July 1, 2011 (Jeff Alan)

The Office of Thrift Supervision (OTS) reports that mortgage loan performance on first-lien mortgages serviced by large national banks and federal thrifts improved during the first quarter of 2011.

Of the 32.7 million loans in the OTS’s portfolio, 88.6 percent are current and performing at the end of the quarter. Mortgages that were 30-59 days delinquent fell to 2.6 percent, the lowest in three years, while mortgages that were 60 days or more past due and delinquent loans to bankrupt borrowers declined to 4.8 percent, the lowest level since the first quarter of 2009.

Mortgage servicers implemented 557,451 home retention actions, driven by a 78 percent increase in trial-period offers in the first quarter. The number of home retention actions was 17.4 percent higher than the previous quarter.

Permanent modifications declined in the first quarter due to a lower number of trial-period plans in the third and fourth quarter of 2010, which would have resulted in more permanent modifications in the first quarter.

The number of mortgages entering foreclosure declined 11.3 percent from the previous quarter to 312,404 properties. Completed foreclosures increased by 26 percent in the first quarter, but were down 27.7 percent from the first 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 $562 compared to $333 for all modifications.

From the beginning of the government’s loan modifications efforts in 2008 until the end of 2010, mortgage servicers have modified 1,923,603 mortgages. Unfortunately, as time has gone by, the performance of those loan modifications has worsened. At the end of the first quarter, only 52.5 percent of modified loans remain current or have been paid off, of which, 8.2 percent were 30 to 59 days delinquent, 18.5 percent were 60 days or more delinquent, more than 10 percent were in the process of foreclosure, and 4.5 percent had completed the foreclosure process

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, 61.6 percent were current and performing.

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

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