INVESTOR OWNED MORTGAGE CARRY HIGHEST RE-DEFAULT RATES

http://www.huffingtonpost.com/2009/12/21/securitization-is-back-in_n_399376.html

More than 99 percent of mortgage modifications that include cutting principal are for those mortgages owned outright by a bank, meaning they are held in the bank's portfolio. Nearly 37 percent of portfolio loans involve cutting principal.

Modified portfolio loans also have the lowest re-default rates: Just 25 percent of them re-default within six months, versus about half of investor-owned mortgages.

Investor-owned mortgages include those held by government-owned mortgage finance giants Fannie Mae and Freddie Mac. Of the 17,412 mortgage modifications last quarter that included principal cuts, 80 were for Fannie Mae-owned mortgages; 54 for Freddie Mac.

"This difference may be attributable to differences in modification programs and the servicers' flexibility to modify loan terms to achieve greater affordability and sustainability," notes Monday's report.

Forty-four percent of Fannie Mae's modified loans re-default within six months; the rate is 47.4 percent for Freddie Mac.

Which raises the question: why isn't the administration pressuring Fannie and Freddie to cut principal?

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