Mortgage Loan Modifications success…..

President Obama’s Housing Plan was launched only a few months ago and it seems that the mortgage loan modification aspect of his plan IS working!

Here are the facts:

1. More Modifications: The regulators reported a sharp increase in the number of loan modifications that were initiated during the period. “Newly initiated loan modifications reached 185,156 during the quarter—rising by 55.3 percent from the previous quarter and 172.3 percent from the first quarter of 2008,” the regulators said in the report. “The impact of this increase in modifications on reducing foreclosures and enabling borrowers to remain current on their loans will only be seen in future data.”

2. Rate reductions most popular: The Obama administration’s plan gives servicers a slew of options for bringing a borrower’s debt-to-income ratio down to that 31-percent threshold. But the report finds that reducing the interest rate and extending the terms of the loan were the most popular approaches for reducing payments in the first quarter. “Of the modifications made in the first quarter of 2009, 70.2 percent included a capitalization of missed payments and fees, 63.2 percent included a reduction in interest rate, and 25.1 included an extended term,” the regulators said in the report. “By comparison, 12.6 percent of the mortgages received modifications that froze the interest rate, 1.8 percent included a reduction of principal, and 1.1 percent included a deferral of principal.”

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3. More monthly payments reduced: Modifications during the first quarter of 2009 resulted in lower monthly principal and interest payments on 54.1 percent of all modified loans, as servicers focused on achieving more sustainable mortgage payments. The number of modifications that reduced payments by 20 percent or more nearly doubled in the first quarter compared with the previous quarter, increasing to 29.3 of all first quarter modifications and exceeding all other categories. Modifications that increased monthly payments declined to 18.5 percent of all modifications during the quarter, down from 25 percent in the fourth quarter and 33.5 percent in the third quarter. Actions that left payments unchanged increased to 27.3 percent.

4. Bigger reductions, better performance: This isn’t terribly surprising, but it’s worth pointing out that loan modifications that reduce monthly payments significantly have lower redefault rates.

5. Performance: It is still too soon to tell if the reduced-monthly-payment approach will drive down redefault rates significantly. Nevertheless, here is a breakdown of how mortgages that were modified last year have performed so far: