According to a new report from the Office of the Comptroller of the Currency, fewer mortgages were delinquent in the first quarter of 2012 than at any time since the first quarter of 2008.
The OCC Mortgage Metrics Report finds the number of newly-initiated foreclosures fell 8 percent compared with a year ago. Some 88.9 percent of first-lien residential mortgages are current and performing.
The percentage of mortgages seriously delinquent (4.5 percent) dropped 10.4 percent from the previous quarter, and 6.2 percent from a year ago.
The findings are based not on a random sample of all mortgages, but on data provided by 9 selected banks that together hold some 60 percent of first-lien mortgages. Their combined portfolio contains 31 million loans totaling $5.3 trillion in principal.
The improvements, says the OCC report, are due partly to the strengthening economy, but also to an increased use of home retention loan modification programs.
During the first quarter of 2012, “Nearly twice as many new home retention actions–loan modifications, trial-period plans, and payment plans” were initiated than were “completed foreclsoures, short sales, and deed-in-lieu-of-foreclosure transactions,” according to the report.
Only 10.2 percent of loan modifications involved principal reductions; eight times as many involved interest rate reductions. The average monthly decrease in loan payments (for borrowers who qualified for modification) was $437.
Modifications that reduced monthly payments by 10 percent or more performed better than those that reduced payments by less. The report found, not surprisingly, that the greater the decrease in monthly payments, the better the subsequent performance.
In all, says the report, loan servicers implemented 352,989 new home retention actions during the quarter–a decrease of 23.3 percent from the quarter before and 36.7 percent from a year earlier.
The OCC attributed the drop in newly-initiated foreclosures to “servicers’ ongoing emphasis on modifications and other loss mitigation programs, a declining number of seriously delinquent mortgages, and slower initiation of new foreclosure referrals.”