Foreclosures Climb, But Overall Mortgage Performance Stable
Mortgage servicers reported a 31.2% jump in new foreclosures in the third quarter of 2010, but the nation’s mortgage portfolio showed some signs of stabilizing as the rate of serious delinquency dropped to its lowest point in five quarters, and the percentage of mortgages in good standing remained unchanged.
The OCC and OTS Mortgage Metrics Report, Third Quarter 2010 said 382,751 new foreclosures were initiated in the quarter—the most in more than a year. The report also indicated that “new foreclosure actions are likely to continue rising as alternatives for seriously delinquent borrowers are exhausted.”
The report covers about 64% of all first-lien mortgages in the country—about 33.3 million loans with $5.8 trillion in outstanding balances.
The report said 87.4% of all mortgages were current and performing in the third quarter, the same rate as the previous quarter but slightly better than the 87.2% rate in the year-ago period; 5.8% of all loans were seriously delinquent (60 or more days past due, or 30 or more days past due in the case of borrowers in bankruptcy), down from 6.2% a year earlier. However, the report noted a slight uptick to 3.2% in the rate of loans delinquent between 30 and 59 days.
While the number of loan modifications declined by 17% from the previous quarter, lenders continued to aggressively pursue principal and interest rate reductions of loans they did modify. In the overall portfolio, 88.2% of modifications made in the third quarter reduced principal and interest payments; and 54.1% reduced monthly payments by more than 20%. Nearly all modifications under the Home Affordable Mortgage Program (HAMP) reduced borrowers’ principal and interest payments, and 76% reduced monthly payments by 20% or more.
Re-default rates continued to drop on modified mortgages. Only 10.5% of loans modified in the second quarter of 2010 were 60 or more days delinquent three months after modification compared with an 18.7% re-default rate in the same category a year earlier. Likewise, 4.7% of loans modified in the second quarter were 90 or more days delinquent three months after modification compared with 9.6% a year earlier. The corresponding re-default rates for HAMP modifications were lower across all categories.
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