Experts Say High Re-Default Rates Inevitable -- ZT

Many subprime borrowers who receive loan modifications are
still likely to fall back into default, according to servicing
executives who spoke Thursday at SourceMedia\'s second annual
mortgage servicing conference in Dallas.

Weak housing markets, a possible recession, and changing
borrower behavior mean that helping borrowers avoid foreclosure
by modifying their loans will not always keep those borrowers
out of trouble for long, the speakers said.

Larry Litton, president and CEO of Litton Loan Servicing, said
35% of the high-foreclosure-risk loans that are modified at his
firm end up back in default after the modification.

Robert Meachum, executive vice president at Saxon Mortgage,
said he believes that is actually on the low side. He expects
40% to 45% to re-default. While a 35% or higher default rate
may sound high, Mr. Litton said it may be inevitable in
today\'s environment. Moreover, he said such modifications are
probably still in the interests of servicers, investors,
and borrowers.

Tightening up on modification requirements would lead to a
higher frequency of foreclosure, and given the rising loss
severity rates, it is best to try to keep foreclosure frequency
down, he said.