Loan Mods Already a Huge Failure

The WSJ summarizes nicely the recent data from Comptroller of the Currency John Dugan:

"The results, I confess, were somewhat surprising, and not in a good way." Of mortgages modified in the early part of this year, more than 35% had gone at least 60 days delinquent again after just six months, and a full 53% were 30 days delinquent or more. By eight months, this default rate had climbed to 58%. Second quarter modifications are on track to be nearly as ugly, with more than 50% of borrowers at least 30 days delinquent at the six-month mark. Come to think of it, these stinkers are going south so quickly that perhaps the FDIC's plan actually will protect taxpayers -- there won't be much left to insure after these toxic loans blow up in the first six months after modification.

Of course, that would mean that fewer foreclosures would be avoided, which is supposed to be the point of this exercise. For her part, FDIC Chairman Sheila Bair says that "The OCC's data on redefaults raises more questions than answers because it fails to define, in any meaningful way, the modifications that have redefaulted." In politics, when you don't like the data, merely wish it away.

Unfortunately for us taxpayers, Bair is perhaps the biggest proponent of restructuring all delinquent mortgages, which will leave the housing industry in shambles for a longer period of time and will present a nice tax bill for Treasury. One observation is that, whenever the name of Sheila Bair comes up in the press, she is always labled "Republican." I suppose it's possible to have such a dim-witted Republican, but when your proposals can't be distinguished from Nancy Pelosi's or Ted Kennedy's, it's hard to believe that she is anything but a big-government Liberal.