OTS and OCC Report Another Uptick in Mortgage Delinquencies, But…

While negative news still dominates the picture, the Officesrnof Thrift Supervision (OTC) and Comptroller of the Currency (OCC) reported thatrnbanks and thrifts implemented twice as many new home retention actions asrnforeclosures during the third quarter of 2009.

Servicers implemented more than 680,000 home modifications andrnpayment plans to prevent mortgage foreclosure during the quarter.  275,000 trial modifications were initiated underrnthe Home Affordable Modification Program (HAMP) and 406,000 other foreclosurernprevention actions were put in place outside of HAMP.  Non-HAMP modifications were 8 percent lowerrnthan last quarter.  The non-HAMP modificationsrnand payment plans required no taxpayer-supported incentives.

Under the HAMP program borrowers must successfully completerna three month trial program before their modifications can becomernpermanent.  Because of this timernrequirement and the age of the program, only 781 loans had been permanentlyrnmodified under HAMP by the end of the third quarter.

In spite of the uptick in modifications, an increase of 67rnpercent over the second quarter, much of the data reported in the OCC and OTSrnMortgage Metrics Report which covers about 65 percent of the mortgagesrnoutstanding in the country, was grim.  Currentrnand performing mortgages in the portfolio covered by the report dropped to 87.2rnpercent compared to 88.6 in the second quarter. rnThis is the sixth consecutive quarter that performance declined.  One year earlier, in Q3 2008 91.5 of thernportfolio was current and performing.  Seriousrndelinquencies rose to 6.2 percent from 5.3 percent in the second quarter andrnthere are 1 million mortgages in foreclosure, about 3.2 percent of thernportfolio, an increase of 100,000 during the quarter. 

The delinquency rates for subprime mortgages increased onlyrn0.2 percent while prime mortgages that were seriously delinquent increased overrn19 percent to a 3.6 percent rate.  Thisrnis more than double the percentage of prime mortgages in serious trouble onernyear ago.

Default rates among modified loans remain high, but loansrnmodified more recently appear to be showing lower defaults than those completedrnin the earlier months of the foreclosure prevention battle.  The default rate for loans written in thernsecond quarter of 2008 was 33.3 percent after three months but those modified duringrnthe second quarter of this year had a default rate of 18.7 percent after threernmonths.  Other data has not aged enoughrnto make comparisons. 

The failure of ARM option loans continues to bernstaggering.  At the end of the thirdrnquarter only 67.7 percent of those loans, which allow borrowers to makernpayments below that necessary to even pay the monthly interest, were currentrnand performing.

Government guaranteed loans, primarily those obtainedrnthrough the Federal Housing Administration and the Veterans Administration,rnshowed higher delinquency rates than the portfolio as a whole.  8.2 percent of government guaranteedrnmortgages were delinquent, up from 7.5 percent in the preceding quarter and anrnadditional 2.5 percent were in foreclosure.

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