Don't Pay Now, Don't Pay Later

The Office of the Comptroller of the Currency and the Office of Thrift Supervision just put out the second quarter Mortgage Metrics Report [pdf] and -- wait! wait! Don't leave! There may be a house in it for you.

Within three months, 27.7 percent of all modified mortgages were again delinquent. This continues the trend we saw last quarter (the first time OCC started tracking redefaults). The more loans you modify, the higher the percentage of redefaults you get. Understand: That doesn't only mean that the total number of redefaults goes up as the total number of modifications goes up; it means the percentage of modified loans that redefault is growing. In the first quarter, 65.9 percent of all modified loans had gone bad again after 12 months. In the second quarter that percentage -- a percentage of a higher number of loans -- had gone up to 67 percent.

Also of note: We are now starting to see results on loans that have been modified along the lines housing fairness advocates [pdf] lobby for: renegotiations in which the lender takes a substantial loss on the original loan. In some cases, monthly payments have been reduced by as much as 20 percent. Some 15 percent of those folks redefault within three months, slightly more than a third after one year.

Keep in mind that that last paragraph is considered success. The OCC argues, and the data indicate, that you have to reduce payments by at least 10 percent in order to make any dent in redefault rates.

The OCC uses indirect language again to describe mortgage-bailout efforts without indicating the results:

"Actions to keep Americans in their homes grew…"

"…efforts to assist homeowners and avoid loss were also on the rise…"

"…home retention actions have increased…"