58% RE-default on "modified mortgages"

[SoCalDem]

http://www.housingwire.com/2008/12/08/redefaults-a-problem-occs-dugan-says/

Redefaults a Problem, OCC’s Dugan Says
By PAUL JACKSON
December 8, 2008

As if you couldn’t see this one coming a mile away: more than half of the loans modified in the first quarter of 2008 had redefaulted within six months of modification, according to statistics released Monday by the Office of the Comptroller of the Currency. “After three months, nearly 36 percent of the borrowers had re-defaulted by being more than 30 days past due,” Comptroller John Dugan said in a statement. “After six months, the rate was nearly 53 percent, and after eight months, 58 percent.”

In other words, recidivism rates are right where they historically have been, despite growing pressure to “do something” about a growing number of foreclosures. Dugan characterized the results, however, as “surprising” for regulators. Dugan’s remarks came during a panel discussion with Office of Thrift Supervision director John Reich, Federal Reserve Board chairman Donald Kohn, Federal Deposit Insurance Corp. chairman Sheila Bair, and Federal Housing Finance Agency Director James Lockhart.

Dugan suggested that regulators weren’t sure why redefault rates were so high. “Is it because the modifications did not reduce monthly payments enough to be truly affordable to the borrowers? Is it because consumers replaced lower mortgage payments with increased credit card debt? Is it because the mortgages were so badly underwritten that the borrowers simply could not afford them, even with reduced monthly payments? Or is it a combination of these and other factors?”

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Here's a HINT... No matter HOW low the "interest rate is". a $15 hr wage CANNOT pay for a $300K house..

This does not even include insurance & taxes

$1,432.52
Monthly Payment

Loan Amount:
Interest Rate:
Term of Loan:
$300,000
4.000%
30 years (fixed)

even a loan that's been "modified" down to 4% will eat up at least $400 per week of a takehome paycheck (with taxes & insurance)..That $400 out, has to leave enough for the payment of utilities, food, gasoline, car insurance, cay payments, child care, medical expenses, phone, etc.

IF a $15 an hour employee HAD a 40 hour week, their check would be around $600 BEFORE taxes..