The Office of the Comptroller of the Currency (OCC), which regulates the national banks, issued a report on Wednesday regarding residential mortgages. Many mortgages that were modified in the first half of last year defaulted within a year. This has led banks and lenders to realize that borrowers need to be given a bigger break in order for a mortgage modification to work. Banks are also more capable of giving the needed breaks because they now have more money on their balance sheets than last year. Most importantly, Obama’s Making Homes Affordable program provided further incentives for banks to modify mortgages. The change in policy has been reflected in the results. There has been a 75% increase in agreements meant to help borrowers, including modifications, from last year. Also, the percentage of modifications that involve a reduction in principal tripled from 3.1% to 10%. Banks are not required to lower principal, but have been doing so anyway to try and forestall costly foreclosures.
A borrower who is struggling with their residential mortgage should strongly consider a mortgage modification. The eligibility criteria are relatively simple. The terms of the government’s mortgage modification program are also straightforward.