Financial institutions that the Office of the Comptroller of the Currency regulates made headway processing modifications of first-lien homes on 1-4 family homes in the first quarter, reporting a significant rise in completions.
The number of loan mods completed during the first quarter rose 7.1% from 5,888 to 6,308, partially reversing a decline during the previous fiscal period, according to the OCC's Mortgage Metrics report.
The rise in completed modifications occurred against the backdrop of stability in many other loan performance indicators, suggesting the increase may reflect the temporary impact of recent procedural changes for government loan programs.
The Federal Housing Administration and Department of Veterans Affairs have been unwinding pandemic related leniencies for distressed borrowers in ways that boost modification workloads.
Although banks generally have recently been less involved in the government-backed loan market than nondepositories, the many smaller community institutions the OCC regulates tend to be more active in VA and FHA lending than their larger counterparts.
Transitions in both government programs' rule sets generally started last year but the loan modification process involved takes some time to unfold.
Other loan performance numbers
The surge in modifications arrived amid minor improvements in some other loan performance indicators, with 97.7% of home mortgages paying on time at the end of the first quarter, compared to 97.6% three months earlier.
The increase in current borrowers may be due in part to tax refunds that some borrowers receive during the first quarter, which can result in temporary seasonal improvements in loan performance by the end of March.
Numerically, short- and long-term delinquencies also experienced minimal improvements, but the OCC reported that both of these generally remained on an even keel as a share of all regulated institutions' loans. The total portfolio of loans held by OCC regulated institutions dropped from 10.28 million to 10.24 million.
The serious delinquent loan count fell from 111,000 to 102,000. Other loans less than 60 days delinquent dropped from 131,000 to 117,000. The number of foreclosures in process rose from 19,000 to 20,000. Newly initiated foreclosures jumped from 7,519 to 7,818. Completed foreclosures increased from 1,601 to 1,697.
The surge in modifications could lead to a foreclosure wave if many borrowers fail during their trial period.
The first-lien mortgages held by OCC regulated institutions have a total principal balance of $2.6 trillion and represent around 19.1% of all outstanding residential mortgage debt in the United States.
