OCC and OTS Mortgage Metrics Report

Disclosure of National Bank and Federal Thrift Mortgage Loan Data
Third Quarter 2008
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The OCC and OTS Mortgage Metrics Report presents performance data on first lien residential mortgages serviced by national banks and federally regulated thrifts. This is the second joint report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision and provides a comprehensive picture of mortgage servicing activities of most of the industry's largest mortgage servicers, and incorporates information on all types of mortgages serviced, including subprime.

The Mortgage Metrics Report focuses on delinquencies and foreclosures, with the range of events that lead to home forfeiture now expanded to include short sales and deed-in-lieu-of-foreclosure as well as completed foreclosures. This report also includes the first available data on the performance of loans that have previously been modified to encourage home retention. Data on the performance of modified loans provide insight into the effectiveness of loss mitigation actions.

The conclusion of the report, in brief, is that delinquencies continue to rise, foreclosures and other actions leading to home forfeiture also continued to rise, and loan modifications were associated with high levels of re-default.

The report continues to promote a common reporting framework using standardized reporting terms and data elements, which allows for better comparisons across the industry and over time. The report uses standard definitions for prime, Alt-A, and subprime mortgages relying on common credit score ranges.

The agencies collected data from the nine national banks¹ and the five thrifts² with the largest mortgage servicing portfolios. At the end of September 2008, the 34.6 million first lien mortgage loans serviced by these institutions totaled more than $6.1 trillion in principal balances. The combined servicing portfolio constituted more than 60 percent of all mortgages outstanding in the United States. About 88 percent of the mortgages in the total servicing portfolio were held by third parties as a result of loans sales and securitization by government-sponsored enterprises, the originating banks, and other financial institutions.

This report includes revised data for the first and second quarters of 2008 that has been submitted by participating banks and thrifts. The revised data include corrections identified by the banks and regulators, reflecting the continuing effort to improve data collection efforts. The report is based on loan-level data; none of the statistics is estimated.

Key findings include:

• Credit quality declined during the third quarter across all loan categories, continuing the trend reported from the first to the second quarters of 2008. More than nine out of 10 mortgages remain current. However, the percentage of current and performing mortgages in the portfolio declined to 91.47 percent at the end of the third quarter from 93.33 percent at the end of the first quarter.
• Early stage delinquencies (30-59 days past due), seriously delinquent mortgages (60 or more days past due plus loans to bankrupt borrowers who are 30 or more days past due), and the number of foreclosures in process increased in the third quarter.

• Newly initiated home retention actions-loan modifications and payment plans-increased by 13 percent from the second to the third quarter 2008. New loan modifications increased by more than 16 percent from the second to the third quarter. New payment plans grew by 11 percent from the second to the third quarter.

• For loans modified in the first quarter of 2008, more than 37 percent of modified loans were 30 or more days delinquent or in the process of foreclosure after three months. After six months, that re-default rate was more than 55 percent. For loans modified during the second quarter, the three-month 30+ day delinquent re-default rate was more than 40 percent.

• For loans modified in the first quarter, more than 19 percent were 60 or more days delinquent or in process of foreclosure after three months. That rate grew to nearly 37 percent after six months. For loans modified in the second quarter, that re-default rate was more than 21 percent after three months.

• 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 to 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 servicers' own books than when loans have been sold to third parties.

• The number of completed foreclosures and other home forfeiture actions (short sales and deeds-in-lieu-of-foreclosure) increased by 11 percent from the second to the third quarter.³ The number of home retention actions-loan modifications and payment plans-was more than twice the number of completed foreclosures and other home forfeiture actions.

• Newly initiated foreclosures fell to 281,298 in the third quarter of 2008, a 2.6 percent drop from the second quarter. The number of foreclosures completed in the third quarter increased nearly 8 percent, rising to 127,738. Many loans that start the foreclosure process never result in foreclosure of the property. On average, the foreclosure process takes about six months to complete. A foreclosure completion rate can be approximated by comparing the number of completed foreclosures with the number of newly initiated foreclosures six months earlier. The 127,738 foreclosures completed during the third quarter represented about 44 percent of the newly initiated foreclosures during the first quarter.