The latest data from the Office of the Comptroller of the Currency (OCC) shows that over 50% of homeowners who had their loans previously modified in order to avoid foreclosure have re-defaulted. This seems like an awfully high failure rate.
As one might expect, mortgages which were given higher cuts to their monthly payments (during the modification process) have been less likely to re-default. More help prevents re-default.
Hopefully the Making Home Affordable plan has encouraged more aggressive modifications. Past mortgage modifications were clearly just a delaying game, rather than a solution, since in the end more than 1 out of 2 “rescued” mortgages re-defaulted. It should have been done better the first time.
Were financial institutions unable to face the upfront losses which more aggressive mortgage modifications (and the haircuts they might cause) would have caused? Feel free to enlighten us here.