Friday, April 3, 2009

OCC reports lower re-default rates on meaningful modifications

For the first time, the OCC mortgage metrics report is breaking down re-default rates according to whether the modifications decreased or increased payments. Not surprisingly (as reported by Diana Golobay on the Housing Wire):

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.

Here's the whole Housing Wire story:

Re-default rates — among modified mortgages continues to represent a problem for the [mortgage] 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.”

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.

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