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A mortgage is there to keep a roof over one’s head

On Wednesday I talked about the benefits of re-engineering mortgages. It seems to me that individual borrowers need to experience a period of stability before they’re likely to feel confident enough to trade up to a better home. And refinancing or modifying an existing mortgage is one way of achieving that stability.It seems a reasonable theory, but it’s one that may not be working in practice. The Office of the Comptroller of the Currency, and the Office of Thrift Supervision reported earlier this week that more than half of mortgage modifications are failing. In fact, the study suggests that 55 percent of modified mortgages are at least 30 days delinquent within six months of being restructured.True, Bloomberg reports that the Federal Deposit Insurance Corporation (FDIC) questions the findings. But no matter how flawed the methodology behind the figures, they must surely contain enough truth to make them of considerable significance.The really scary scenario is that borrowers are modifying mortgages in order to continue to fund unaffordable lifestyles: that they’re still seeing their homes as elaborate ATMs.Nobody is yet saying that that is the case for most. But those who own their properties must accept that their homes are primarily a roof over their heads, and that–for now, at least–they are not a source of cheap borrowing for consumer baubles.

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