A recent study completed by the credit rating company TransUnion Corp. looked at what happens when homeowners receive mortgage loan modifications. Approximately 3.9 million homeowners in the United States, including some in Minnesota, had mortgage loans modified between January 2009 and April 2012. The TransUnion study looked at more than half-a-million homeowners who had loans modified between January 2008 and January 2011. These homeowners had missed at least four payments prior to loan modification to be included in the study.
The study found that homeowners who received mortgage loan modifications were less likely to default on their auto and credit card loans. Specifically, researchers found that homeowners who had lower mortgage payments due to loan modifications had a 6.1% default on auto loans compared to the 11% default rate for people who did not have mortgage modifications. The rate was also lower on credit card defaults; however, the difference was not as great. Specifically, homeowners with loan modifications defaulted on their credit cards about 14% of the time compared to the 17% default rate among those without mortgage modifications.
While mortgage loan modifications seemed to help homeowners pay their auto and credit card bills, the modifications did not prevent the majority of seriously delinquent debtors from defaulting again in the future. The study found that 42% of the loans were in default again within 12 months of loan modification and that 59% were in default again within 18 months of the loan modification.
Minnesota had neither the highest nor the lowest rate of mortgage default, according to TransUnion. However, our Minnesota loan modification lawyers know that many Minnesotans are suffering and may be in default. We encourage anyone facing mortgage default or loan modification to find out all of their options before making a financial commitment.