NEW YORK — One in five US homeowners whose loans were modified under a federal program to help reduce foreclosures were at least 60 days late in their payments a year after their mortgages were reworked.
The redefault rate for the Making Home Affordable Program averaged 20.4 percent after 12 months, 15.9 percent after nine months, 10.7 percent after six months, and 4.6 percent after three months, according to the Treasury Department.
The number of active, permanent modifications reached 521,630 as of Dec. 31 under the program, which was intended to help 3 million to 4 million homeowners save their properties from being seized by lenders.
“While we cannot prevent every foreclosure, it is important to remember that these programs have helped to create more options for affordable and sustainable assistance than have ever been available before,’’ said Tim Massad, the acting assistant Treasury secretary for financial stability.
In a Jan. 25 report, Neil Barofsky, special inspector general for the Troubled Asset Relief Program, or TARP, called the loan-modification program “anemic’’ and “remarkably discouraging.’’ He said permanent loan modifications “pale in comparison’’ to foreclosure filings.
The Treasury Department yesterday released demographic information about borrowers who received loan modifications.
The median gross annual income for a homeowner with a permanent modification was $46,196, according to Treasury data. The median credit score was 570 upon entering the trial period. The Federal Housing Administration requires at least a 580 FICO score to qualify for its loans with a minimum down payment of 3.5 percent. The largest lenders usually require scores above 620 to qualify for FHA loans.
The median loan balance was just over $232,196 after a modification and the median mark-to-market loan-to-value was 118 percent, meaning most homeowners had negative equity or were “underwater.’’ The median monthly payment reduction was about 40 percent.