CNN reports on a statement from US Comptroller John Dugan that states that over half of those that had their defaulted mortgages adjusted through the Hope Now Alliance, a coalition of lenders, servicers, investors and counselors, redefaulted on their mortgages within 6 months of having the adjustment. Some numbers from the article:
– So far in 2008, 1.7 homeowners have had their mortgages adjusted through this program.
– 53% of those who had their mortages adjusted in the first quarter of 2008 have redefaulted within 6 months.
– At least 51% of those who had their mortgages adjusted in the second quarter of 2008 have redefaulted within 6 months. This percentage could easily increase, as those who underwent the adjustment in June (and possibly part of May) have not reached the 6-month threshold.
Despite these failures, FDIC chairwoman Sheila Bair wants to extend this program to reduce payments to no more than 31% of gross monthly income by lowering interest rates to 3% and extending the mortgage to 40 years, with the government eating 50% of the loss of those who make it past 6 months without redefaulting to the tune of an estimated $24.4 billion.
Now, what did Albert Einstein say about insanity? I believe it had something to do with doing the same failed thing over and over while expecting a different result.
I believe Einstein said that the definition of insanity was expecting the government to be able to fix anything!