Modification Redefault Risk Calculator

Mods succeed or re-default; model the risk.

Mod payment reduction %

Months of post-mod history

Baseline default rate %

Loss given default %

Loan balance

Expected redefault loss

$17,500

Adjusted redefault %

0.1%

LGD $ (if redefaults)

$140,000

How the math works

Adjusted redefault = baseline × reduction factor × history factor. Expected loss = balance × adjusted × LGD.

20% reduction × 6 mo history → 7% adjusted redefault. $400k × 7% × 35% LGD = $9.8k expected loss. Mod wins vs foreclosure.

How to Use

Enter mod payment reduction %.
Enter months of post-mod history.
Enter default rate baseline %.
Enter foreclosure loss given default %.
Enter loan balance.
Read expected redefault loss.

Frequently Asked Questions

Mod success rates?

HAMP-style mods with >20% payment reduction: 75-85% sustained 24 months. 10-20% reduction: 50-70% sustained. <10% reduction: 30-50% sustained. Deeper reduction = better outcomes. Additional principal forgiveness improves further.

Predictive factors?

Income stability (stable = lower redefault). Loan-to-value post-mod (<90% better). Reason for original default (medical, job loss, divorce have different profiles). Geographic labor market. Counseling completion. Quality of underwriting drives re-default prevention.

Economics?

Mod at 20% payment reduction: expected 20% re-default at 35% LGD = 7% loss. Avoided foreclosure cost (15-25% of balance). Net mod wins by 8-18% of balance vs foreclose. Lender economics favor modification unless borrower clearly can't sustain even reduced payments.

How often should I rerun this?

Rerun this calculator whenever inputs change materially — new rent roll data, rate moves, loan balance updates, or quarterly operating data. For active deals, monthly refresh is typical. For stabilized assets under monitoring, quarterly is fine. Treat the output as a decision tool, not a one-time answer — market conditions evolve and so should your analysis.