Tuesday, December 22, 2009

New OCC report on mortgage performance.

The Office of the Comptroller of the Currency has released its Third Quarter 2009 report on Mortgage Metrics. Click here for the report.

The main thrust of the report is that mortgage performance in the United States continues to deteriorate. Only 87.2 percent of the servicing portfolio is current and performing.

Other notable points include:

The percentage of current and performing mortgages in the portfolio fell to 87.2 percent of the total servicing portfolio—a decrease of 1.5 percent from the previous quarter. Serious delinquencies reached 6.2 percent of the servicing portfolio, an increase of 16.7 percent from the previous quarter. Foreclosures in process reached 3.2 percent, an increase of 9.4 percent.

Serious delinquencies increased in all risk categories, with the greatest percentage increases in the prime category and the “other” category, which includes mortgages for which credit scores are unavailable. The seriously delinquent rate for prime mortgages, the largest risk category of mortgages in the servicing portfolio, has more than doubled over the last year as financial difficulties have increasingly affected this most creditworthy category of borrowers.

Home retention actions—loan modifications, trial period plans, and payment plans—increased by 68.7 percent from the previous quarter to 680,153 (see Table 1). Loan modifications declined as a result of servicer emphasis on initiating trial period plans made under HAMP and other proprietary servicer programs. Servicers significantly increased the number of trial period plans implemented under HAMP during the third quarter.2 Servicers also doubled the number of other trial period plans under proprietary homeowner assistance programs and further increased the number of payment plans. Notably, home retention actions relative to the number of borrowers either seriously delinquent or in process of foreclosure substantially increased in the third quarter to more than 21 percent.

Modifications that decreased monthly payments continue to show significantly lower re-default rates than modifications that left payments unchanged or increased payments (see Table 4). While lower payments reduce monthly cash flows to mortgage investors, the payments may also result in longer term sustainability of the payments. After 12 months, 38.6 percent of modifications that decreased monthly payments by 20 percent or more were seriously delinquent. In contrast, 66 percent of modifications that left payments unchanged and 68.7 percent of modifications that increased payments were seriously delinquent after 12 months.