We have long advocated mortgage modifications as a remedy that banks used fairly freely in the stone ages when they held the paper. While we have also been told that the mods being offered these days are often too shallow to give the homeowners sufficient relief (ie, the bank could offer a reduction in principal, rather than the more common, and lower effective reduction of merely providing interest rate relief, and still come out ahead compared to a foreclosure). However, the latest report from the Office of the Comptroller of the Currency may put a dent in efforts to find ways to offer viable borrowers sufficient changes in terms.
The report shows redefaults occuring in more than 50% of those modified loans.
I fully expect the chart above to look more like Pacman in the near future (i.e. redefaults even higher as home prices have continued to fall). I guess an analogy for the ghosts is personal wealth?
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