Austin Kilgore | 12.23.08

There were more than 133,000 new loan modifications - an increase of 16 percent - in the third quarter of 2008, and new foreclosures decreased 2.6 percent from the second to third quarters, according to the latest joint Mortgage Metrics Report from the offices of the Comptroller of the Currency and Thrift Supervision.

For the first time, the report also included re-default rates for modified loans. 37 percent of loans modified in the first quarter were 30 or more days delinquent after three months, and 55 percent of the same loans were delinquent after six months. 19 percent of the loans were 60 or more days delinquent after three months, and that figured jumped to nearly 37 percent after six months.

While the increase in loan modifications is a signal that lenders are more willing to help troubled borrowers stay in their homes, Comptroller of the Currency John Dugan warned it may not be enough.

“One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months and even eight months,” Dugan said. “This trend of increasing delinquencies underscores the need to understand why these modifications have not been more sustainable.”

The quarterly report provides data on 35 million first-lien mortgages, representing more than $6.1 trillion in assets, held or serviced by national banks and thrifts.

Other highlights of the report:
 

- The number of delinquent loans increased during the third quarter across all loan categories—prime, Alt-A, and subprime. More than nine out of 10 mortgages remained current, but the percentage of current and performing mortgages fell from 93.33 percent at the end of the first quarter to 91.47 percent at the end of the third quarter.

- Banks and thrifts continued to work with borrowers to mitigate losses and help borrowers retain their homes. The number of newly initiated home retention actions—loan modifications and payment plans increased by 13 percent from the second quarter to the third quarter.

- Loans held on the books of servicing banks and thrifts had the lowest re-default rates at 35.06 percent after three months, and 50.86 percent after six months, compared with loans serviced on behalf of third parties. The lower re-default rate for loans held by servicers may suggest that there is greater flexibility to modify loans in more sustainable ways when loans are held on a servicer's own books than when loans have been sold to third parties.