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Americans default rather than make good

3 minute read
The Adviser

American borrowers are choosing to default on their loans rather than make good on their missed repayments.

A recent release by ratings agency Fitch said ‘cure-rates’ – the percentage of delinquent loans that return to normal payments each month – has fallen to 6.6 per cent from an average of 45 per cent in the six years to 2006.

According to the release, 25 per cent of the ‘cured’ loans were first modified by the lenders so that the borrowers were paying a reduced monthly repayment.

The Obama administration recently implemented a program that encourages all lenders to modify troubled loans and allow struggling borrowers to reduce their monthly repayments. However, the success of the program has so far been limited.

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