Mortgage Daily

Published On: June 27, 2014

Among all home loans serviced by banks and thrifts, government-sponsored enterprise loans are performing the best. Government-subsidized modifications are performing better than proprietary ones.

Banks and thrifts regulated by the Office of the Comptroller of the Currency serviced 24,503,971 first liens for $4.1297 trillion as of March 31. That represents around 48 percent of all U.S. first liens.

Prime mortgages, those with credit scores of at least 660, accounted for 75 percent of the portfolio. Alt-A loans, where scores were between 620 and 659, made up 10 percent, and subprime mortgage borrowers, who had scores of less than 620, represented 6 percent.

The remaining share wasn’t identifiable.

The findings were discussed in the OCC Mortgage Metrics Report First Quarter 2014.

The 30-day delinquency rate, including bankruptcies and foreclosures, was 6.9 percent on the entire portfolio as of the end of the first quarter, improving from 8.2 percent three months earlier and 9.8 percent a year earlier.

Loan performance has improved for six consecutive quarters.

Foreclosures in process accounted for 1.8 percent of the most recent rate, down from 2.1 percent at the end of 2013 and 3.2 percent at the same point in 2013.

When considering just the 2,204,358 loans that were in the banks’ investment portfolios as of the end of March, the delinquency rate jumped to 11.5 percent as of March 31 from 12.6 percent as of Dec. 31, 2013. The rate was 13.4 percent as of March 31, 2013.

But 30-day delinquency on the 14,425,078 loans serviced for Fannie Mae and Freddie Mac was just 3.3 percent, improving from 4.1 percent three months earlier and 5.4 percent a year earlier.

“Since 2009, mortgages owned by the servicers have performed more poorly than mortgages serviced for GSEs because of concentrations in nontraditional loans, weaker markets, and delinquent loans repurchased from investors,” the report said.

On the 6,078,268 government-guaranteed loans owned by the financial institutions, 30-day delinquency fell to 11.6 percent from 13.9 percent at the end of the fourth-quarter 2013 and 13.8 percent at the end of the first-quarter 2013.

Of the 3,460,476 loans that have been modified since 2008, 69.9 percent were current, 8.1 percent were 30 to 59 days past due and 15.8 percent were seriously delinquent. Another 6.1 percent were in the foreclosure process and 8.2 percent had a foreclosure completed.

In addition, 3.3 percent have been paid off, and 28.7 percent were no longer in the portfolio.

Loan modifications completed through the Home Affordable Modification Program have performed better than proprietary modifications, with 80.9 percent of HAMP modifications being current versus just 67.8 percent for proprietary modifications.

“HAMP modifications perform better because of the emphasis on reduced monthly payments, affordability relative to income, income verification, and successful completion of a trial period,” the report said. “While HAMP modifications generally reduce the borrowers’ monthly payments more and perform better over time, more restrictive criteria limit the number of borrowers who may qualify for a HAMP modification.”

Within three years of modification, 26.8 percent of portfolio loans became at least 60 days past due. The re-default rate soared to 53.0 percent on government-guaranteed loans and was 48.2 percent on loans serviced for third parties. Fannie Mae’s re-default rate was 27.4 percent, and Freddie Mac had a 27.6 percent re-default rate.

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