Thrift Mortgage Volumes, Overdues Both Up

Thrifts originated $88 billion in 1-4 family loans in the first quarter, up 69% from the previous quarter, as serious delinquencies hit a record level and the Office of Thrift Supervision anticipates a surge of resets on Alt-A and payment-option loans later this year. The 801 OTS-supervised thrifts posted a $47 million loss for the first quarter, the best performance for the thrift industry since third quarter of 2007. OTS acting director John Bowman said thrifts are "not out of the woods yet." But earnings were essentially at the "break even level," he said, and thrifts are well positioned with "solid capital, strong levels of loan loss reserves and improving operating income." However, non-current single-family loans (90 days or more past due or in non-accrual status) hit a record 5.2% as thrifts charged off $916 million in bad mortgages. OTS officials expect defaults and foreclosures will increase as house prices continue to decline and more mortgages lose all their equity. Moody's Economy.com is projecting that the number of underwater mortgages will rise from 15.4 million in first quarter to 17.5 million by the first quarter of 2010. OTS senior economic advisor Sharon Stark also noted that loss severity rates on Alt-A and payment-option ARMs are 55 cents on the dollar.