While negative news still dominates the picture, the Offices of Thrift Supervision (OTC) and Comptroller of the Currency (OCC) reported that banks and thrifts implemented twice as many new home retention actions as foreclosures during the third quarter of 2009.
Servicers implemented more than 680,000 home modifications and payment plans to prevent mortgage foreclosure during the quarter. 275,000 trial modifications were initiated under the Home Affordable Modification Program (HAMP) and 406,000 other foreclosure prevention actions were put in place outside of HAMP. Non-HAMP modifications were 8 percent lower than last quarter. The non-HAMP modifications and payment plans required no taxpayer-supported incentives.
Under the HAMP program borrowers must successfully complete a three month trial program before their modifications can become permanent. Because of this time requirement and the age of the program, only 781 loans had been permanently modified under HAMP by the end of the third quarter.
In spite of the uptick in modifications, an increase of 67 percent over the second quarter, much of the data reported in the OCC and OTS Mortgage Metrics Report which covers about 65 percent of the mortgages outstanding in the country, was grim. Current and performing mortgages in the portfolio covered by the report dropped to 87.2 percent compared to 88.6 in the second quarter. This is the sixth consecutive quarter that performance declined. One year earlier, in Q3 2008 91.5 of the portfolio was current and performing. Serious delinquencies rose to 6.2 percent from 5.3 percent in the second quarter and there are 1 million mortgages in foreclosure, about 3.2 percent of the portfolio, an increase of 100,000 during the quarter.
The delinquency rates for subprime mortgages increased only 0.2 percent while prime mortgages that were seriously delinquent increased over 19 percent to a 3.6 percent rate. This is more than double the percentage of prime mortgages in serious trouble one year ago.
Default rates among modified loans remain high, but loans modified more recently appear to be showing lower defaults than those completed in the earlier months of the foreclosure prevention battle. The default rate for loans written in the second quarter of 2008 was 33.3 percent after three months but those modified during the second quarter of this year had a default rate of 18.7 percent after three months. Other data has not aged enough to make comparisons.
The failure of ARM option loans continues to be staggering. At the end of the third quarter only 67.7 percent of those loans, which allow borrowers to make payments below that necessary to even pay the monthly interest, were current and performing.
Government guaranteed loans, primarily those obtained through the Federal Housing Administration and the Veterans Administration, showed higher delinquency rates than the portfolio as a whole. 8.2 percent of government guaranteed mortgages were delinquent, up from 7.5 percent in the preceding quarter and an additional 2.5 percent were in foreclosure.
