Lower Loan Payments = Fewer Redefaults for Homeowners

by juliaredstone | December 23, 2009 at 09:17 am

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It should come as no surprise that fewer troubled borrowers will redefault if their loan payments are lowered in a mortgage modification.

Only 18.7% of borrowers who had their loans modified in the second quarter were delinquent three months later, according to a banking regulators' report released Monday. This compares to 30.7% of borrowers in the first quarter.

Why the sharp drop in redefaults?

Regulators attribute it to their March directive that urged financial institutions to make sure the loan modifications they do are affordable and sustainable.