San Joaquin Homes Community Blog

Most successful mortgage modifications reduce principal
A new study found that borrowers who receive loan modifications that reduce loan balances, and not simply interest rates, are less likely to redefault on the loan, according to the Federal Reserve Bank of New York.

Principal reductions are more successful at avoiding redefaults because they reduce negative equity and provide the borrowers with greater incentive to remain current on the loan, according to the study.  The study also found that borrowers who owe 15 percent or more than their homes’ value have a 51 percent higher risk of redefaulting in any given month.

Posted by Norbert G. Huston on January 6th, 2010 5:19 PMPost a Comment (0)

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