OCC Reports Continued Improvement in Mortgage Performance

Summary

The performance of first-lien mortgages serviced by large national and federal savings banks continued to improve in the second quarter of 2013, 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 2013 indicates that the strengthening economic conditions, servicing transfers, home retention efforts, and home forfeiture actions contributed to improved performance of home mortgages in the second quarter of 2013. The report showed 90.6 percent of mortgages were current and performing at the end of the quarter, compared with 90.2 percent at the end of the previous quarter and 88.7 percent a year earlier. Seriously delinquent mortgages—60 or more days past due or held by bankrupt borrowers whose payments are 30 days or more past due—decreased to 3.8 percent compared with 4.0 percent at the end of the previous quarter and 4.4 percent a year ago. The percentage of mortgages that were seriously delinquent decreased 15 percent from a year earlier. The percentage of early stage delinquencies, mortgages that were 30-59 days past due, was 2.9 percent, an increase of 11.6 percent from the previous quarter and up 1.8 percent from a year ago.

Foreclosure activity fell to its lowest level since the inaugural OCC Mortgage Metrics Report in the first quarter of 2008. The number of loans in the process of foreclosure at the end of the second quarter of 2013 fell to 744,369, a decrease of 39.8 percent from a year ago. This decline is attributable to a reduction in the number of newly initiated foreclosures from a year ago and decrease in the number of significantly delinquent mortgages.

After falling materially at the end of 2012, the number of newly initiated foreclosures continued to decline to its lowest levels since early 2008. During the second quarter of 2013, servicers initiated 150,592 new foreclosures, a 50.8 percent decrease from a year ago. Compared to a year ago, the number of completed foreclosures fell 22.2 percent to 79,960. Factors contributing to the reduction in foreclosure activity include improved economic conditions, aggressive foreclosure prevention assistance, regulatory actions, and transfer of loans to servicers outside of the federal banking system.

During the quarter, servicers implemented 314,672 home retention actions (modifications, trial-period plans, and shorter-term payment plans) compared with 121,746 home forfeiture actions (completed foreclosures, short sales, and deed-in-lieu-of-foreclosure actions). The number of home retention actions implemented by servicers decreased by 9.8 percent from the previous quarter and 25.2 percent from a year earlier. In the second quarter of 2013, 93 percent of modifications reduced monthly principal and interest payments, and 59.1 percent of modifications reduced payments by 20 percent or more. Modifications reduced payments by $358 per month on average, while modifications made under the Home Affordable Modification Program (HAMP) reduced monthly payments by an average of $517.

Servicers have modified 3,180,522 mortgages from the beginning of 2008 through the end of the first quarter of 2013. At the end of the second quarter of 2013, 46.6 percent of these modifications were current or paid off. Another 6.8 percent were 30 to 59 days delinquent, and 11.5 percent were seriously delinquent. Another 6.1 percent were in the process of foreclosure, and 7.5 percent had completed the foreclosure process.

The mortgages in this portfolio comprise 52 percent of all mortgages outstanding in the United States—26.5 million loans totaling $4.5 trillion in principal balances. This report provides information on their performance through June 30, 2013.