The percentage of delinquent mortgages has fallen to the lowest level in four years due primarily to the strengthening economy, officials with the Office of the Comptroller of the Currency said Wednesday.
While new foreclosure actions fell in the first quarter, completed foreclosures spiked as servicers exhausted efforts to help some borrowers, according to the OCC's quarterly mortgage metrics report.
The number of new foreclosures initiated in the first quarter fell 2% from the previous quarter and 8% from a year earlier. But the inventory of foreclosures in process rose 2% from both the previous quarter and a year earlier to 1.3 million, the OCC found.
Roughly 4.5% of mortgages were seriously delinquent at the end of the first quarter, a 10% drop from the fourth quarter and 6% decrease from a year earlier.
"You're seeing a continued and fairly significant drop in loan modification activity that is attributed to the decreasing number of delinquent borrowers and the criteria for receiving a modification under existing programs where the number of people who qualify is limited now," Bruce Krueger, the agency's lead mortgage expert, said on a conference call.
Mortgage servicers use a combination of actions when modifying mortgages including capitalization of missed payments, interest rate reductions and extending terms of the loan. Servicers reduced borrower principal on 10% of all loans modified in the first quarter, compared with just 8.5% in the fourth quarter and 3% a year earlier. Servicers deferred principal on 25% of all loans in the first quarter, in line with the previous quarter but up from 11% a year earlier.
The report did not include any of the effects of the $25 billion national mortgage settlement that requires the five largest servicers to provide billions of dollars in borrower relief, including principal reductions. Four of the servicers — Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) — are regulated by the OCC. The fifth, Ally Financial (ALLY), is regulated by the Federal Reserve.
The OCC's performance data on first-lien residential mortgages comprises 60% of all outstanding mortgages in the U.S., or 31 million loans with $5.3 trillion in principal balances. Of those, 89% were current and performing at the end of the first quarter, the highest level in three years.
Servicers have modified 2.5 million loans since the start of 2008 through the end of the first quarter. Of those loans, 51% were current or had been paid off, 22% were delinquent, 11% were in some stage of foreclosure and 6.3% had completed the foreclosure process.