Redefaults on private modifications cut by more than half
The percentage of mortgages that redefaulted within six months after receiving a private modification fell to the lowest level since the industry began reporting the data in 2009.
Roughly 8.9% of the more than 925,000 modifications banks granted through their own private programs over the past 18 months slipped into 90-plus day delinquency as of July, according to the Hope Now alliance of servicers, investors and insurers.
That's down from a 10.3% redefault rate measured the month before. One year ago, the rate neared 20%, according to previous Hope Now reports.
More modifications were offered in July as well. More than 66,000 homeowners received a private modification during the month, up 42% from June as servicers ramped up relief under the $25 billion robo-signing settlement with the 49 state attorneys general.
The improved performance showed not just in modified home loans but across the entire market. The 2.47 million total mortgages at least two months delinquent dropped more than 10% over the last 12 months, according to Mortgage Bankers Association data.
Faith Schwartz, executive director for Hope Now, attributed the improving rate of redefaults to a "higher percentage of sustainable and realistic solutions being offered to homeowners."
"The state of the economy, geography and modification program types are always contributing factors to the effectiveness of modifications," Schwartz added.
Still, the 164,500 foreclosures started in July will likely outnumber short sales and modifications during the month after the Treasury Department reports its latest program figures in the coming days.
Foreclosure starts increased 5% from the previous month but remained down more than 11% from one year ago.