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Mixed Reports on Loan Mods

Adam Rust's picture

Posted July 15, 2010

The number of permanent loan modifications is up. There are more than 340,000 households with permanent loan modifications.

This is good number. Unfortunately, there is other news that doesn't seem so promising. The May Making Home Affordable report shows that a number of loan modifications that were canceled increased.
The number of cancelations was significant. There were 429,000 in May, compared to approximately 295,000 in April. This number, when compared to the permanent loan mod figure, paints a harsh picture of the options facing home owners that are trying to avoid a foreclosure. Even with political pressure from all kinds of places, more borrowers drop out of HAMP mods than reach a permanent mod.

It is hard to ignore the problem of parallel debt. A successful HAMP reduces mortgage debt to 31 percent of income. Unfortunately, it does nothing to address the other consumer debt. The average permanent mod recipient has a total debt service commitment of 63 percent of income. When debt is that high, it seems hard to believe that a borrower can avoid bankruptcy.