Loan modifications through the Housing Affordable Modification Program (HAMP) and various individual programs at many big banks have led to the reduction in monthly payments for millions of borrowers who were behind on payments.
Bank of America (NYSE: BAC) has been one of the leaders in loan modifications thus far, with more than 500,000 completed modifications between its programs and HAMP, and more than 200,000 currently in trial.
However, have these modifications led to struggling homeowners being able to pay their mortgage even with the reduced payment?
The study, released on Thursday, showed more than 50 percent of loans that have been modified have re-defaulted as of the fourth quarter of 2009 and are at least 60 days past due.
Modifications are aimed at enabling homeowners to stay current on their loans by providing them a monthly payment they can avoid, generally around 30 percent of monthly income. This in turn should boost the overall level of outstanding home loans that are current in America.
According to the study though, the percentage of overall loans that were current fell to 86.4 percent in the fourth quarter of 2009.
However, some positive developments did exist. The study showed that 594,000 loan modifications were started in the fourth quarter, more than double from the same period a year ago, which is a sing modification efforts have truly stepped up.
Also, newly initiated foreclosures fell by more than 15 percent in the quarter, which is a sign that more borrowers are will likely stay in their homes.
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