High Default Rate Seen for Modified Mortgages

The problem with "goosed" economic statistics and endless stimulus, better known as pretend and extend, is that it doesn't work. The illusion of centralized control (economic and social), however, ensures the the former will never be recognized.

Fitch Ratings Ltd. forecasts that most borrowers who get lower mortgage payments under a federal government program will default within 12 months.

Among those with loans that aren't backed by any federal agency, the redefault rate within a year is likely to be 65% to 75% under the Obama administration's Home Affordable Modification Program, or HAMP, according to a report to be released Wednesday by Fitch, a New York-based credit-rating firm. Almost all of those who got loan modifications have already defaulted once.

Diane Pendley, a managing director at Fitch, said the failure rate was likely to be high largely because most of these borrowers were mired in credit-card debt, car loans and other obligations.

Source: online.wsj.com