Mortgage Loan

Healthy mortgages far outweigh distressed home loans

by Broderick Perkins

(3/30/2012) ERATE Exclusive - For all the talk about the zillions of foreclosures and gazillions of underwater homeowners, the market of mortgage-holding homeowners is relatively healthy.

At the end of 2011, 27,600,497 mortgages were current and performing, representing 87.9 percent of the portfolio of loans covered by the Office of the Comptroller of the Currency (OCC) in its "Mortgage Metrics Report" for the fourth quarter of 2011.

Delinquencies remained historically elevated, but are down from a year ago, in line with reports that say the end of the bust is near or already here.

Mortgages that were 30 to 59 days delinquent, represented 3.0 percent of the total serviced portfolio at year's end, and seriously delinquent mortgages, 60 days late or more, were only 5 percent of the total portfolio.

The report covers 31.4 million first-lien mortgages worth $5.4 trillion in outstanding balances, about 60 percent of all first-lien mortgages in the United States.

OCC says, the large number of delinquent loans continues to work through the loss mitigation process.

For the quarter, servicers initiated 460,213 new home retention actions - modifications, trial-period plans, and payment plans.

During the past five quarters, servicers initiated more than 2.4 million home retention actions - 772,425 modifications, 902,860 trial-period plans, and 731,927 payment plans. Completed foreclosures for the quarter increased to 116,060 up 2.5 percent from the previous quarter and 22.1 percent from the fourth quarter of 2010.

However, revealing some market strengthening, the number of new foreclosures initiated during the quarter decreased to 292,173, down 16 percent from the previous quarter. The inventory of foreclosures in process also decreased to 1,272,287, down 4.1 percent from the previous quarter and 3.1 percent from a year earlier.

Distressed homeowners saving money

On average, OCC says private modifications implemented in the fourth quarter of 2011 reduced borrowers' monthly principal and interest payments by 26.5 percent, or $430. Modifications made under the Home Affordable Modification Program (HAMP) reduced payments by 36 percent on average, or $593.

Of course, modifications that reduced payments by 10 percent or more performed better than those that reduced payments by less. At the end of the fourth quarter of 2011, 55.4 percent of modifications made since the beginning of 2008 that reduced payments by 10 percent or more were current and performing, compared with 34.5 percent of modifications made during that time that reduced payments by less than 10 percent.

Since the beginning of 2008, servicers have modified 2,395,565 mortgages through the end of the third quarter of 2011. At the end of the fourth quarter of 2011, 48.3 percent of those modifications remained current or had been paid off. Another 8.5 percent were 30-to-59 days delinquent, and 17.4 percent were seriously delinquent. There were 10.6 percent in the process of foreclosure and 6.1 percent had completed the foreclosure process.

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