Real Progress on the Foreclosure Front

With the raging recession killing jobs, falling prices driving even more homeowners underwater, and thousands of loans that should never have been made resetting, reports of record foreclosures have become the norm.


It’s too much to expect a miraculous turnaround in delinquencies, but there’s still some very good news in the war against foreclosures.  America is making progress modifying mortgages at risk of default and in keeping those modified loans from re-defaulting.


According to the latest mortgage metrics report issued Tuesday by the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS), loan modifications also increased in the first quarter and the trend continued toward more sustainable modifications with lower monthly payments. 


During the quarter, servicers implemented 185,156 new loan modifications, up 55 percent from the previous quarter and 172 percent from the first quarter of 2008.  Overall home retention actions totaled 337,192 during the quarter, an increase of 13.7 percent over the fourth quarter of last year and 66.4 percent over the first quarter of 2008.


More than half of the modifications in the first quarter of 2009 resulted in lower monthly principal and interest payments.  The number of modifications that reduced payments by 20 percent or more nearly doubled over the previous quarter.


The OCC/OTS report also found that defaults and foreclosures also increased in the quarter, news previously reported by RealtyTrac and the Mortgage Bankers Association.  However, the new government analysis found that 30-59 delinquency of subprime and Alt-A mortgages declined in the first quarter, a sign that the worst of foreclosures caused by these toxic loans may be over at last.


Credit for the improved pace and quality of modifications goes not to the Administration’s Making Home Affordable program, which didn’t kick into gear modifying loans until the second quarter, nor to the Hope for Homeowners program administered by HUD but to the private sector, especially the


It was those same banks and thrifts that failed so miserably during the first half of 2008, when more than half the homeowners who modified-largely by writing down interest-re-defaulted within a matter of a few months.  The experience underscored the importance of reducing principle to bring monthly payments to a level borrowers can manage. That they moved ahead to implement the principles of the Administration’s program, including the debt to value ratio, months before Treasury and HUD were ready, is to their credit.


Now that we know how to make modifications stick, confidence in the Administration’s approach should grow.  We cannot win the war against foreclosures without first winning the battle against re-defaults

Above is the full OCC/OTS report.

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