Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Darin Arita - Deutsche Bank Securities.
Darin Arita - Deutsche Bank Securities
On the U.S. Mortgage Insurance business, can you give a little more color on the rescissions? What are you seeing now that the initial underwriting process did not pick up? And on the loan modifications, what changes to the loans are being made?
Kevin Schneider
As it relates to rescissions, we continue - in this recent environment there was a fair amount of loans that were originated that we're seeing didn't comply with our underwriting guidelines and the guidelines that we had approved and said under which we would insure production. We've also continued to see increasing amounts of misrepresentation and fraud in some of the files when you actually get a chance to look at them and investigate them.
So we've continued the routines that we've always done in our business in terms of looking at and investigating this, but frankly, with the developments in our delinquency pipeline, we just have a lot more loans to look at. And so that's really what's driving the increase in that investigation activity.
On the modification side, I'm not sure if I got your question exactly but modifications, specifically as they relate to the government-announced programs, have really not gotten a lot of traction yet at this point. We're beginning to see a lot of pickup in that from the servicer side. There's been intense proactive cooperation between the mortgage insurance industry, the servicers, the lenders, and in fact Treasury and administration to knock down all the barriers to trying to make these modifications work, so we've begun to see that start to pick up in terms of modifications that are approved to be processed, and we would see that feathering in and accelerating hopefully over the second half of the year.
Darin Arita - Deutsche Bank Securities
On those modifications, would those be reductions of the interest rates and reductions of the principal? I'm just wondering what changes will be made so that we don't see these borrowers re-default.
Kevin Schneider
That's a great point, Darin. When you think about re-defaults, a loan that has resulted in a reduced monthly payment to the borrower and in fact improves their cash flow and their ability to maintain their payment going forward has a far lower likelihood of re-default. And we've begun to see really in the fourth quarter, first quarter and second quarter some of the modifications that we're seeing now and participating in, you're having an increasing number of reduction in borrower payments, and what that does is get them down so they can cash flow the loan. And so we're encouraged that those modifications, with that type of reduction in payment, will drive down a lower default rate going forward - re-default rate, excuse me.
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