Half A Million Bad Loans Kept On Life Support

The Treasury Department announces that 500,000 delinquent mortgages have been modified since July. Treasury provides no details on the scale or type of these modifications, so it's impossible to say how many of them reduce the borrowers' monthly payment by an amount (usually 20 percent or more) sufficient to make it somewhat likely that the borrower will not redefault. However abundant historical evidence suggests that roughly 200,000 to 250,000 of these mortgages will be back in default within a year.

Separately, the $75 billion Making Home Affordable program releases its own loan mod report [pdf], which details how the modification universe shakes out according to lender. My own useless bank, Wells Fargo, is now giving second chances to 20 percent of its 60-day-or-more deadbeats.

Treasury Secretary Timothy Geithner notes that the department has hit the half-million mark one month ahead of schedule. That's true. Unfortunately for Geithner, it isn't striking enough to distract audience members from the big Treasury news of the day: The dollar's pummeling in international currency markets.

Which is weird, in a way. Geithner has put a lot more energy into devaluing the dollar than he has into keeping deadbeats in their borrowed houses. But because the government knows people are stupid, he's only allowed to brag about the latter.

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  • Johnny Longtorso||

    Pardon my whoring some loan stats:

    http://www.federalreserve.gov/.....ratext.pdf

    ...For example, nearly 90 percent of large banking institutions report higher 30-89 day delinquency rates for CRA-related home purchase and refinance lending than for overall home purchase and refinance lending....

    http://www.banking.senate.gov/.....rb-cra.htm

    ... Delinquency rates for CRA loans are twice that for non-CRA loans in the market for home purchase and refinance (1.57 percent v. 0.79 percent)....

  • Johnny Longtorso||

    Only two links per comment? Me no likee:

    http://papers.ssrn.com/sol3/pa.....id=1106907
    George Mason Law & Economics Research Paper No. 08-17
    University of Colorado Law Review, Vol. 80, No. 1, Winter 2009, pp. 1-86

    ...According to the transcript of a Bank of America
    quarterly earnings call for analysts in October 2008, CRA
    lending comprised only 7% of its lending volume but 29% of its
    losses on mortgage products....

  • Suki||

    Unrelated: Obama wins Nobel Peace Prize

  • ||

    I plan to make a speech saying I will cure cancer next year. That should get me the Nobel Prize for medicine under the new standards.

  • hmm||

    People aren't stupid. They are just dealing with a limited information set.

  • Ben Kenobi||

    I've never owned any property before. Is there any reason I shouldn't default on my mortgage and get the monthly rate lowered 20% or more? That sounds like a sweet deal. Does this seriously mess up your credit, and so its not worth it?

  • Ebeneezer Scrooge||

    It will until Obama has you pardoned. Which is coming just as soon as somebody remembers to do a voter poll and he sees that it will help him get re-elected.

  • Suki||

  • Rhywun||

    Don't joke like that.
    ...
    Oh shit.

  • Ebeneezer Scrooge||

    the big Treasury news of the day: The dollar's pummeling in international currency markets

    Hmmm.

    Given the % change we're talking about, I'm somehow unimpressed. This is just a tiny little knee-jerk. The kind the stock market goes through all the time, only less.

    The gradual weakening over time, now that could actually mean something.

    For example it could mean, we're in debt up to our asses and people don't trust us to pay off our debt anymore. Because we elected first Bush and then Obama, and it's clear that congress is in no mood to reign in its own spending either. Instead it passes "stimulus" bills where the money isn't even to be spent until just before the next election cycle gets rolling.

  • Ebeneezer Scrooge||

    Or maybe, it means the international community is really pissed because we bombed the moon.

  • Turnkey||

    The dollar really should be worth a lot less considering how the US is dealing with it.

    If it falls then some improvement might actually be made to US government practices and trade deficits.

  • Turnkey||

    The dollar really should be worth a lot less considering how the US is dealing with it.

    If it falls then some improvement might actually be made to US government practices and trade deficits.

  • Xeones||

    If it falls then some improvement might actually be made to US government practices and trade deficits.

    HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA

    wait were you serious?

  • Xeones||

    I think i'm gonna stop paying my mortgage. That way i can afford a new car and maybe a better tv. All y'all can just bail me out later, cool?

  • ||

    the big Treasury news of the day: The dollar's pummeling in international currency markets

    Hmmm.

    Given the % change we're talking about, I'm somehow unimpressed. This is just a tiny little knee-jerk. The kind the stock market goes through all the time, only less.

    That would be true, if the dollar weren't the international reserve currency and safe haven of choice. For that kind of currency, any kind of volatility is very bad news.

    Plus, the long term trend is decidedly down, with no reason to think it will stop. I lack the technical expertise to really understand it, but I understand that the dollar is the currency just recently adopted for the "carry trade", which I gather means it is the currency of choice for large-scale arbitrage and manipulation. The carry traders just made the switch from the yen, so that should give you some idea what they think the long-term outlook for the US economy is.

  • Ebeneezer Scrooge||

    Well, okay, but those fluctuations in international currencies have always been there anyway.

    But I still can't get away from the conclusion that this "unseat the US dollar" thing remains a pipe dream. Doesn't the fact that the US economy still dwarfs everybody else play a big role here?

    I'm out of my element here and never get time to read as much about it as I'd like. Somehow in this economic "down turn" I find myself working more over time than ever before. But hey I'm employed right.

    If I read it right, the European system is in worse shape than ours. They've got at least as much collective debt and less central control and authority over the individual players (countries). So I'm not seeing why the Euro is going up. Markets have mis-perceived things before. Why is Europe's long term economic prospects any better than ours? I contend the contrary is true.

    And China, Russia? No way. China's growth potential slows in proportion to slowing down the US economy. Who else are they going to sell their stuff to? Russia hardly counted in the first place.

    Given the passage of a socialist health care system and a nice fat carbon tax, I could see the US economy taking a big sudden nose dive. But as it is, I just see us limping slowly down hill for a while to come yet.

    Eventually yes, we're no longer the big bull elephant and then this pipe dream could become real.

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