Friday, April 3, 2009

OCC: More Seriously Delinquent Prime Loans than Subprime

Posted on Calculated Risk:

From the Office of the Comptroller of the Currency and the Office of Thrift Supervision: OCC and OTS Release Mortgage Metrics Report for Fourth Quarter 2008

The Office of the Comptroller of the Currency and the Office of Thrift Supervision today jointly released their quarterly report on first lien mortgage performance for the fourth quarter of 2008. The report covers mortgages serviced by nine large banks and four thrifts, constituting approximately two-thirds of all outstanding mortgages in the United States.

The report showed that credit quality continued to decline in the fourth quarter of 2008. At the end of the year, just under 90 percent of mortgages were performing, compared with 93 percent at the end of September 2008. This decline in credit quality was evident in all loan risk categories, with subprime mortgages showing the highest level of serious delinquencies. However, the biggest percentage jump was in prime mortgages, the lowest loan risk category and one that accounts for nearly two-thirds of all mortgages serviced by the reporting institutions. At the end of the fourth quarter, 2.4 percent of prime mortgages were seriously delinquent, more than double the 1.1 percent recorded at the end of March 2008.
emphasis added
Seriously Delinquent Loans Click on graph for larger image.

Note: "Approximately 14 percent of loans in the data were not accompanied by credit scores and are classified as “other.” This group includes a mix of prime, Alt-A, and subprime. In large part, the loans were result of acquisitions of loan portfolios from third parties where borrower credit scores at the origination of the loans were not available."

This report covers about two-thirds of all mortgages. There are far more prime loans than subprime loans - and the percentage of delinquent prime loans is much lower than for subprime loans. However, there are now more prime loans than subprime loans seriously delinquent. And prime loans tend to be larger than subprime loans, so the losses from each prime loan will probably be higher.

We're all subprime now!

Posted on the Housing Wire by Diana Golobay:

Less than 90 percent of all mortgages were considered “performing” at the end of 2008, compared with 93 percent at the end of September 2008, the Office of the Comptroller of the Currency and the Office of Thrift Supervision announced Friday in a joint quarterly mortgage performance report. Although subprime mortgages (unsurprisingly) showed the highest level of serious delinquencies, prime mortgages posted the largest percentage jump — more than double — from 1.1 percent recorded at the end of March 2008, to 2.4 percent at year-end. Prime mortgages, considered the lowest risk bucket due to inherent high credit score distribution, account for two-thirds of the mortgages examined for the study.

Recidivism — or re-default rates — among modified mortgages continues to represent a problem for the industry. The agencies reported that 41 percent of loans modified in the second quarter had fallen at least 60 days behind payments after eight months, a trend that “appeared to continue for loans modified during the third quarter.”

“The reasons for high re-default rates are not clear,” officials wrote in a press release. “As noted in the previous quarter’s report, high re-defaults could be the result of a worsening economy, excessive borrower leverage, or poor initial underwriting.”

For the firs time, the OCC and OTS reported separate data sets for four modification categories that: reduced monthly payments by more than 10 percent or 10 percent or less, had no effect on monthly payments, or increased monthly payments. “Overall for 2008, about 42 percent of modified loans resulted in reduced payments, 27 percent in unchanged payments, and 32 percent in increased payments,” the agencies reported. “The proportion that reduced payments increased significantly in the fourth quarter, to more than 50 percent of all modifications.”

Re-default rates among modifications that actually lowered monthly payments “were consistently lower,” according to the report. About 23 percent of modifications that eased payments by more than 10 percent re-defaulted six months later, compared with the 51 percent of unchanged modifications that re-defaulted after six months. Some 46 percent of modifications that led to an increased payment had re-defaulted six months later.

Combined modifications and payment plans rose more than 11 percent overall in the quarter, although they “declined as a percentage of all retention actions” to 40 percent at year-end from 52 percent recorded at mid-year, the agencies reported. HousingWire has found in recent months that these options broken out between prime and non-prime borrowers shows a continuing disparity. During February, 39.7 percent of loan workouts for prime borrowers were loan modifications; in contrast, 66.5 percent of subprime loan workouts were loan modifications, according to data released in late March from HOPE NOW, the private sector alliance of mortgage servicers.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.