Walking away is a Calculated Risk

Tanta says:

If you have a servicer who is doing a lot of repayment plans, and the MBA data suggests we have that, then you’re going to see a lot of delinquency statuses going “in reverse,” and you’re also going to see, unfortunately, a lot of loans going from 30-days or 60-days down straight to FC, because the MBA data tells us that 29% of all FCs in the third quarter of 2007 happened after a repayment plan failed. That nasty fact may tell us something about the wisdom or practicality of these repayment plans. It may tell us that borrower financial distress just keeps increasing. It may tell us that borrowers get demoralized long before they’re done with the repayment plan and just give up. It may tell us that some borrowers entered the repayment plan in less than complete good faith. We’d need more evidence to decide that. But the last thing it tells us is that borrowers are “just walking away” with no attempt to save their homes.

Reading and analyzing real-time remittance reports is a complicated matter that can lead you down the wrong path if you aren’t well-versed in how it all works. I fault no one, certainly not Mish, for not being an expert in remittance analysis. It is only recently that this became something non-experts were interested in, after all. (For most of my years in this business I’d have called you a liar if you’d said the day would come when huge numbers of civilians would avidly read websites that post long treatises on boring technical mortgage-related crap when they were not forced to. I’d have been wrong.)

Update: My apologies to Tanta, who actually wrote the post.