The above statement was made by John Dugan, U.S. Comptroller of the Currency on CNBC this morning. The Comptroller of the Currency is the administrator of the national banking system. He was reporting on a study recently released that indicated that loan modifications are not successful in averting mortgage default and foreclosure for most of the homeowner-borrowers that have been its beneficiaries.
“Re-default rates increased each month and showed no signs of leveling off after six months,” Dugan said in a statement. “This trend of increasing delinquencies underscores the need to understand why these modifications have not been more sustainable.”
Mr. Dugan wasn't sure if the modifications don't work because the modifications weren't drastic enough, or if the people simply were in over their heads so deep that no form of loan modification would have any hope of helping them. In either case, between 50-60% of loan modifications result in new defaults and foreclosures within 6 months of the modifications. Doesn't it make sense to know this before the modifications are made so that taxpayer funds aren't wasted by throwing good money after bad? (One of my cardinal rules of trading is never, never, never add to a losing position. You always lose money that way.) Regardless, this is why Mr. Dugan said that the mortgage crisis is going to get much worse and foreclosures are certain to continue to rise! (And Congress will continue to create more debt so they can throw good money after bad!)
