Posted on Wednesday, June 23, 2010
Fitch Ratings expects 55 to 66% of prime loans modified under HAMP to redefault within the next 12 months. For subprime and Alt A loans the prediction is 65 to 75%. Mods involving principal reductions, they say, may improve those numbers but those programs are not expected to roll out until later this year. And even they limit the write down to not less than 11% LTV and require 3 years borrower performance to earn the write down.
Even those mods that succeed often need to be restructured more than once. According to Fitch, 15% of the non GSE mods in RMBS had at least one mod as of May 2010. And 15% have received at least one additional mod. Yet mods still make up 70& of all work outs.