Modified Subprime Mortgages Redefault

Fitch Ratings is slated to release a report this week showing that 65 percent to 75 percent of modified subprime mortgages will still fall behind by 60 days or more within one year of the loan change. Although some experts believe that reducing the principal amount owed is the best way to keep distressed borrowers in their homes, Fitch found that 30 percent to 40 percent of mortgages that had lowered principal amounts were still redefaulting after 12 months. Borrowers are redefaulting at a high rate because home prices continue to fall and unemployment continues to rise.

Also this week, the Standard & Poor’s/Case-Shiller Home Price Index in March showed that home price levels in 20 major metro areas dropped more steeply than expected. The twenty cities fell an average of 3.13 points with Minneapolis taking the greatest hit at 6.37. This index is a 3 month moving index that is reported with a 2 month lag. Nashville did decline over the same period, but not nearly enough to place it in the top 20.