The blogger at Sober Look writes,
This is telling us that mortgage modification programs have not been very successful, as the probability of re-default rises. By modifying mortgages, banks in many cases are simply kicking the can down the road – and now some are writing down these mortgages (which may be what is driving the higher charge-off numbers). We are therefore seeing an increase in delinquencies, but mostly among modified mortgages and concentrated in sub-prime portfolios.
It actually helps to have some experience in the mortgage business. Unlike Joseph Stiglitz, Martin Feldstein, Glenn Hubbard, and others who have written op-eds and influenced policy makers, I actually know something about the track record of giving delinquent borrowers a “break” by modifying their mortgages. What lenders have found is that, even in good times, loan modifications just set borrowers up to fail again. Maybe in the confines of your faculty office you can design a program that should work in theory. But in the real world, we observe failure in practice.