Mortgage Performance Improved from a Year Ago, OCC Report Says

Summary

The overall quality of first-lien mortgages serviced by large national and federal savings banks improved from the same period a year ago but showed seasonal decline from the prior quarter, according to a report released today by the Office of the Comptroller of the Currency (OCC).

The OCC Mortgage Metrics Report for the Second Quarter of 2012 showed the percentage of mortgages that were current and performing at the end of the quarter was 88.7 percent, compared with 88.9 percent the prior quarter and 88.1 percent a year earlier. The percentage of mortgages that were 30 to 59 days past due was 2.8 percent, up 12.1 percent from the prior quarter but down 7.5 percent from a year ago. Seriously delinquent mortgages—60 or more days past due or held by bankrupt borrowers whose payments are 30 or more days past due—fell to their lowest level in three years. The percentage of mortgages that were seriously delinquent was 4.4 percent, down 0.8 percent from the prior quarter and 9.2 percent from a year earlier.

Several factors contribute to the year-over-year improvement, including strengthening economic conditions, servicing transfers, and the ongoing effects of both home retention loan modification programs as well as home forfeiture actions.

Servicers continued to emphasize alternatives to foreclosure during the quarter. Servicers implemented 416,036 new home retention actions during the quarter, while starting 302,636 new foreclosures. The number of home retention actions implemented by servicers increased 17.9 percent from the prior quarter but decreased 8.8 percent from a year earlier.

Other key findings included:

• On average, the modifications implemented in the second quarter of 2012 reduced borrowers’ monthly principal and interest payments by 24.6 percent, or $381. Modifications made under the Home Affordable Modification Program (HAMP) reduced payments by 35.3 percent on average, or $576.
• Modifications that reduced payments by 10 percent or more performed better than those that reduced payments by less. At the end of the second quarter of 2012, 55.4 percent of modifications made since the beginning of 2008 that reduced payments by 10 percent or more were current and performing, compared with 34.3 percent of modifications made during that time that reduced payments by less than 10 percent.
• Since the beginning of 2008, servicers have modified 2,645,290 mortgages through the end of the first quarter of 2012. At the end of the second quarter of 2012, 48.6 percent of those modifications remained current or had been paid off. Another 7.6 percent were 30 to 59 days delinquent, and 14.9 percent were seriously delinquent. There were 10.5 percent in the process of foreclosure and 6.5 percent had completed the foreclosure process.

The report covers 30.5 million first-lien mortgages worth $5.2 trillion in outstanding balances, about 60 percent of all first-lien mortgages in the United States.