Ocwen’s Rising Modification Re-default Rate
Ocwen’s 6-month modification re-default rate has been rising and will most likely keep rising. That is not a knock on Ocwen, but a realization that more of Ocwen’s modifications now come from loans that have already failed a prior modification. This increase is inevitable as there are a limited number of loans that have never been modified and need to be. In 2013, 74% of all lower FICO Ocwen loan modifications were first time modifications, while in 2016 that statistic has dropped to 42%. For higher FICO loans, the percentage of first time loan modifications has dropped from 80% in 2013 to 62% in 2016. As the 6-month re-default rate of subsequent modifications is approximately 2 to 2.5 times higher than that of first time modifications, the overall 6-month re-default rate is destined to rise. Slightly muting this rise is the improving 6-month re-default rate of Ocwen’s first time loan modifications. We believe what we have discovered with Ocwen may be affecting all Servicers in the coming year.
Logic doesn’t always apply when trying to guess which modifications will work. There are quite a few loans where the modified payment actually increases. We show some interesting and surprising examples starting on page 12.
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