10% of mortgage mods reduced principal
The number of modifications that cut the mortgage balance, while still small, is growing. Borrowers with loans backed by Fannie Mae and Freddie Mac remain shut out.
About 10% of mortgage modifications made in the first quarter included principal reduction, three times the percentage of a year ago.
A new report by the Office of the Comptroller of the Currency found that mortgage servicers reduced principal on 10.2% of the modifications done in the first quarter of 2012, up from 3% in the first quarter of 2011.
The number of homeowners receiving principal reductions is still quite small: 10,400 in the first quarter of 2012, compared with 9,870 in the last quarter of 2011 and about 4,800 in the first quarter of 2011.
The data in the report covers about 60% of mortgages, including loans serviced by the largest nine companies. The data includes loans backed by government-supported entities Fannie Mae and Freddie Mac, which are not eligible for principal reduction.
Homeowners whose mortgages are backed by the Federal Housing Administration and the Veterans Administration also are not eligible for principal reduction. Earlier this year, Edward
DeMarco, the acting director of the Federal Housing Finance Agency, had indicated the agencies were on the verge of rolling out a principal reduction plan, but the decision has been delayed for months.
No matter what Fannie and Freddie do, expect to see more principal reductions next quarter, Bruce Krueger, chief mortgage examiner for the OCC said. The $25 billion settlement reached between the federal government and major mortgage servicers called for tripling the compensation to servicers for principal reductions. That increased payment took effect in January.
"This report does not include any effects of the AG settlement," Krueger told journalists, as reported by Housing Wire. "You will likely see the effects the principal reduction starting in the second quarter."
Other data from modifications made in the first quarter:
- Interest rates were reduced in 80.6% percent of modifications.
- The length of the loan was extended in 73.7% of modifications.
- Principal was deferred in 24.6% of modifications. Fannie and Freddie favor this tactic, which sets aside a portion of the loan and doesn't require any payments on that portion of the loan until the loan is paid off or the home is sold.
- Monthly payments were reduced by an average of 27.4%, with an average decrease of $437 per month.
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Before all you "responsible people" start tossing rocks at the "irresponsible people" please do a little homework first. I bought a home in 2001 for 119k, and my bank told me it was worth 280k in 2006. I took 30k out, kept that home as a rental, and bought a bigger home for my growing family for 330k. Every expert we turned to for advice said that was a great move, including both mortgage companies we worked with and many realtors. Two years later the rental was worth 75k and our bigger home's foundation cracked in half and was worth $130k. Those same mortgage companies refused to help us at all so we bailed on both. At the same time my 100k/yr job went to 45k, and I was met with a crippling set of medical bills. Tell me where "irresponsible" came into play?
Those who gave their homes back/we're foreclosed on are not lazy, stupid, irresponsible, etc. Millions of people have a similar story. I didn't receive a bailout, but all of the bank down the street did. Toss your rocks at them.
Why can't we be fair to all those who have been honest? Freddie and Fannie should do the same thing in all states. We are constantly trying to prove right and wrong, instead of helpng people. Who died and left them in charge? This has been the worst housing market in history and their afraid that by doing the right thing for people who are victims, will send the wrong message? That is just another example of govenment not really caring. We who pay the bills, get little respect! They just don,t care People!!!
Why all of a sudden does it look like the banks are willing to re-negotiate loans and terms on loans? Has government regulators held them back or did they finally figure out they can still make money by working with the people that have fallen behind. They can still make a fair amount of money off of the loans by just refinancing them.
I still believe, the investors of the loans caused a majority of the economies collapse. That is not to say the banks weren't at fault, because they were, but they need to start taking resposibility for their actions in this economic mess also. This mess goes all the way up the chain, and congress is just as much at fault as the rest for letting the policies stand for investors to capitalize off of bad mistakes lower down the chain.
I am really glad to see if for no other reason than to save a little face the banks willing to negotiate with some people on their properties. Maybe now, real estate values for those who managed to stay afloat thru this will see values of the property they own start going up in value.
Banks are not in the real estate business.and neither were the investors. They only wanted to see a large return on investment and sometimes that doesn't happen. Look at the stock market as it goes thru its growing pains and the ups and downs.
Maybe this is the start of something good finally. The country could sure use it..........
About Teresa Mears
Teresa Mears is a veteran journalist who has been interested in houses since her father took her to tax auctions to carry the cash at age 10. A former editor of The Miami Herald's Home & Design section, she lives in South Florida where, in addition to writing about real estate, she publishes Miami on the Cheap to help her neighbors adjust to the loss of 60% of their property value.
