Most HAMP Loan Mods Will Default

Though both Home Affordable Modification Program (HAMP) and servicer-specific loan modifications continue to increase, a sizeable amount of these loans will default again within a year, according to Fitch Ratings in a new report. As a result, Fitch maintains its projection that 65%-75% subprime and Alt-A
loans that have been modified will default again within a year. The prognosis is slightly lower for prime loans (55%-65%).

“Fitch continues to believe that, when properly done, modifications can benefit both homeowners and RMBS investors,” analysts wrote. “However, modification performance or sustainability continues to be affected by the borrowers’ desire to keep their property, as well as having sufficient cash flow to make the modified payments.”

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