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With loan mods on the decline, U.S. foreclosures poised to spike: Fitch

February 08, 2011 11:37AM

Loan modifications are declining to the point where eventual foreclosures for distressed U.S. homeowners are becoming all but certain, if somewhat delayed, according to a report from Fitch Ratings, released yesterday. Just 36,500 mortgage modifications were completed in December 2010, down from a high of 86,500 in April 2009, the report says, and Fitch says it expects the majority of those modified borrowers to default again within one year, which could lead to another spike in foreclosures. Meanwhile, short sales, deeds in lieu and other foreclosure alternatives are up slightly, and are projected to increase further in 2011. The Obama administration’s foreclosure prevention program and other efforts at promoting loan modifications “have made little more than a dent in the large volume of outstanding distressed loans,” said Diane Pendley, managing director at Fitch. “Based on current and expected inventory, it will take four years to remove the backlog of properties and return the market to balance.” TRD