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For several months, in discussions about the various and varied loan modification programs out there, we've been noting that re-defaults are rising, but we never actually had any numbers. Today we do. According to the Comptroller of the Currency, John Dugan, who gave a preview of his latest Mortgage Metrics report:

“After three months, nearly 36 percent of the borrowers had re-defaulted by being more than 30 days past due. After six months, the rate was nearly 53 percent, and after eight months, 58 percent.”

Dugan was speaking at the Office of Thrift Supervision's National Housing Forum. All the headliners were there: FDIC Chairman Sheila Bair, the OTS's John Reich, the Fed's Donald Kohn, FHFA Director James Lockhart, to name a few. Unfortunately, none of them could give a definitive answer as to why all those loans are redefaulting, not even Dugan.

“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?”

Unfortunately, no answers. My guess is, the growing number of job losses, and all of the above. I realize that there are a lot of public and private sector programs really trying to help troubled borrowers, but the fact of the matter is that a lot of troubled borrowers are beyond help. And instead of spending so much time focusing on trying to modify these loans, perhaps we need to look at the problem from a different perspective.

• Many Borrowers Re-Default After Mortgage Is Modified

How do we transition these borrowers out of homes they can't afford, with as little pain as possible, and in turn give qualified borrowers the incentive to buy up the inventory? Unless the lenders or investors or government officials are willing to simply throw the loan out and give away an awful lot of house to an awful lot of borrowers, modifications, and certainly "mass modifications" which a lot of government types are pushing, are just exacerbating the problem.

• Housing Chief Sees No 'Target' in Mortgage Rates

Questions?  Comments? 

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