Lenders Avoid Redoing Loans, Fed Concludes; Boston Globe
The Obama administration's $75 billion foreclosure prevention effort is unlikely to succeed because mortgage lenders cannot turn a profit on modified loans, concludes a new report by the Federal Reserve Bank of Boston. Analyzing 665,410 loans originated between 2005 and 2007 that subsequently became seriously delinquent, the Boston Fed found that only 3 percent of borrowers had their loans modified to lower monthly payments; and about 5.5 percent received workouts that did not result in lower payments. Also, up to 45 percent of about 150,000 borrowers who received some kind of aid ended up in arrears again; but about 30 percent of delinquent borrowers were able to fix their problems without help from their lenders.