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Following Mortgage Modification, Majority of Borrowers Fall Behind Again


A recently released study discovered that many borrowers that are behind on their mortgages and work with lenders to get mortgage modifications simply end up falling behind on their mortgage payments a second time after the modification. In fact, Chicago-based credit reporting agency TransUnion found that nearly 60 percent of homeowners who obtained a mortgage modification fell behind on their mortgage again within 18 months following the modification.

TransUnion Mortgage Modification Study

During the study, TransUnion analyzed more than five million mortgages with origination dates prior to 2008 - all of which had become past due for at least four months sometime between January 2008 and June 2010. Of these mortgages reviewed, roughly 559,000 were modified between January 2008 and July 2011.

According to Steve Chaouki, group vice president in TransUnion's financial services business unit, "Our results found that about 4 in 10 consumers remained current on their mortgages 18 months after modification." Unfortunately, these numbers are not surprising as many borrowers who participate in loan modifications without any further guidance merely find themselves in the same predicament again.

However, one bright side of the study was that, "TransUnion found that consumers with a mortgage mod performed better on new loans originated after their initial mortgage default than those with no mods," said Chaouki.

For example, borrowers who obtained a new credit card following a mortgage modification had an average 18 percent lower delinquency rate on those cards than other borrows who did not get a mortgage modification.

Unfortunately, these relatively few positive figures do nothing to help homeowners stay in their houses. However, one option that may still be beneficial is bankruptcy. Not only will bankruptcy stop a foreclosure in its tracks - giving the homeowner more time to obtain a loan modification - but it may also help with other bills a debtor may fall behind on, such as credit card debt. An experienced bankruptcy attorney can provide helpful guidance to a debtor who is struggling just to get by.

Source: TransUnion, " TransUnion: Consumers With Mortgage Mods Outperform Those Without on New Loans, Despite 60% of Mods Going Delinquent Within 18 Months," June 21, 2012