Servicers tweaking loans, even though debt forgivenss more effective way of preventing defaults
Loan modifications for financially pressed homeowners have soared six-fold in the last year, though mortgage servicers are still making little use of the most effective approach to reducing borrowers’ delinquent payments.
Modifications rose to about 30,000 in August, from about 5,000 a year before, according to a report Wednesday by Rod Dubitsky, head of asset-backed securities research at Credit Suisse. The increase is a result of the decline in the performance of subprime loans, as well as new government and industry efforts.
“Our analysis does indicate some hope that indeed loan mods are a very useful tool in the housing rescue tool kit,” the eight-page report said. “Although mods have increased significantly this year, we think there is room for the industry to expand the scope, type and measurement of loan modification effectiveness.”