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HAMP Loan Mods Spiked in 1Q as Delinquencies Fell: OCC

JUN 26, 2014 3:47pm ET
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WASHINGTON – The number of home retention actions taken by the largest banks in the first quarter was more than three times the amount of completed foreclosures, short sales and deed-in-lieu-of-foreclosure, according to a regulatory report released Thursday.

The Office of the Comptroller of the Currency’s quarterly mortgage metrics report found that the number of non-performing loans and foreclosures continued to decline while loans through the Home Affordable Modification Program jumped by nearly 50%.

An official at the OCC said the migration to more HAMP loans through the Federal Housing Administration was partly due to financial improvements for borrowers who can now qualify for more typical forms of modification.

“We might see a continued trend there,” said Kathie Gouldie, the OCC's lead retail credit expert, in a conference call with reporters.  “It is my hope and belief that through some of the improved macro-economic trends that individuals . . . will get a mortgage that is more in line with current market conditions and be able to qualify under normal terms as anybody else who is looking for a new mortgage today or a refinance.”

Among various modification and trial-period plans offered in the first quarter, HAMP loans grew the most by 49% from the previous quarter to 31,030 modifications as of March 31. It was the highest amount of HAMP modifications reported in the past four quarters and a reversal of the declines seen in the previous two quarters. Other modifications outside of HAMP declined more than 33% to 34,407 in the first quarter this year compared to the prior quarter. However, Gouldie warned not to see such declines as a negative trend.

“I see that as a positive one in that when borrowers are requesting some sort of relief under a mod program, there’s a prescribed waterfall of actions that can be taken or different levers that servicers can use and borrowers are getting affordable payments by having to push fewer levers,” she said. “So people might be concerned that there are fewer principal reduction mods but that’s really just showing that the borrowers’ capacity has improved and fewer actions need to be taken to get them into an affordable modification.”

Overall, mortgage performance continued to improve for the sixth consecutive quarter, with 93.1% of the $4.1 trillion in mortgages big banks reported to the OCC as current and performing as of March 31. That is an increase from 91.8% performing mortgages in the prior quarter and 90.2% a year earlier.  

Mortgages that were past due or in foreclosure also continued their quarterly declines seen throughout last year. Homes in the process of foreclosure fell to 432,832 in the first quarter, down 17.3% from the previous quarter and more than 52% from a year earlier.

The percent of mortgages that were past due between 30 and 59 days represents 2.1% of the overall mortgage portfolio, which was the lowest ratio since the OCC began issuing its mortgage metrics report in the first quarter of 2008. Seriously delinquent loans -- typically 60 or more days past due -- also reached their lowest level since June 2008, totaling 3.1% of the overall portfolio.

“There have been a lot of safeguards [lenders] put back into the system. The types of products that people are now qualifying for have additional parameters around them as far as ability to pay and affordability,” Gouldie said. “And with 93% of the mortgages being current, I think that’s the trend that we hope continues.”

However, a safer portfolio also means fewer loans and smaller dollar amounts overall. The seven largest mortgage servicers reported the total portfolio dropped nearly 1.8% from the previous quarter and 13% from a year earlier.  Nearly 59% of the mortgages in the overall portfolio are serviced by Fannie Mae and Freddie Mac.

Gouldie said the decline in mortgage volume is partly because lenders are selling off their servicing rights to other entities that do not have to report for the mortgage metrics study and there is an increase in mortgages being paid off or modified.

“It is a combination of things and as we know, overall mortgage lending volume is down so all of these portfolios are shrinking a bit,” she said. 

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