May 2016 - Rise and Fall

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50 | TH E M R EP 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 Scales Tip Toward Performing With an increasing percentage of mortgages performing, fewer foreclosures and loss mitigation actions are necessary. A s overall first-lien mortgage performance improves with more borrowers maintain - ing their monthly payments, the need for loss mitigation actions is dissipating. The Office of the Comptroller of the Currency's (OCC) Mortgage Metrics Report for the fourth quarter of 2015 found that eight reporting banks (Bank of America, JPMorgan Chase, CIT Bank (formerly OneWest), Citibank, HSBC, PNC, U.S. Bank, and Wells Fargo) serviced ap - proximately 21.5 million first-lien mortgage loans with $3.7 trillion in unpaid principal balances (UPB) as of December 31, 2015. The UPB was 41 percent of all first-lien residential mortgage debt outstanding in the United States. According to the data, overall performance of mortgages that were current and performing at the end of the fourth quarter of 2015 was 94.1 percent, up from 93.2 percent a year earlier and 93.9 percent the previous quarter. With mortgage payment per - formance continuing its upward path, foreclosure activity has steadily declined since the end of 2013. Foreclosure activity fell 15.9 percent since the end of 2014. A total of 63,387 new foreclosures were initiated by reporting ser- vicers during the fourth quarter of 2015, down from 75,395 a year earlier. The OCC's report also found that as mortgage performance improves, the need for loss miti- gation actions has also declined. Servicers implemented 35,118 mortgage modifications in the fourth quarter of 2015, compared with 47,561 mortgage modifica- tions the previous year. According to the data, 87 per- cent of the modifications lowered monthly payments for borrowers. For some time there have been questions surrounding how ser- vicers can protect the lien rights of their investors with regard to the lien position of homeowner association properties, but there are ways to avoid this conflict. The problem stems from the various lienholders of a property residing in one of these commu - nities, according to a whitepaper released by LRES in March. When an HOA forecloses on a property for unpaid association fees, the servicer faces significant risk of loss, including the possibil - ity of losing its investor's stake in the property, the report said. "Since no investor would con- sider this acceptable, servicers are left in need of a better method of managing the HOA lien process," LRES stated. "Homeowner associations are very important to the housing industry as a whole, which is why it is extremely important for servicers to have a good understanding of the risks to be mitigated and the requirements for doing so," said Roger Beane, LRES founder and CEO.

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