More than half of the homeowners whose mortgages were modified or rescheduled earlier this year ended up delinquent within six months, the Comptroller of the Currency John C Dugan said.

''After three months, nearly 36 per cent of the borrowers had re-defaulted by being more than 30 days past due. After six months, the rate was nearly 53 per cent, and after eight months, 58 per cent,'' the comptroller said.

Dugan was speaking at a panel discussion with OTS director John Reich, Federal Reserve Board vice chairman Donald Kohn, FDIC chairman Sheila Bair and Federal Housing Finance Agency director James Lockhart, at the Office of Thrift Supervision's National Housing Forum.

Dugan wondered whether the default numbers are going up ''because the modifications did not reduce monthly payments enough to be truly affordable to the borrowers? Whether consumers replaced lower mortgage payments with increased credit card debt? Is it that the mortgages were so badly underwritten that the borrowers simply could not afford them, even with reduced monthly payments? Or is it a combination of these and other factors?''

That question ''has important ramifications for the foreclosure crisis and how policymakers should address loan modifications, as they surely will in the coming weeks and months,'' the comptroller added.

The second OCC and OTS Mortgage Metrics Report, to be published later this month, is also expected to show continued increasing delinquencies and foreclosures in process for all first-lien mortgages held by the largest national banks and federally-regulated thrifts.

''However, the report will show new foreclosures decreasing by 2.6 per cent from the second quarter,'' the comptroller said.

The mortgage metrics report covers nearly 35 million loans worth more than $6.1 trillion, or about 60 per cent of all first-lien mortgages in the United States. The quarterly reports consist of validated, loan level data using standardised definitions for prime, Alt-A, and subprime mortgages, and standardised definitions for loan modifications.

''We believe the reports include the most accurate and reliable data on mortgage performance that is available today,'' Dugan said. ''And in addition to providing more clarity about mortgage performance generally, the data have proven to be exceptionally valuable for supervisory purposes,'' he added.

The high redefault rate raises concerns about the effectiveness of loan modifications, which many are pushing as a key solution to the current financial crisis.

Around 1.35 million homes are in foreclosure, while the number of borrowers who have fallen delinquent soared to 6.99 per cent, according to the Mortgage Bankers Association.

Meanwhile, a coalition of lenders, servicers, investors and counselors working with delinquent borrowers on modifications and repayment plans, called the Hope Now Alliance, has helped 1.7 million homeowners in 2008.

Dugan said his office will find out whether the modifications reduced the monthly payments to affordable levels or whether the borrowers had too much other debt to keep their head above water.

Other regulators speaking at the conference also said that early efforts to restructure loans were not very effective.

"The quality of the modifications are not what they should be," said FDIC chairwoman Sheila Bair. She also cited a Credit Suisse study to show that modifications that include an interest rate reduction have a 15 per cent redefault rate.

To address the foreclosure crisis, Bair last month announced a modification of loan installments to as low as 31 per cent of a borrower's gross monthly income and setting interest rates to as low as 3 per cent or extending loan terms to 40 years.

Under the plan, the government would share up to 50 per cent of losses should the loan redefault. But, for the loan guarantee to kick in, the borrower has to make six monthly payments. The plan would have cost $24.4 billion, which Bair has said could come from the rescue funds. The Bair plan is yet to be acted upon.