Mortgage Loan Performance Worsens in Second Quarter

September 30, 2011 (Jeff Alan)

Mortgage loan performance by the nation’s largest banks and federal savings associations declined in the second quarter of 2011 as mortgage delinquencies increased slightly for the first time in six quarters according to the Office of the Comptroller of the Currency (OCC).

Of the 32.7 million loans in the OCC’s portfolio, 88.0 percent are current and performing at the end of the quarter, down from 88.6 in the first quarter.

Mortgages that were 30-59 days delinquent increased from 2.6 percent in the first quarter to 3.0 percent in the second quarter.

Mortgages that were 60 days or more past due and delinquent loans to bankrupt borrowers increased from 4.8 percent in the first quarter to 4.9 percent in the second quarter.

Mortgage servicers implemented 456,397 home retention actions in the second quarter, down from 557,451 in the first quarter. The number of home retention actions was 18.1 percent lower than the previous quarter.

Modifications under the Home Affordable Modification Program (HAMP) increased by 31.6 percent in the second quarter compared to the first quarter, but other home retention actions declined.

The number of mortgages entering foreclosure declined 8.0 percent from the previous quarter to 287,145 properties. Completed foreclosures increased by 1.2 percent in the second quarter to 121,202, but were down 30.7 percent from the second quarter in 2010.

Payment modifications through the government’s Home Affordable Modification Program (HAMP) continued to provide larger relief as the average principal and interest reduction under a HAMP modification was $577 compared to $393 for all modifications.

From the beginning of the government’s loan modifications efforts in 2008 until the end of the first quarter of 2011, mortgage servicers have modified 2,083,464 mortgages. Unfortunately, as time has gone by, the performance of those loan modifications continues to worsen.

At the end of the second quarter, only 51.3 percent of modified loans remained current or have been paid off, down from 52.5 percent in the first quarter. Another 9.2 percent were 30 to 59 days delinquent, up from 8.2 percent in the first quarter, and another 18.2 percent were 60 days or more delinquent, down from 18.5 percent in the second quarter.

More than 10 percent were in the process of foreclosure, and 5.3 percent had completed the foreclosure process, up from 4.5 percent in the first quarter.

Loans that were modified by 10 percent or more performed better than those that were modified less than 10 percent. Of the loans that were modified which resulted in a payment reduction of over 10 percent, 59.9 percent were current and performing, down from 61.6 percent in the first quarter.

Of the loans that were modified which resulted in the payment being reduced by less than 10 percent, only 37.0 percent remained current and performing, down from 37.1 percent in the first quarter.

Tags: OCC, mortgage loan performance, delinquent mortgages, mortgage servicers, foreclosures, loan modifications, HAMP

Source:
Office of the Comptroller of the Currency