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American borrowers are choosing to default on their loans rather than make good on their missed repayments.
A recent release by ratings agency Fitch said ‘cure-rates’ – the percentage of delinquent loans that return to normal payments each month – has fallen to 6.6 per cent from an average of 45 per cent in the six years to 2006.
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According to the release, 25 per cent of the ‘cured’ loans were first modified by the lenders so that the borrowers were paying a reduced monthly repayment.
The Obama administration recently implemented a program that encourages all lenders to modify troubled loans and allow struggling borrowers to reduce their monthly repayments. However, the success of the program has so far been limited.
