The figures provided by the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) are based on information collected from nine institutions with the largest mortgage servicing portfolios among national banks and thrifts.
The reporting firms include: Bank of America, JPMorgan Chase, Citibank, HSBC, MetLife, PNC, U.S. Bank, Wells Fargo, and OneWest Bank (formerly IndyMac). The report covers about 64 percent of all first-lien mortgages in the country, worth $5.8 trillion in outstanding balances.
The regulators’ quarterly mortgage performance report shows that new foreclosures initiated by these institutions also rose during the July to September timeframe, before the robo-signing scandal broke. The number of foreclosure starts in Q3 increased to more than 382,000 – 31.2 percent more than in the previous quarter and 3.7 percent more than in the third quarter of 2009.
All in all, the reporting institutions counted 1.2 million foreclosures in process as of September 30, 2010, according to the report. That represents a record-high 3.6 percent of their combined servicing portfolios. “Completed foreclosures, which have risen for six consecutive quarters, are expected to continue rising as servicers and borrowers exhaust home retention options to assist borrowers with seriously delinquent mortgages,” regulators noted in the report.
Although foreclosure activity increased during the third quarter, the servicers reported almost twice as many home retention actions as completed home forfeiture actions. They implemented 470,321 home retention actions, including loan modifications, trial period plans, and shorter term payment plans. By comparison, there were 244,840 home forfeiture actions, which takes into account the 187,000 completed foreclosures, as well as approximately 56,200 short sales and 1,700 deeds-in-lieu of foreclosure.
Home forfeiture actions in Q3 were up 11 percent from the previous quarter, while home retention actions dropped by 17 percent, the regulators reported. According to the OCC and OTS, servicers modified 1,506,025 loans from the beginning of 2008 through the second quarter of 2010. At the end of the third quarter of 2010, 48 percent of these modifications remained current or were paid off, but the report notes that more recent modifications have been performing better than the earlier ones.
At six months after modification, 20.2 percent of the modifications made in the fourth quarter of 2009 were seriously delinquent compared with 33.5 percent of the modifications made during the second quarter of 2009, according to the regulators’ analysis.
They also pointed out that modifications under the federal government’s Home Affordable Modification Program (HAMP) are performing better than servicers’ proprietary modifications implemented during the same period.
At six months after modification, the re-default rate for HAMP modifications was about half that of other modifications. The regulators attribute the distinction to HAMP’s emphasis on repayment sustainability, namely guidelines that ensure monthly payments are reduced and are affordable relative to verified borrower income, as well as the completion of a successful trial payment period.