Fewer homeowners who have taken advantage of loan modification programs are redefaulting, according to a multi-state group of public officials and regulators in a report released last week.

The State Foreclosure Prevention Working Group found in a study of nine state-regulated mortgage companies that borrowers who had loans modified in 2009 were up to 50 percent less likely to redefault on their loan within six months than borrowers who went through modifications in 2008. 

The figures echo the improvements noted in a recently-released report by Federal regulators which found that of the 590,000 modifications made in 2009, nearly 52 percent were current at the end of the first quarter of 2010, while only 27% of loans modified in 2008 were current.

“Some analysts have predicted redefault rates as high as 75 percent but today’s report paints a brighter picture of the future,” Washington Attorney General Rob McKenna said. “The newer modifications are holding up better, with fewer borrowers redefaulting.”

Many critics of mortgage modification efforts still believe that the ultimate default rates on modified mortgages will hit 75% or even higher, as homeowners' incomes fail to meed the demand of even the reduced payments after modification.  And even with the improved redefault rate on modifications, the number of modifications has fallen far short of government targets, and far more distressed homeowners are still losing their homes in foreclosure than getting any modification of their mortgage at all.

The State Foreclosure Prevention Working Group consists of 12 state attorneys general (Arizona, California, Colorado, Florida, Illinois, Iowa, Massachusetts, Nevada, North Carolina, Ohio, Texas and Washington), bank regulators for New York, North Carolina, and Maryland, and the Conference of State Bank Supervisors.