Friday, April 3, 2009

Home Retention Actions

I learned a new word today from the Office of Thrift Supervision: Home Retention Action. A Home Retention Action is change in a borrower's monthly mortgage payment (contrary to the loan's original terms) with the supposed purpose of getting the borrower to remain in his home rather than walk away from the home and mortgage. I have referred to this as "loan modification" but OTS explains that some payment changes are technically not "loan modifications" because (many of?) the loan's original terms are still in place.

From a conceptual point of view, it hardly matters how a payment is changed is labeled, but rather the determinants of whether and how much of a payment change occurs.

In their study of 32 million mortgages, more than one million home retention actions occurred during 2008. Some of these may be multiple actions on the same mortgage, but as a rough approximation three percent of mortgages had a home retention action in 2008.

I have suggested that a significant amount of non-employment in 2008 is due to the anticipation of modifications (some of which would occur in 2009). The Obama Administration would like to see about 9 million home retention actions.

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