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More Modifications Focusing on Sustainability

Modification BHMore mortgage modifications are focusing on the sustainability of a loan in addition to focusing on affordability, according to a recent report [1] from the Office of the Comptroller of the Currency (OCC [2]).

The OCC’s Q1 Mortgage Metrics report found that out of the 34,481 modifications completed by the seven largest banks during Q1 (Bank of America, Citibank, HSBC, JPMorgan Chase, PNC, U.S. Bank, and Wells Fargo), 91 percent of them were of the “combination modification” variety. Combination modifications include multiple actions that affect both the affordability and sustainability of a mortgage loan. Actions that may affect sustainability may include interest rate reduction and term extension, according to the OCC.

The servicers completed an additional 2,681 modifications that received only a single action, the OCC reported.

The total number of combination modifications during the first quarter came to 31, 450; out of those, 93 percent of them included capitalization or delinquent interest fees, according to OCC. Approximately 81 percent included an interest rate reduction or freeze while 88 percent featured a term extension. Finally, 8 percent of combination modifications included some amount of principal reduction, while 13 percent of them had some amount of principal deferred, according to OCC.

Out of the total number of loan modifications completed during Q1, about 80 percent of them (30,028) reduced the pre-modification monthly payment of the loan. Servicers also reported that about 6,058 modifications that were completed during the third quarter of 2015 (which were at least six months old as of March 31, 2016) were either 60 days or more past due or in the process of foreclosure.

Overall, the 58,921 new foreclosures initiated by servicers in Q1 was a 29 percent decline from a year earlier, and the percentage of mortgages that were current and performing rose from 94.2 percent at the end of Q1 2015 up to 94.9 percent at the end of Q1 2016, according to the OCC. The report covered approximately 21.1 million first-lien mortgage loans with $3.6 trillion in unpaid principal balances, and covered about 38 percent of all outstanding first-lien residential mortgage debt in the U.S.