More Florida Home Mortgages Permanently Modified

The number of homeowners able to fight off foreclosure with permanent changes to their mortgages has jumped in the past three months, a new report shows.  Through the end of June, about 7,800 mortgage holders have secured permanent loan modifications in Metro Orlando since early last year—a 65 percent increase compared with three months earlier.  Meanwhile, the number of delinquent homeowners with only temporary loan modifications has been cut in half.  Those with permanent deals had a median of about $500 a month cut from their monthly payments, according to the report, which was issued this week by the U.S. Department of Housing and Urban Development and the Department of Treasury.

Two parts of Florida—the four-county Orlando metro area and the giant Miami-Fort Lauderdale-West Palm Beach metro area—were among those nationwide with the most mortgage modifications, both temporary and permanent, in the latest report.  Orlando had 15,130 as of June 30, while Miami-Fort Lauderdale-West Palm Beach had 35,261.

The tradeoffs homeowners are willing to make to get smaller monthly mortgage payments appear to be shifting.  All of the homeowners admitted to the federal Home Affordable Modification Program have benefitted from lower interest rates, but now a greater proportion are also agreeing to make payments for an extra decade.  As of the end of June, 56 percent of the borrowers with mortgage modifications agreed to extend the terms of their notes, usually from 30 years to 40 years.  Just three months earlier, when the federal government last reported on the program, only 39 percent were agreeing to longer terms.  Pushing up the number of years on a mortgage is typically a last resort, after an interest-rate reduction.  “The government isn’t terribly fond of extending the loan term, because they want people to build equity,” said Tim Mattingly, president of United Mortgage Partners.

Lenders have nudged little in terms of writing off principal as customers struggle to make payments on houses now worth less than the mortgage.  Lenders reduced the principal on about 29 percent of the nation’s modified loans through June 30, only a one-percentage-point increase from the March 31 report.  Some lenders continued to lag the industry as a whole in getting delinquent homeowners into permanently modified loans. Bank of America, which became the behemoth of mortgage holders after acquiring Countrywide Financial in 2008, had converted only about 15 percent of its borrowers who were at least two months behind on their payments, according to the June report. In comparison, the conversion rate for lenders overall was about 23 percent, the report said.