Mortgage Delinquencies Rise as Home Retention Actions Drop: Report

Friday, October 7, 2011   /   by Justin Hoffmann

Mortgage Delinquencies Rise as Home Retention Actions Drop: Report

Data released Thursday by a federal banking regulator provides a snapshot of mortgage performance over the second quarter of this year  both early stage and serious delinquencies increased slightly compared to the previous three-month period while new modification actions fell nearly 20 percent.

According to information compiled by the Office of the Comptroller of the Currency (OCC), 88 percent of the nearly 33 million first-lien mortgages in the subject portfolio were current and performing at the end of the second quarter, down from 88.6 percent at the end of the first quarter, but up from 87.3 percent a year earlier.

The decline in portfolio quality is mainly attributable to an increase in early stage delinquencies. Mortgages 30-to-59 days delinquent increased 0.4 percent from the previous quarter to represent 3 percent of the servicing portfolio.

The OCC says the increase in early stage delinquencies reflects seasonal effects as well as a sluggish economy and elevated unemployment.

The percentage of mortgages that were 60 or more days past due and delinquent mortgages to bankrupt borrowers increased slightly to 4.9 percent of the portfolio from 4.8 percent in the first quarter of 2011, after decreasing during each of the previous five quarters.

Completed foreclosures increased for the second consecutive quarter to 121,202  up 1.2 percent from theprevious quarter and over 27 percent from the fourth quarter of 2010 following the lifting of foreclosure moratoria.

The OCC says this stat is expected to increase in future quarters as stalled foreclosures work their way through the system.

Newly initiated foreclosures, however, have declined for three straight quarters. Foreclosure starts decreased by 8 percent to 287,145 over the April-to-June timeframe and are down nearly 2 percent from a year earlier.

The regulators data show that there were 1,319,902 mortgages in the process of foreclosure at the end of the second quarter  4.0 percent of the subject portfolio.

The OCC stressed that mortgage servicers continue to seek alternatives to foreclosure for delinquent borrowers.

A total of 56,403 new short sales were reported during the second quarter period, up more than 12 percent from the previous quarter. New deed-in-lieu actions nearly doubled to 2,546.

Over the same period, servicers implemented 456,397 home retention actions, including loan modifications, trial-period plans, and payment plans.

Although modifications under the Home Affordable Modification Program (HAMP) increased by 31.6 percent during the quarter, other home retention actions declined, causing an overall decrease of 18.1 percent in new modification actions from the previous quarter.

On average, modifications during the second quarter reduced borrowers monthly payments by $393, or 25.1 percent. HAMP modifications reduced payments by an average of $577, or 35.9 percent.

Perhaps the most troubling result in the report is post-modification performance. Of loans modified since the beginning of 2008, nearly half  48.7 percent  have since gone delinquent.

The OCCs mortgage performance report covers about 63 percent of all first-lien mortgages in the United States, worth $5.7 trillion in outstanding balances.


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