Lowell Deeds

The latest on real estate recordings and new technology from the Middlesex North Registry of Deeds in Lowell

July 10, 2009

New Study on Mortgage Modifications

by @ 1:04 pm. Filed under Archived, Real Estate

A Globe article earlier this week described the apparent futility of efforts to reduce foreclosures by modifying mortgages that are already in distress. The article cites a new study by the Federal Reserve Bank of Boston which concludes that banks are only willing to help mortgagors who don’t really need the help in the first place and avoid attempts to modify the loans of those in the most financial distress because the bank is likely to lose money on them.

The FRB study, which is available online here, also concludes that securitization does not play a major role in this hesitancy to modify mortgages. By securitization, the study refers to the theory that modifications were not occurring because investors who purchased shares of pooled mortgages were sabotaging such efforts in an attempt to maintain the high initial returns on their investments. The FRB study concludes that mortgages controlled by investors are modified at the same rate as mortgages held by banks, so the data does not support singling out the investors as the cause of the poor incidence of modification.

There is a sense left after reading the study that money from the federal government for mortgage modifications would be more effectively spent by giving it directly to the borrowers for use in making current their delinquent loans rather than giving it to financial institutions (as is now the case) who don’t seem to be using the money for the purposes intended.

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