3Q09 report shows progress
The Office of the Comptroller of the Currency Office of Thrift Supervision released the 3Q09 Mortgage Metrics Report last month noting minor improvement in preventing defaults among borrowers. The document reports “performance data on first-lien residential mortgages serviced by national banks and federally regulated thrifts”.
The report notes that lenders have increased loan modifications to 680,000 in the 3Q of last year which brings a better-than-nothing improvement in the mortgage market statistics. With this, we’re finally sensing the banks’ realization of loan sustainability to keep homeowners away from possible defaults and worse, foreclosures.
Banks would prefer modifying loans instead of selling foreclosed properties. Putting the house on the auction block will entail significant costs in terms of keeping the property for some time and may balloon into a larger expense if it remains unsold in the auction.
However, there’ll be more problems that we need to be in focus of. The 49-page report states, “National bank and thrift servicers implemented more than 680,000 home loan modifications and payment plans in the third quarter of 2009 to avoid preventable foreclosures… Despite progress in this area, the percentage of current and performing mortgages dropped for the sixth consecutive quarter to 87 percent of the servicing portfolio, serious delinquencies rose to 6.2 percent, and foreclosures in process surpassed 1 million mortgages, or about 3.2 percent of the servicing portfolio. Of particular note was the deterioration among prime mortgages, the largest category of mortgages. Serious delinquencies at the end of the third quarter increased to 3.6 percent of prime mortgages, up almost 20 percent from the previous quarter and more than double a year ago.”
Here’s our forecast for he OCCTS’ 4Q report. It will show some more improvements but it may experience drastic downturns this year when more ARMs expire this year.