High performance of first-lien mortgages and declining foreclosure activity spelled a healthy servicing market for the first quarter of 2016 and a decreasing need for new loss-mitigation actions, according to the Office of the Comptroller of the Currency’s newest quarterly report on mortgages. The report showed that 95 percent of mortgages at the seven largest banks were current and performing at the end of Q1, up from just over 94 percent a year earlier.
Banks serviced approximately 21 million first-lien mortgage loans with 3 point 6 trillion dollars in unpaid principal balances, which was 38 percent of all first-lien residential mortgage debt outstanding. The OCC also showed that foreclosure activity declined 7 percent from Q4 of 2015 and 29 percent from a year ago; there were almost 59 thousand new foreclosures during the Q1 of 2016 than Q1 of 2015. Home forfeiture actions also decreased 19 percent from a year earlier to about 38 thousand.
Risk of default among mortgage borrowers is on the rise, especially on loans being written right now, according to data from University Financial Associates. UFA’s latest default risk index for Q2, which measures the risk of default on newly originated prime and nonprime mortgages, ended at 112, up from Q1’s 109. The report stated that under current economic conditions, investors and lenders should expect defaults on loans currently being originated to be 12 percent higher than the average of similar loans originated in the 1990s.