Loan Modifications...Are they Working?

According to an article on the Bloomberg website, loans that were modified in the later part of 2008 are failing at a faster rate than those that were modified in the first part of 2008. Also what is most troubling is that these loans are not risky loans (the so-called subprime loans) which is increasing the credit default rate.

In a conference call with reports, John Dugan of the Office of Comptroller and Currency mentions that the trends of re-deault are on the same pace a year ago. The Office of Thrift Supervision and the Office of the Comptroller and Currency stats for the third quarter are 46% deliquency rate vs. a 41% deliquency rate in the first quarter of 2008.

Why is this happening? The economy and job markets are still in peril and the new loan plans are not reducing mortgage payments so they are more affordable to homeowners.

Couple of bright spots: The Obama Administrations housing plan is now in place this past month that should assist 9 million struggling homeowners. Also, some lenders are still willing to work to modify loans for applicants that qualify.

So we are in a wait and see mode how it will play out this year. What are your thoughts?