30% of FHA mortgage modifications redefault within a year
Posted By JON PRIOR On November 18, 2011
More than 30% of the nearly 282,000 modifications completed on Federal Housing Administration mortgages in 2010 redefaulted within a year, according to an independent study sent to Congress this week.
It's not great news, but it is down from last year's statistics.
Modifications made in 2009 remain the worst performing since the financial crisis struck in 2007. Nearly 39% of the 180,700 FHA modifications completed that year redefaulted within 12 months.
FHA loans do not go through the wider Home Affordable Modification Program, but have their own FHA-HAMP option, which combines principal deferment, among others.
The FHA put in new tools in 2011 including longer forbearance timelines for unemployed borrowers.
Public programs, while they reach fewer borrowers than the private ones, have consistently performed better. The Office of the Comptroller of the Currency reported in October that 34% of the 129,000 permanent mods completed in the first quarter of 2010 redefaulted within one year , compared to 19.4% of the 100,200 HAMP workouts completed in the same period.
Still, public programs are funded through taxpayer dollars. The Treasury Department has obligated $29 billion through HAMP.
Foreclosure starts on FHA-insured mortgages dropped to less than 10,000 in September 2011 from nearly 28,000 at the peak in March 2010. But that has been due to the continued robo-signing freeze servicers put on in October 2010 to fix faulty affidavits and other practices. "That, in turn, produced a decrease in claim payments during FY 2011," according to the report. "The final resolution of these open cases is still unknown."
Ron D'Vari, CEO of the financial advisory firm NewOak Capital in New York, said housing cures will come by adding more jobs. "The ultimate cure will come with fixing the job market which most effects those less prepared to deal with a sustained unemployment. ," D'Vari said. "In many cases these borrowers are better off with renting and having a more flexible arrangement so they can migrate to where jobs are."