Financial institutions completed 25 percent fewer loan modifications in the second quarter than in the first quarter, though trial modifications are gaining steam, according to a new government report. Re-defaults improved for the second consecutive quarter, and portfolio loans had a re-default rate that was around half the level of the rate on loans serviced by third parties.
Loan modifications by banks and thrifts were 142,362 during the second quarter, according to the OCC and OTS Mortgage Metrics Report jointly released today by the Office of the Comptroller of the Currency and the Office of Thrift Supervision. Around 64 percent of U.S. home loans were serviced by the group covered in the report.
Activity tumbled from 190,357 modifications in first quarter but climbed from 125,348 a year ago.
Trial modifications under the Home Affordable Modification Program totaled 114,538 during the latest period. Because details of the program were only released in March, no trial modifications were reported for the first quarter.
Trial payment plans for non-HAMP modifications were 59,571, rising from the first quarter’s 51,189.
More than three-quarters of modifications completed in the second quarter resulted in a lower payment — an increase from just over half of first-quarter modifications.
Re-defaults — loans that became at least 60 days delinquent after being modified — were 27.7 percent on loans modified during the first quarter. Re-defaults improved from the fourth quarter 2008’s modifications, which had a 28.1 percent rate three months after modification, and the third quarter’s 30.8 percent.
The report indicated, however, that delinquency on modified loans after nine months has been trending worse.
At just 14.0 percent after three months, re-defaults on portfolio loans were far lower than for loans serviced for third-parties — which ranged from 27.7 percent to 34.4 percent. Nine out of every 10 loans covered in the report were serviced for investors.
“This difference may be attributable to differences in modification programs and the servicers’ flexibility to modify loan terms to achieve greater affordability and sustainability,” the report said.
Re-defaults after three months were lowest — 15.0 percent — for loans where the payment decreased by at least one-fifth.
