Loan Modification Success Rate

If you have some time to kill... feel free to read through the page-turner known as the:

"Office of the Comptroller of the Currency and Office of Thrift Supervision Mortgage Metrics Report, Disclosure of National Bank and Federal Thrift Mortgage Loan Data". (Full document here).

Assuming you won't actually read the whole document :-), allow us to highlight some of the findings for you:

1. In 2008, only 41.85 percent of all modifications reduced monthly principal and interest payments for homeowners. For delinquent borrowers - - a loan modification resulted in an INCREASED or EQUAL payment amount 58.15% of the time!!
2. If a loan modification resulted in NO CHANGE in principal and interest payments, that generally resulted in the homeowner re-defaulting 50.6% of the time after 6 months.
3. If a loan modification resulted in an INCREASE in monthly principal and interest payments, that generally resulted in the homeowner re-defaulting 45.8% of the time after a period of six months. (Yes... it's interesting that an INCREASED payment has a lower re-default rate than a loan mod with no change in payment amount).
4. HOWEVER, if a loan modification resulted in a reduced payment of 10% or more, the re-default rate shrank to just 22.7%. (77.3% success rate).

The national press jumped on the news a few weeks ago about the re-default rate of loan modifications (Here and Here, for example)... as 'proof' that foreclosure mitigation strategies don't work. What they DIDN'T mention is that NOT all loan modifications are equal - - some even INCREASED homeowners payments!

If you've thought about seeking a loan modification with your lender, or have already received an offer to modify the loan from them... you want to be EXTREMELY careful that the modification they're offering you is really in your LONG-TERM best interest. The Center's network of Foreclosure Counselors are ready, willing and able to take a look at the suggested modification, and help you decide if it will work for you.

ALSO... we couldn't post about loan modifications with warning Minnesota Home Owners AGAIN, to make sure that they do not PAY for any third-party loan modification service. Deal directly with your lender yourself, or with one of our free, non-profit Foreclosure Counselors. For additional warnings about for-profit loan modification companies (and scams)... visit here and here.