500,000 loan modifications done, 3.5 million to go

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Treasury Secretary Tim Geithner announced today that the government’s Making Home Affordable mortgage modification program has lowered monthly payments for 500,000 homeowners, beating a Nov. 1 deadline the administration set earlier in the year. I wish Barbara were here to tell us what this means (she’s off this week). The overall goal is 4 million loan modifications, so there’s still a ways to go. It’s also impossible to tell up-front how many of the modifications will stick—that is, prevent foreclosures rather than merely delay them. The Washington Post quotes an economist estimating that the mods have reduced foreclosures by 7% to 8% so far this year. The idea is that if you slow foreclosures, you slow home price declines, which in itself reduces the number of foreclosures. Still, as far as stopping the house price collapse, I think the super-low mortgage rates engineered by the Federal Reserve and made possible by the bailout of Fannie Mae and Freddie Mac have played a much bigger role than the loan-modification program.

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