It's interesting to note that the default rate for U. S. mortgages that have been modified to prevent house foreclosures may actually end up at 75% according to Fitch Ratings, because of "shrinking disposable income, escalating job losses and possibly some deceptive practices on the part of the borrowers themselves".
Since the U. S. government announced assistance programs to help struggling homeowners and lower the rate of foreclosures, lenders have been trying to modify mortgage terms for borrowers to give them a better chance to get back on track. They reported that aproximately seven per cent of U. S. home loans packaged into securities without government support have been modified to date.
In a statement to Bloomberg, a Fitch representative stated that loan modifications hold clear value for many homeowners proved the modified payments are sustainable. Unfortunately, more often than not, reducing the home payments to an affordable level may not be enough to rescue borrowers who are overextened on other credit and expenses.
How will all this shake out? We'll have to watch and wait, only time will tell.
Warmly,
Mary Wozny
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