Banks said 187,000 mortgages nationwide were modified in the first half of 2008. The FDIC said it modified 5,000 loans since mid-November at IndyMac. A historic 6.99% of borrowers were behind on their payments in December 2008, said the Mortgage Bankers Association.
The loan modification process is complex and cumbersome for most borrowers. A number of loan modification companies formed in 2008, which promised to help borrowers to the tune of upfront cash payments of $3,000 and up.
As of October, 2008, the HOPE Now program sent out two million notices to homeowners and 17% of those borrowers called back to ask about modifying their loans.
However, the long-term effect of loan modifications is questionable. A Credit Suisse study in October revealed that 30% of loans modified in 2007 were 60 days delinquent within the first 8 months of 2008. According to the Office of Thrift Supervision, more than half of the borrowers who negotiated a loan modification in 2008 fell behind in their payments within six months.
