Mortgage Delinquencies Rose During Second Quarter of 2011

Summary

The performance of first-lien mortgages serviced by large national banks and federal savings associations declined slightly during the second quarter of 2011, according to a report released today by the Office of the Comptroller of the Currency (OCC).

The quarterly OCC Mortgage Metrics Report showed that 88 percent of the 32.7 million loans in the portfolio were current and performing at the end of the second quarter, down from 88.6 percent at the end of the first quarter, but up from 87.3 percent a year earlier. The decline in portfolio quality is mainly attributable to an increase in early stage delinquencies—mortgages 30-to-59 days delinquent—which increased 0.4 percent from the previous quarter to represent 3 percent of the servicing portfolio. The increase in early stage delinquencies reflects seasonal effects as well as a sluggish economy and elevated unemployment. The percentage of mortgages that were seriously delinquent, as well as mortgages that were 60 or more days delinquent and delinquent mortgages to bankrupt borrowers, increased slightly to 4.9 percent of the portfolio from 4.8 percent in the first quarter of 2011, after decreasing during each of the previous five quarters. While early stage delinquencies and serious delinquencies both increased from the previous quarter, they decreased from a year earlier.

The percentage of mortgages that were in the process of foreclosure remained steady at 4 percent of the mortgages serviced by the reporting banks and savings associations. Although completed foreclosures decreased by more than 30 percent from a year earlier and increased only 1.2 percent from the previous quarter, completed foreclosures may continue to increase in future quarters as a large number of foreclosures work through the process and alternatives to foreclosure are exhausted.

Mortgage servicers continued to seek alternatives to foreclosure for delinquent borrowers in the second quarter, implementing 456,397 home retention actions compared with 287,145 new foreclosure proceedings. Although modifications under the Home Affordable Modification Program increased by 31.6 percent during the quarter, other home retention actions declined, causing an overall decrease of 18.1 percent in new modification actions from the previous quarter.

Other key findings of the report included:

• Mortgage modifications during the second quarter of 2011 reduced borrowers’ monthly principal and interest payments in 89.4 percent of all modifications, with 53.8 percent of the modifications reducing payments by 20 percent or more. On average, modifications during the quarter reduced borrowers’ monthly payments by $393, or 25.1 percent. HAMP modifications reduced payments by an average of $577, or 35.9 percent.
• 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 2011, 59.9 percent of modifications made since the beginning of 2008 that reduced payments by 10 percent or more were current and performing, compared with 37.0 percent of modifications made during that time that reduced payments by less.
• Servicers have modified 2,083,464 mortgage loans from the beginning of 2008 through the end of the first quarter of 2011. At the end of the second quarter of 2011, 51.3 percent of those modifications remained current or had been paid off. Another 9.2 percent were 30-to-59 days delinquent, and 18.2 percent were seriously delinquent. More than 10 percent were in the process of foreclosure and 5.3 percent had completed the foreclosure process. Of the 938,180 modifications implemented during 2010, 62.4 percent were current or paid off. Another 10.4 percent were 30-to-59 days delinquent, 15.2 percent were seriously delinquent, and 8.4 percent were in the process of foreclosure or had completed the foreclosure process.

The report covers about 63 percent of all first-lien mortgages in the United States, worth $5.7 trillion in outstanding balances.