The country's largest mortgage servicers stepped up their loss mitigation efforts in the second quarter, federal regulators said Friday.
With foreclosures continuing to rise, the proportion of borrowers in loss mitigation increased from 76% in the first quarter to 87% in the second, according to the data collected by the Office of Thrift Supervision and the Office of the Comptroller of the Currency. The regulators reported on 14 of the country's largest banks and thrifts, which hold or service about 60% of all primary mortgages — at a total value of $1.6 trillion.
Officials called the rise in mitigation an encouraging sign.
"The trend is definitely moving in the right direction to minimize the number of avoidable foreclosures and keep more Americans in their homes," OTS Director John Reich said in a press release.
The OCC and OTS Mortgage Metrics Report showed that loan modification as a form of loss mitigation has become more popular. Modifications increased 80% over the first half of the year, but payment plans, another type of loss mitigation, increased just 8%. Loan modifications as a percentage of all mitigation attempts rose from 35% in the first quarter to 45% in the second.
During the first six months of the year new foreclosures remained above 92,000 a month, and they reached a height of 99,000 in May. By the end of June there were over a million seriously delinquent home loans, as delinquencies rose for loans in every category, from prime to subprime and alternative-A, the report said.
"As banks continue to work through this portion of the credit cycle, we are watching closely to ensure they have safe and sound risk management strategies in place," said Comptroller of the Currency John Dugan.
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Corrected September 15, 2008 at 7:03PM: An earlier version of this story understated the value of mortgages held or serviced by 14 of the country's largest banks and thrifts. It is $6.1 trillion. It also misstated one of the findings. New loss-mitigation efforts increased more quickly than new foreclosures during the second quarter.