Feds say early goals met on loan modifications

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The Obama administration and lenders are saying that the federal Make Home Affordable loan modification plan is finally getting some traction.

The $75-billion program pays lenders to reduce loan payments for troubled homeowners and pays bonuses to borrowers who stay current on the modified loans.

First off, my colleague Jim Puzzanghera in Washington reports this morning that the administration says it has already reached its Nov. 1 goal of 500,000 trial restructurings.

Meanwhile, Wells Fargo, the second largest mortgage-servicing company, joined No. 1 servicer Bank of America in touting its progress on the modification front.

In a news release, San Francisco-based Wells said it has “done 62,989 trial and completed Home Affordable modifications through Sept. 30; nearly double what the U.S. Treasury reported last month.”

Stand by for more details in the short term and for answers to the big question: whether these modified loans will hold up or whether “underwater” homeowners will stumble back into default after hitting new bumps along their financial roads.

Economist Mark Zandi of Moody’s Economy.com says the federal program ‘is kicking to a higher gear, but not high enough to forestall a continued increase in foreclosures and more house price declines.”

The trial modifications “are simply offers,” Zandi notes. “Many won’t turn into actual mods, and those mods that occur will have a high redefault rate.”

In an e-mail to me this morning, he estimated that of 4.5 million home loans that are in the foreclosure process or 90 days or more delinquent, 1.5 million will be modified and only 1 million will avoid a redefault.

-- E. Scott Reckard