financials savior.
Daniel King of Babylon, N.Y. stopped making his $3,300 a month mortgage payment two years ago.
"Everything went up and I just misjudged my money at the time," he said.
The truck driver faced foreclosure so he applied for a mortgage modification. After a year of waiting, he learned his monthly payment will be cut by more than $1,000.
"I can't describe how great it feels to have my house again," King said.
The study by credit reporting company TransUnion looked at more than 500,000 modifications. Rick Sharga of Carrington Mortgage Holdings isn't surprised nearly two out of three homeowners with modifications fell behind in their payments again.
"Lenders were under a lot of pressure from the government from the regulators to modify just about everybody," Sharga said, "and frankly there were probably a lot of modifications made that really wouldn't have been made in a more normal period of time."
The report found that borrowers with modified mortgages who stayed current with their payments also did a better job repaying other debt.
Just 6 percent ended up behind on their car loans, compared to 11 percent of people without home loan modifications.
And more than 13 percent of borrowers who modified their mortgages fell behind on credit card payments compared to 17 percent of homeowners without a modification.
Sharga argues the 40 percent of Americans who've successfully stuck with modified loans is significant.
"That is about 2.2 million people who didn't go into foreclosure, whose homes didn't contribute to housing market depreciation overall and whose loans didn't have to be written off the books by the lenders. That is an enormous impact," he said.
Some 5.5 million Americans have modified their mortgages since 2006. But 4.8 million more Americans are in danger of losing their homes.
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