Mortgage Modifications Fail to Halt Defaults
Fitch Ratings is slated to release a report this week showing that 65 to 75 percent of modified subprime loans will fall behind by 60 days or more within one year of the loan change.
Although some experts believe that reducing the principal amount owed is the best way to keep distressed borrowers in their homes, Fitch found that 30 to 40 percent of loans that had lowered principal amounts were still redefaulting after 12 months.
Borrowers are redefaulting at a high rate because home prices continue to fall, unemployment is rising, and because of public pressure to help home owners, even those who are still likely to default even after receiving assistance.
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