Mortgage work outs and renegotiation are not working. too many people are re defaulting on their mortgages. The Office of Comptroller of the Currency shows that a high re-default rate on mortgages that have been modified in the first two quarters of 2008.
Here are the results of the OCC statistics during the first and second quarter of 2008:
1. 36% of borrowers had re-defaulted by being more than 30 days past due
2. 56% defaulted after roughly six months
3. 58% of borrowers had re-defaulted after an eight month period
These numbers represent the number of mortgage work outs that had re-defaulted on their mortgages after the modification was completed. Clearly, the banks have not done enough in restructuring these loans to keep people in their homes. This coupled with a small amount of work outs completed and a terrible economy are adding to the housing mess that is now an across the board slowdown that is still not contained.
The fed is aware of the continuing spiraling down of the economy and is now shifting from making "qualitative loans" to making "qualitative loans". In other words, throwing so much money at the problem that eventually, the banks will have to free up and start lending.
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