WASHINGTON The $4 trillion in mortgages serviced by the largest financial institutions slightly improved in the third quarter with more loans back in performing status and fewer in serious delinquency, a regulatory report said Friday.
The Office of the Comptroller of the Currency released its Mortgage Metrics Report revealing that 93% of mortgages held at the 8 largest banks and thrifts were performing in the third quarter, just a smidgen up from the 92.9% level in the previous quarter and 91.4% a year earlier. The mortgages represent 46% of outstanding loans nationwide through Sept. 30.
"In addition to providing information to the public, the report and its data support the supervision of national bank and federal savings association mortgage-servicing practices," the OCC said in its report. "Examiners use the data to help assess emerging trends, identify anomalies, compare servicers with peers, evaluate asset quality and necessary loan-loss reserves, and assess loss mitigation actions."
The improvements in the mortgage market were concentrated in a continued drop in foreclosures and seriously delinquent loans that are at least 60 days past due. However, the 2.4% of mortgages that were 30 to 59 days past due rose nearly 2% from the previous quarter, though it was down 8% from last year.
"The percentage of early stage delinquencies increased across all risk categories from the previous quarter and decreased from the previous year across all risk categories," the report said.
Seriously delinquent mortgage were down nearly 1% from the previous quarter, making up 3.1% of the portfolio in the third quarter. It also represented a drop of 14.5% from a year earlier.
The biggest drops were seen in mortgages in foreclosure, completed foreclosures and those just starting the process. Mortgages in the process of foreclosure fell 41.5% from a year earlier to 353,906. Foreclosure starts also dropped almost 37% from a year earlier to 82,668 new foreclosures in the third quarter.
"Improved economic conditions and foreclosure prevention assistance contributed to the decline in foreclosure activity," the OCC said.
Servicers are still implementing modifications and other home retention plans for struggling borrowers, though at a slower pace than previous years. There were 205,689 home retention actions implemented during the third quarter, down 1.2% from the previous quarter and 34% from a year earlier. More than 90% of those modifications in the third quarter offered borrowers a reduction in monthly principal and interest payments with more than half of those cutting payments by at least 20%.
The performance of modifications, however, remains a bit spotty with nearly 26% of the 2 million active modifications in the third quarter listed as delinquent and 5.7% in a foreclosure process. Still, nearly 69% of those modifications were performing at the end of the third quarter.
The OCC report noted that modifications in the Home Affordable Modification Program tended to perform better than other modification plans.
"HAMP modifications perform better because of the emphasis on reduced monthly payments, affordability relative to income, income verification, and successful completion of a trial period," the report said. "While HAMP modifications generally reduce the borrowers' monthly payments more and perform better over time than other modifications, more restrictive criteria limit the number of borrowers who may qualify."
Overall, servicers have implemented 3.6 million modifications from January 2008 through June 30 this year. More than half of those modifications, or 57%, were active at the end of the third quarter. The remaining had already exited the portfolios either because servicers received payment in full, the mortgage went into involuntary liquidation like a foreclosure, or it was transferred to a servicer that was not in the OCC's largest reporting network.