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As many home loans could redefault, consumers may consider options like debt consolidation for credit cards
By Marvin Milner on Jun 19th, 2010
Consumers facing problems with their home loans may have tried to seek help through the government's Home Affordable Modification Program.
The goal of HAMP is to help between 3 million and 4 million people facing foreclosure avoid losing their homes. The program works by reducing monthly payments to a more affordable amount.
However, a recent report from Fitch Ratings noted that between 55 and 65 percent of prime home loans modified through the program are going to redefault in the next year. Furthermore, subprime mortgages face a potentially harder road, as between 65 and 75 percent of those modified will still face failure.
"Fitch continues to believe that, when properly done, modifications can benefit both homeowners and RMBS investors," the ratings agency said. "However, modification performance or sustainability continues to be affected by the borrowers' desire to keep their property, as well as having sufficient cash flow to make the modified payments."
Along with modifications, consumers may consider options for dealing with credit card debts, as doing so might make it easier to pay down home loans. Debt consolidation could lead to lower interest rates on money owed on plastic.
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