By: Dennis Norman
Today the Office of the Comptroller of the Currency (OCC) and the Office of the Thrift Supervision (OTS) released their mortgage metrics report for 1st quarter 2009. The report covers the performance of 34 million home loans in the US.
The report shows that delinquencies and foreclosures continue to increase during the first quarter of this year. However the report also shows that lenders are greatly increasing the number of loan modifications they are doing for borrowers in an effort to curb foreclosures. As you review the stats it is worth noting that the loan modifications reported happened before the “Making Home Affordable” program which was implemented after this period and should increase the number of modifications in the future.
Below are some stats from the report:
- 90% of all mortgages were current and performing at the end of 1st quarter, about the same as the prior quarter
- Overall serious delinquencies (60 or more days past due) increased by nearly 9% from the previous quarter to 5% of all mortgages.
- Prime loans (the highest credit borrowers) which represented 2/3 of all mortgages experienced the highest percentage increase in serious delinquencies climbing by more than 20% from the prior quarter to 2.9% of all prime mortgages.
- Foreclosures in process rose to 844,389 which represents 2.5% of all loans. This is a 22% increase from the prior quarter and a 73% increase from a year ago.
On a good note below are some stats on loans being modified to help the borrower and the results of the modifications:
- Newly initiated loan modifications reached 185,156 loans during the quarter, a 55.3% increase from the prior quarter and a 172.3% increase from a year ago.
- First quarter loan modifications resulted in a lower payment for the borrower 54.1% of the time.
- Almost 30% of the loan modifications resulted in a payment that was reduced by 20% or more.
- For loans that were modified in 2008 resulting in a reduced payment of 20% or more the re-default rates (60 days or more late) afterward are below:
- 6 months after modification – 24.3% in default
- 9 months after modification – 27.7% in default
- 12 months after modification – 37.6% in default
I think it is pretty positive and proves the modifications are working (with a 20% or more payment reduction) by the fact that one year afterward 2/3 of the borrowers are not in default and have managed to hang onto their homes.
Some of the positive benefits of the loan modifications, such as a lower foreclosure rate, won’t be seen until a quarter or two down the road, but based upon the preliminary results it appears it should be positive.