Fitch Ratings predicts mortgage re-defaults

As many as three-quarters of risky mortgages reworked after being packaged into securities will likely default within a year, according to Fitch Ratings.

Such re-defaults on subprime and Alt-A mortgages will probably reach 65 percent to 75 percent, taking into account loans changed under the federal Home Affordable Modification Program and outside of it, the New Yorkbased ratings company said Wednesday.

About 15 percent of all U.S. home loans in securities without government backing received modifications through May, up from 10 percent in September, including almost 35 percent of subprime loans, Fitch said. Lender and government programs continue to change as lawmakers threaten moratoriums and states mandate mediation for homeowners, so gauging the effectiveness of anti-foreclosure efforts will take time, the company said.

“Many distressed mortgage loans, including modified loans, will not see a final resolution until well into 2012,” Diane Pendley, a managing director at Fitch, said in a statement.

About 300,000 borrowers have received permanent relief since the federal modification program began, saving an average of more than $500 a month, according to a report released last month by the Treasury and the Department of Housing and Urban Development.

Business, Pages 22 on 06/17/2010

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