The NY Times reported in this article that over half of borrowers who had their loans modified in the first 3 months of 2008 are again at least 30 days delinquent on their mortgage. This raises questions as to the effectiveness of loan modifications.
Or, it may also lead to questions about how loans are being modified. It may be that the loan modifications that took place in the first 3 months of the year primarily focused on cutting the principal balance of the loan without addressing the amount of the monthly payment. If this is the case the homeowner may appreciate the lesser amount owed but if they’re having trouble making ends meet it won’t do anything do address that problem.
Or, it ma be that the downturn in the housing market is making it so many of these homeowners have lost their jobs making it impossible to pay their mortgage.
No matter what the cause it is clear that underwriting got a little too aggressive over the past couple years.