PART II: Home Retention Actions

Fourth Quarter 2008

Home retention actions are taken by servicers with the intent of keeping borrowers in their homes. Home retention actions include loan modifications, where servicers modify one or more mortgage terms (e.g., interest rates), and payment plans, where no terms are modified but borrowers are given time to catch up on missed payments.

A. Loan Modifications and Payment Plans

Newly Initiated Home Retention Actions

Newly initiated home retention actions totaled 301,648 during the fourth quarter, an increase of more than 11 percent from the third quarter and an increase of more than 16 percent from the second quarter. Loan modifications accounted for 40 percent of all newly initiated home retention actions during the fourth quarter, compared with 43 percent during the third quarter and 52 percent during the second quarter.

This declining percentage of loan modifications relative to payment plans may have resulted from the fact that, prior to contractually implementing new loan modifications, borrowers are often required to successfully complete trial periods to demonstrate the ability to make payments under the new terms. These "trial" modifications became more prevalent in the fourth quarter and are reported as payment plans until the successful completion of the trial periods.

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