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Home General News Mortgage Industry Articles Mortgage Modifications Hit Record High
Mortgage Modifications Hit Record High PDF Print E-mail
Written by By: Reuters   

U.S. mortgage companies increased their use of loan modifications in foreclosure prevention efforts to a record level in December, an industry group said Thursday.

Modifications, or permanent contract changes to lower payments, reached 122,000 in December, compared with the previous high set in October, said Hope Now, a coalition of mortgage servicers, lenders and counselors.

Total "workouts," including negotiated payment plans, increased to a record 239,000 in the month.

Regulators and lawmakers have criticized the industry's foreclosure prevention efforts as too slow, or not effective, given reports that more than half of the modifications were failing after six months. The Federal Reserve said this week it would take steps to reduce foreclosures by encouraging servicers to modify at least $74 billion loans it owns, or has stakes in.

Hope Now, an industry group that includes major lenders such as Wells Fargo and subprime loan servicers, said members will likely turn more to re-underwriting new mortgages with lower interest rates or principal, over the less draconian practice of setting new payment plans to stretch out costs.

"Hope Now expects that the increasing reliance on loan modifications rather than payment plans will continue as economic conditions warrant," the group said in a statement.

Data showing more prime borrowers than subprime borrowers were facing foreclosures in December underscored the urgency of foreclosure prevention. Total foreclosure starts rose by 34,000 in December from November, 75 percent of which were prime loans, it said.