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First-Lien Mortgages Get an A+

Up and Down Graph BHPerformance of first-lien mortgages improved during the second quarter of 2016 compared with a year earlier, according to the Office of the Comptroller of the Currency’s (OCC) Mortgage Metrics Repor [1]t.

The overall performance of mortgages remained relatively unchanged from the previous quarter but improved from a year earlier. The percentage of mortgages that were current and performing at the end of the second quarter of 2016 was 94.7 percent, compared with 93.8 percent a year earlier.

The first-lien mortgages included in the OCC’s quarterly report comprise of 37 percent of all residential mortgages outstanding in the United States or about 20.7 million loans totaling $3.6 trillion in principal balances as of June 30, 2016.

The OCC broke down this data further to show that servicers initiated 48,732 new foreclosures in the second quarter of 2016. This was a decrease of 17.3 percent from the previous quarter and 31.1 percent from a year earlier.

Additionally, home forfeiture actions, such as completed foreclosure sales, short sales, and deed-in-lieu-of-foreclosure actions, decreased 29.0 percent from a year earlier, to 33,344.

Servicers were also reported to have completed 34,604 modifications during the second quarter of 2016. Among the 34,604 modifications completed during the quarter, 30,179, or 87.2 percent, reduced the loan’s pre-modification monthly payment.

Broken down even further, of these 34,604 modifications, 94.2 percent were “combination modifications”, or modifications that included multiple actions affecting affordability and sustainability of the loan, such as an interest rate reduction and a term extension.

Among the 32,592 combination modifications completed during the quarter, 93.9 percent included capitalization of delinquent interest and fees, 81.8 percent included an interest rate reduction or freeze, 87.6 percent included a term extension, 7.5 percent had principal reduced, and 11.9 percent had principal deferred. An additional 1,855 loan modifications received only a single action.

The fourth quarter of 2015 is the first quarter for which all loans modified during the quarter could have aged at least six months by June 30, 2016. Among modifications that were completed during the fourth quarter of 2015, servicers reported that 4,404 were 60 or more days past due or in the process of foreclosure at the end of the month that they became six months old.