Mortgage mod. helps with re-defaults
TEXT OF INTERVIEW
STEVE CHIOTAKIS: Mortgage applications rose last week,
lifting the number of refinancing loans to its highest level in more than a year. Thanks to low interest rates. A tiny morsel of good news in a buffet of bad housing news. Yesterday, news came down that sales of previously owned homes plunged between June and July. We’ll get new home sales numbers later today. So then here’s this morning’s big question. It’s one we’ve asked before, about people having problems with their home loans and whether they’re getting any relief from programs designed to help. A new report out today says yes, efforts to prevent foreclosures are working out better these days. That’s according to a group of state banking regulators. They found homeowners who got recent mortgage modifications are less likely to wind up back in default. Marketplace’s Amy Scott is with us live this morning from Baltimore with the latest. Good morning, Amy.
AMY SCOTT: Good morning, Steve.
CHIOTAKIS: Sounds like good news. Why the change?
SCOTT: Well, it’s partly because home prices have stabilized. People who had their loan payments reduced last year were half as likely to fall behind as those who got a break in 2008.
Here’s how Chris Mayer at Columbia Business School explains it.
CHRIS MAYER: People who saw their mortgages modified watched house prices continue to fall and that really killed many modifications that had started because people just saw that even with the modification they were terribly underwater.
As in they owed the bank more than their house was worth. And, Steve, it wasn’t just the market getting better. Mayer says lenders are also more willing to give people a reduction on the balance of their loans, not just monthly payments. And that helps, too.
CHIOTAKIS: So Amy, how is this going to this affect the housing market, where we have these lousy sales numbers?
SCOTT: Right, well in theory, it could mean fewer foreclosures than analysts have been predicting and that could help stabilize the market. But this report points out that foreclosures still far outpace mortgage modifications.
CHIOTAKIS: Marketplace’s Amy Scott, reporting from Baltimore this morning. Amy, thanks.
SCOTT: You’re welcome.
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