Do loan modifications work? That question was not answered by the Treasury Department today in a news release announcing the growth of loan mods. The Treasury said there are now about 650,000 borrowers in the loan modification program, or 20% of eligible borrowers. That figure is up from 16% participation in September.
What percentage of loan mod participants have missed a payment? The Treasury doesn't answer that question. Anecdotal reports suggest default rates at about 50%.
Are loan mod programs with high default rates better than immediate foreclosure for housing prices and lenders? My answer is yes because it keeps many people in their homes and alleviates some pressure on housing prices in hard hit markets. Some argue that we're just postponing our problems.
What's your opinion?
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