Re-default data shows Obama housing plan potential

The recent data on re-default rates for modified home mortgages indicate that the Obama administration's modification plan is headed in the right direction, said John Dugan, Comptroller of the Currency.

Dugan said in light of the data released by his office on Friday, the OCC is going back to each of the servicers and directing them to review their modification policies to ensure that they are producing sustainable mortgages, and not just changing terms.

The OCC is the regulator for the nation's largest banks.

Modifications for loans that had "teaser rates" can result in payments that are unchanged or increase, but do not increase as much as contractually required.

"I think what that tells us is it really does make a difference to have reduced payments as a factor in getting at the sustainability of a mortgage modification," Dugan said.

"The approach the administration has taken with its program, which focuses very heavily on reducing monthly payments, this validates that kind of thought."

The Obama administration announced in February a modification plan that commits up to $275 billion to help reduce mortgage payments for up to 9 million families.

Prior attempts at broad modification programs focused more on borrowers who had already fallen behind on their mortgages, rather than reducing monthly payments for all at-risk borrowers.

A total of 8.1 million U.S. homes, or 16 percent of all households with mortgages, could fall into foreclosure by 2012, according to a report by Credit Suisse.