One bright spot, but troubling signs in housing

Homeowners who had mortgages modified recently are faring better than those who did so earlier in the housing crisis, according to a report released Tuesday, possibly debunking predictions of a huge wave of defaults to come.

The State Foreclosure Prevention Working Group warned of other troubling signs, however, on the same day a separate report showed the most severe July sales drop-off for previously occupied homes in 15 years.

The group of 12 state attorneys general and banking regulators said Tuesday foreclosures still easily outpace the number of loan modifications. Modifications usually lower monthly payments and reduce the odds of losing a home.

And nearly 63 percent of homeowners with seriously delinquent loans aren't taking part in foreclosure prevention programs, the group found.

The group compared delinquencies for mortgages modified last year with those revised in 2008, and then payments received six months after the terms were changed. Those modified more recently were nearly 50 percent less likely to be seriously delinquent than those revised at the same point in 2008.

The reduction in the number of borrowers getting into trouble after modifications "suggests that dire predictions of high re-default rates may not come true," the report said.- AP