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REOs Plummet as Prime Delinquency Surges

Mortgage metrics report issued on banks

April 3, 2009

By staff

A quarterly analysis of mortgages serviced by the largest U.S. banks indicated that as U.S. repossessions have tumbled, delinquency on prime mortgages has surged.

U.S. first mortgages outstanding at the end of last year were approximately 52.6 million loans for $9.278 trillion, according to data extrapolated from the fourth-quarter 2008 OCC and OTS Mortgage Metrics Report jointly released today by the Comptroller of the Currency and Office of Thrift Supervision -- both division of the Department of the U.S. Treasury.

The findings were based on data submitted by Bank of America, Citibank, JPMorgan Chase, USBank and Wells Fargo. Data was also submitted by Countrywide, IndyMac, Merrill Lynch, National City, Wachovia and Washington Mutual FSB -- all of which have been acquired. In addition, data was submitted by First Horizon, which has sold off most of its mortgage operations, and HSBC, which has ended consumer finance operations.

The 13 institutions that submitted data, which are now owned by just nine holding companies, serviced 34.7 loans for more than $6.124 trillion as of Dec. 31 -- exactly two-thirds of all U.S. first mortgages. The latest figures were up from 34.6 million loans for $6.117 billion in the third quarter. More than 90 percent of loans covered in the fourth-quarter report were owned by third-party investors.

The study noted that the one-third of the country's mortgages not held by the reporting institutions don't necessarily reflect the same characteristics.

Prime borrowers, those with credit scores above 660, accounted for 67 percent of outstanding mortgages held by the reporting institutions in the fourth quarter. Alt-A borrowers, those whose scores were between 620 and 659, represented 10 percent of the outstandings. Subprime borrowers whose scores were below 620 made up 9 percent. No credit score data was available on the remaining 14 percent.

Around 9 percent of mortgages at the reporting banks and thrifts were insured by the Federal Housing administration, and 3 percent were guaranteed by the Department of Veterans Affairs.

Overall delinquency of at least 30-days -- including loans in foreclosure -- ended last year at 10.05 percent, higher than 8.52 percent three months earlier.

Excluding loans in the process of foreclosure, 30-day delinquency was 8.05 percent at the end of December, rising from 6.74 percent at the end of September. Serious delinquency of at least 60 days, also excluding loans in foreclosure, ended the quarter at 4.60 percent, increasing from 3.54 percent.

Prime loans delinquent at least 30 days ended last year at 4.15 percent, climbing from 3.19 percent at the end of October. Prime 60-day lates were 2.40 percent, jumping from the third quarter's 1.67 percent.

Delinquency of at least 30 days on Alt-A loans was 16.12 percent on Dec. 31, sharply higher than 13.64 percent on Oct. 31. Serious delinquency on Alt-A loans climbed to 9.10 percent from 7.05 percent.

Subprime borrowers who were at least 30 days past due at the end of the fourth quarter accounted for 27.64 percent of all subprime loans, higher than 24.66 percent at the end of the third quarter. Subprime 60-day delinquency was 16.40 percent, surging from 13.52 percent.

On just government loans, 30-day delinquency excluding loans in foreclosure was 14.27 percent on Dec. 31, rising from 12.87 percent three months earlier. Delinquency of at least 60 days was 7.73 percent, up from 6.55 percent.

New U.S. foreclosure filings by the reporting institutions were 262,906 during the fourth quarter, off from 281,298. Prime filings were down 7 percent -- reflecting the moratorium imposed on agency loans late last year. Alt-A filings were down 6 percent, and subprime filings dropped 10 percent.

During all of 2008, 1,113,054 foreclosures were initiated -- leaving foreclosures in process at the end of last year at 2.00 percent, up from 1.78 percent the prior quarter.

Foreclosures were completed on 89,634 U.S. mortgages, down from the third-quarter's 126,280. Completed foreclosure on just prime loans were down one-third, while Alt-A repossessions dropped 32 percent and subprime REOs were down 28 percent.

Total REOs last year were 409,799.

Workout plans initiated during the latest three-month period were 301,648, rising 11 percent from the third quarter. Modifications accounted for 121,496 of fourth-quarter workouts, and payment plans made up 180,152.

Around 44 percent of modified loans become at last 60 days past due within nine months of loan modifications.

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