A new study conducted by TransUnion has found that consumers who received mortgage modifications outperformed those who did not on new consumer loans that were opened after their initial mortgage delinquency. This improved performance occurred despite the fact that nearly six in 10 mortgage modifications went 60 or more days delinquent 18 months following the modification date.
According to TransUnion, the study only looked at loan modifiers and non-modifiers, with comparable VantageScore credit scores, who had originally been 120 or more days past due (DPD) on their mortgage loans. It found the recidivism rate – the rate at which modified mortgages again went 60 or more DPD – was 41.9% 12 months after modification. After 18 months, that rate had risen to 59.1%.
‘The purpose of this study was to learn how consumers performed on other loans opened following serious mortgage delinquency, and what impact mortgage mods might have on that performance,’ says Steve Chaouki, group vice president in TransUnion's financial services business unit. ‘To do this, first we needed to determine the outcome of certain mortgage loan modification programs. Our results found that about four in 10 consumers remained current on their mortgages 18 months after modification. More generally though, TransUnion found that consumers with a mortgage mod performed better on new loans originated after their initial mortgage default than those with no mods.’