TransUnion ran a study which found that more than 50% of "borrowers who had received mortgage modifications were behind in payments again 18 months later." It also found that they are more likely to keep current on debt they obtained after falling behind on their mortgages.
Stunner, right? Choosing not to pay your mortgage makes it much easier to keep up with your (new) car payment and your (new) credit cards. Steve Chaouki, group VP for financial services with the credit reporting agency said that (from the article) "the analysis showed that some borrowers were still able to handle new credit, even after falling behind on a mortgage loan and obtaining a modification."
No it didn't, idiot. It showed that people had figured out that Government Sugar Daddy would make sure that mean bank wouldn't take their house away, so, instead of keeping current on their mortgage, even after a loan modification, they decided to buy a new car, and run up some more credit card debt.
Summing up this idiocy comes this line:
The data also showed that people who fell behind on their mortgage alone remain much better credit risks than those who fell behind on their mortgage and other types of debt." (emphasis mine).
No, really? If I only fall behind on one loan, I'm a better risk than someone who is behind on seven? Wow, what stunning insight. What a razor intellect.
Let's be clear on this. TransUnion exists only to evaluate your FICO score, better known as your Credit Score, or, as Dave Ramsey likes to call it, your "I love debt score." Therefore, it behooves TransUnion to have as many people as possible with decent FICO scores. If everyone had bad scores, fewer people would use credit, making fewer requests for credit scores, meaning less money for TransUnion. That does not make the study wholly flawed or irrelevant, but it does mean you should be careful when you read the analysis of the study.
One thing the article says I agree with:
In contrast with the past, he said, people are more likely to let their mortgage loan become delinquent so they can stay current on credit cards and auto loans. That's probably because people usually need their cars to get to work, he said, and because car values are currently high - unlike many people's homes, which have lost value. "People are making different choices," he said.
I just disagree that those "different choices" are a good thing. Maybe, instead of those different choices, they could make different different choices. Choices that don't involved taking out additional debt when you just had to have your mortgage modified, for instance.