Sometimes I am surprised that people are surprised.
According to a December 8th article by Market Watch, a high number of modifed mortgages are re-defaulting. They were surprised?? Really??
According to the OCC statistics, which looked at loans modified in the first quarter and second quarter of 2008, 36% of borrowers had re-defaulted by being more than 30 days past due and after six months, the rate was roughly 56%. After eight months, 58% of borrowers had re-defaulted.
Some home buyers had “legitimate” defaults in that they lost a job, had medical issues etc, but that is a small portion of defaults. The mass foreclosures were due to speculation and a desire to have more. People that don’t know how to budget aren’t going to suddenly learn how to budget just because their loan was reworked.
I was actually surprised that the rate of re-default was so low. I would have expected it to be in the 70%ish range. Well, the good news is that some home buyers worked out a way to live free for a few more months. The bad news is that more foreclosures are going to hit the market.
I think we need to stop giving people so many chances. It just delays the inevitable.