The Three Percent Solution

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38 | Th e M Rep o RT O r i g i nat i O n S e r v i c i n g a na ly t i c S S e c O n da r y m a r k e t SERVICING The laTesT mortgage Performances improve in Q3 Delinquent mortgages, foreclosures, and forfeitures were all down year-over-year. t he OCC Mortgage Metrics Report, Third Quarter 2014, released by the Office of the Comp- troller of the Currency, showed improvement in the performance of first-lien mortgages serviced by seven national banks and one federal savings association. The report found that out of a portfolio totaling 23.6 million loans with a combined unpaid principal balance of about $4 billion (about 46 percent of residential mortgages in the United States), the percentage of current and performing mortgages increased both quarter-over-quarter (from 92.9 percent to 93 percent) and year-over-year (from 91.4 per- cent to 93 percent) in Q 3. Mortgages that were 30 to 59 days delinquent made up 2.4 percent of the portfolio, which was an increase of 1.9 percent from Q2 to Q 3 but a decline of 8 percent from the same quarter in 2013. The percentage of seriously delinquent mortgages, which are defined by OCC as 60 or more days past due or held up by bankrupt borrowers whose payments are 30 days or more past due, declined by 0.9 percent quarter-over-quarter and 14.5 per- cent year-over-year in Q 3 2014. Delinquent mortgages were not the only category that saw a decline in the report, however. The overall number of homes in the process of foreclosure took a big tumble year-over-year of 41.5 percent in Q 3, down to 353,906. This number represented 1.5 per- cent of all mortgages. Foreclosures initiated by servicers during the quarter also experienced a signifi- cant year-over-year decline of 36.7 percent in Q 3, down to 82,668. Completed foreclosures performed likewise, falling 45.4 percent year- over-year in Q 3 down to 45,245. OCC attributed the large decline in foreclosure activity to improved economic conditions and foreclo- sure prevention assistance. Another positive sign for the housing market in the OCC's report was the number of home retention actions implemented by servicers in Q 3, which outpaced the number of forfeiture actions by nearly a 4-to-1 ratio. Home retention actions, which include modifications, trial-period plans, and shorter-term payment plans, totaled 205,689 for Q 3, compared with 58,214 home forfeiture ac- tions, which include completed foreclosures, short sales, and deeds-in-lieu of foreclosures. The disparity between home retention actions and home forfeiture ac- tions was still nearly 4-to-1 despite a 1.2-percent decline quarter-over- quarter and a 34.3 percent decline year-over-year in Q 3. More than 90 percent of modi- fications in Q 3 reduced monthly principal and interest payments, and 55.1 percent of modifications resulted in a reduced payment of 20 percent or more. Modifications made under the government's Home Affordable Modification Program (HAMP) reduced home- owners' payments by an average of $284 per month. Out of the nearly 3.6 million modifications implemented during the six-and-a-half year period between January 1, 2008, and June 30, 2014, about 57 percent of them were still active as of the end of Q 3 2014, while nearly 43 percent of them had exited reporting institutions' portfolios through either payment in full, involuntary liquidation (foreclosure, short sale, or deed-in-lieu of foreclosure), or transferring their loans to a non- reporting servicer.

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