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Loan Mods, Late Payments Increase Substantially

Washington-Loan modifications by banks and thrifts rose substantially in the second quarter, but delinquency and default rates also increased, according to data compiled by the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

The data seem to suggest that major mortgage servicers are indeed heeding calls to negotiate with troubled borrowers to keep more of them in their homes. Combining their data for the first time, the OCC and OTS said that new loan modifications by banks and thrifts increased by 56% between the first and second quarters of this year. Repayment plans on home loans serviced by banks and thrifts also increased, but by just 8%.

All told, banks and thrifts servicing nearly 35 million home loans engaged in some form of loss mitigation on 208,250 mortgage loans in the first quarter and 252,508 loans in the second quarter. In the second quarter, 92.6% of the loans were performing, down from 93.4% in the first quarter. The share of loans in foreclosure rose from 1.4% in the first quarter to 1.6% in the second.

The report says that new loss-mitigation actions increased more quickly than new foreclosures during the second quarter. In fact, new loss-mit actions outpaced new foreclosures by 87% during the second quarter. The OCC/OTS data cull servicing information from Bank of America, Citibank, Countrywide, First Horizon, HSBC, IndyMac, JPMorgan Chase, Merrill Lynch, National City, USBank, Wachovia, Washington Mutual and Wells Fargo. The OCC and OTS said these institutions represent more than 90% of first-lien mortgages serviced by banks and thrifts. About 88% of those loans are serviced for third-party investors via securitization. The combined portfolio consisted of 34.7 million loans worth more than $6.1 trillion. Sixty-six percent of the loans are prime, defined by the regulatory agencies as loans with a credit score above 660. Scores between 620 and 660 are considered alt-A.

At the end of June, foreclosures in process totaled 555,680 at the end of June. Subprime loans accounted for 28% of the foreclosures in process. However, the data showed a slight increase in the number of new foreclosures that involved prime credit quality loans.

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