When the government intervenes and creates programs that attempt to help homeowners, such as the Home Affordable Modification Program, mix results can happen. In this case, 865,000 homeowners were helped with their underwater mortgages. However, almost 1/2, 306,000, ended up back into problems.
The reason in many cases is that time doesn’t solve all issues. Sometimes, systemic problems are so severe that a more draconian solutions are the only possibility. Hence the rise in mortgage delinquencies.
I believe that we will continue to see pressure in delinquencies until the employment picture strengthens and the banks relax underwriting guidelines. I’m not suggesting banks go back to the “stated income” days for mortgage applications, but the pendulum has swung way too far and there needs to be some moderation.