Report: Mods Increase Total Mortgage Debt

Alan M. White, an assistant professor at the Valparaiso University School of Law, has updated his report published in August that examined the success of industry loan modification efforts.

In ‘Deleveraging American Homeowners: December 18, 2008 Update to August 2008 Report,’ White expanded his previous study to look at data on more than 3.5 million subprime and alt-A mortgages, all securitized. About 300,000 of the mortgages were in foreclosure as of Nov. 25 – a number that is about one-sixth of all foreclosures pending. The 21,000 mortgage modifications in the November data represent about 20% of the monthly total modifications reported by HOPE NOW for October 2008.

Among White's findings were that modifications are not reducing principal debt, but actually increasing total mortgage debt. This is because almost no modifications include significant cancellation of either past due interest or principal and because many modifications involve capitalizing unpaid interest and fees into a larger debt and reamortizing the loan, White notes.

To see White's report in its entirety, visit

SOURCE: Alan White


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