Modified Loans Continue to Grow Delinquent
The Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) released the Mortgage Metrics Report for the first quarter of 2009 (1Q09) .
Despite some discouraging numbers, the OCC and the OTS say they will “continue to drill deeper into the mechanics of foreclosure prevention actions.”

As the number of foreclosures and delinquencies increased in the first quarter (Jan-March), so did the number of modifications.
Loan mods increased by 55% in the quarter, up 172% from the same time last year.


(Note:The statistics in this report do not include “modifications made under the Administration’s Making Home Affordable program.
 which was announced in March and began to be implemented after the reporting period, [or] changes to the Hope for Homeowners program.”)

Over 50% of the loans modified succeeded in reducing borrowers’ monthly payments as well as their interest payments.
 Modifications that resulted in monthly payment reductions of 20% or more increased 19% from the fourth quarter of 2008 (4Q08).
Furthermore, loan mods that increased monthly payments were down 25% from 4Q08, yet still represent 19% of all loans modified in 1Q09.

Here’s where the numbers begin to get troubling. It appears that modified loans only tend to help homeowners stay current for a short time.
According to the report, the number of delinquencies increases with each month following the modification.
 After six months, nearly a quarter of all the loans in which monthly payments were reduced were 60 days delinquent.
The loans in which payments weren’t reduced, 54% were at least 60 days delinquent.

Here’s a stat that at its face seems disingenuous: Six months after modification, half of the loans where payments actually increased were delinquent.
That means half of the people whose monthly payments increased have been able to make their payments on time.
 While it sounds like a statistic that should be celebrated, it’s confusing, at least to us.

If the description of a struggling homeowner is one whose payments are too expensive,
How could half of those homeowners have their payments increased and still continue to make those payments on time?
We’re not sure if there is even an answer to this question, but it surely needs to be asked.

The overall upbeat nature of the tone in the report reflects Washington’s dedication to their modification programs which will be documented in next quarter’s report.
We expect the numbers of loan mods and foreclosures will continue to increase.

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