Mortgage Performance and Modifications: Fourth Quarter 2011

The OCC Mortgage Metrics Report for the Fourth Quarter of 2011 released late last week showed some improvement among delinquencies and the foreclosure inventory. There is still a large pipeline of delinquent loans which continue to work through the loss mitigation process. Some interesting highlights from the report after the jump:

• The number of loss mitigation actions initiated in the 4th quarter of last year continues to be relatively high – there were 460,213 actions, including modifications, trial-period plans, and payment plans. During the past five quarters (Q3 2010 to Q4 2011), servicers started more than 2.4 million home retention actions—772,425 modifications, 902,860 trial-period plans, and 731,927 payment plans.
• Home Affordable Modification Program (HAMP) modifications were 21.6 percent fewer from the quarter before to 42,275. Other modifications fell by 11.6 percent to 73,878. However, servicers implemented 210,179 new trial-period plans, a 34.0-percent increase from the previous quarter, as certain servicers converted payment plan programs to trial-period plans. Payment plans are short-to-medium-term changes in scheduled terms and payments in order to return mortgages to a current and performing status. Trial-period plans are home retention actions that allow borrowers to demonstrate capability and willingness to pay their modified mortgages for a set period of time. The action becomes permanent following the successful completion of the trial-period.
• On average, the modifications implemented in the fourth quarter of 2011 reduced borrowers’ monthly principal and interest payments by 26.5 percent, or $430. Modifications made under the Home Affordable Modification Program (HAMP) reduced payments by 36 percent on average, or $593. Modifications that reduced payments by 10 percent or more performed better than those that reduced payments by less.
• At the end of the fourth quarter of 2011, 55.4 percent of modifications made since the beginning of 2008 that reduced payments by 10 percent or more were current and performing, compared with 34.5 percent of modifications made during that time that reduced payments by less than 10 percent. Since the beginning of 2008, servicers have modified 2,395,565 mortgages through the end of the third quarter of 2011. At the end of the fourth quarter of 2011, 48.3 percent of those modifications remained current or had been paid off. Another 8.5 percent were 30-to-59 days delinquent, and 17.4 percent were seriously delinquent. There were 10.6 percent in the process of foreclosure and 6.1 percent had completed the foreclosure process.
• In addition, the built up foreclosure inventory is also slowly clearing out with foreclosure sales increasing to to 116,060, up 2.5 percent from the previous quarter and 22.1 percent from the fourth quarter of 2010. However, the number of new foreclosures initiated during the quarter decreased to 292,173—down 16 percent from the previous quarter. This is largely due to process reviews implemented as robo-singing issues came to light in the second part of last year. The inventory of foreclosures in process also decreased to 1,272,287—down 4.1 percent from the previous quarter and 3.1 percent from a year earlier.

The report covers 31.4 million first-lien mortgages worth $5.4 trillion in outstanding balances, about 60 percent of all first-lien mortgages in the United States. The complete report can be downloaded from the OCC Web site.