Modifying loans may not stem foreclosures: Boston Fed

NEW YORK (Reuters) – Unemployment is a bigger reason for missed mortgage payments than high interest rates, according to a study from the Boston Federal Reserve that raises questions about President Barack Obama’s plan to stem foreclosures by modifying loans.

Borrowers are more likely to default on their payments because they have lost their jobs or because the price of their homes has plummeted than because of tough terms on their mortgages, the study found.

Loan modifications are not necessarily a better deal for investors either, wrote Boston Fed economists Christopher Read more