A recently released study discovered that many borrowers that are behind
on their mortgages and work with lenders to get mortgage modifications
simply end up falling behind on their mortgage payments a second time
after the modification. In fact, Chicago-based credit reporting agency
TransUnion found that nearly 60 percent of homeowners who obtained a
mortgage modification fell behind on their mortgage again within 18 months following the modification.
TransUnion Mortgage Modification Study
During the study, TransUnion analyzed more than five million mortgages
with origination dates prior to 2008 - all of which had become past due
for at least four months sometime between January 2008 and June 2010.
Of these mortgages reviewed, roughly 559,000 were modified between January
2008 and July 2011.
According to Steve Chaouki, group vice president in TransUnion's financial
services business unit, "Our results found that about 4 in 10 consumers
remained current on their mortgages 18 months after modification."
Unfortunately, these numbers are not surprising as many borrowers who
participate in loan modifications without any further guidance merely
find themselves in the same predicament again.
However, one bright side of the study was that, "TransUnion found
that consumers with a mortgage mod performed better on new loans originated
after their initial mortgage default than those with no mods," said Chaouki.
For example, borrowers who obtained a new credit card following a mortgage
modification had an average 18 percent lower delinquency rate on those
cards than other borrows who did not get a mortgage modification.
Unfortunately, these relatively few positive figures do nothing to help
homeowners stay in their houses. However, one option that may still be
beneficial is bankruptcy. Not only will bankruptcy stop a foreclosure
in its tracks - giving the homeowner more time to obtain a loan modification
- but it may also help with other bills a debtor may fall behind on, such
as credit card debt. An experienced bankruptcy attorney can provide helpful
guidance to a debtor who is struggling just to get by.
Source: TransUnion, "
TransUnion: Consumers With Mortgage Mods Outperform Those Without on New
Loans, Despite 60% of Mods Going Delinquent Within 18 Months," June 21, 2012