The performance of mortgages serviced by banks regulated by the Office of Comptroller of the Currency (OCC) declined in the second quarter but was improved over the same period one year earlier according to the OCC Mortgage Metrics Report for the Second Quarter of 2012 released Thursday morning.   OCC called the quarterly change in delinquency rates "seasonal."  The report covers 30.5 million first-lien mortgages with $5.2 trillion in outstanding balances, about 60 percent of all first-lien mortgages in the United States. 

OCC reported that 88.7 percent of mortgages serviced by large national and federal savings banks were current and performing at the end of the second quarter, a decline of 2 basis points from Q1, but up from 88.1 percent in the second quarter of 2011.  Loans that were 30 to 59 days past due increased by 12.1 percent to 2.8 percent, but this rate was 7.5 percent lower than a year earlier.  Those mortgages that were seriously delinquent, i.e. 60+ days past due or where the borrower was in bankruptcy, fell to 4.4 percent, down 0.8 percent from the prior quarter and 9.2 percent from a year earlier and the lowest level in three years.

OCC said several factors contributed to the year-over-year improvement including a strengthening economy, servicing transfers, and both the effects of home retention programs and home forfeiture actions.

The nine reporting institutions held 7.8 percent of the 30.5 million mortgages included in the report.  The performance of mortgages held by the institutions improved both from the previous quarter and from a year earlier with 84.0 percent current and performing compared to 83.5 percent in the first quarter and 80.3 percent a year earlier

Government guaranteed mortgages made up 22.9 percent of the mortgages in the report, up from 20.7 percent a year earlier.  Current and performing mortgages were down both quarter-over-quarter and year-over-year at 84.9 percent compared to 85.9 and 85.7 percent in the respective earlier periods. 

GSE mortgages comprised 58.4 percent of the loan universe compared to 60.2 percent a year earlier.  The performance of these loans was better than others because the portfolio contains more prime loans and was unchanged from the previous quarter at 93.7 percent current and performing.  A year earlier this figure was 93.1 percent.

Servicers continued to emphasize alternatives to foreclosure, implementing 416,036 new home retention actions while starting 302,636 new foreclosures.  Home retention actions were up 17.9 percent from Q1 but down 8.8 percent from a year earlier.

Home retention actions during the quarter reduced borrowers' monthly principal and interest payments by 24.6 percent or $381.  HAMP modifications had an average payment reduction of 35.3 percent or $576.  At the end of the quarter 55.3 percent of modifications that reduced payments by 10 percent or more were current and performing compared to 34.3 percent which did not.

Servicers have modified 2,645,290 mortgages from 2008 through the end of the first quarter of 2012.  At the end of the second quarter of 2012, 48.6 percent of those modifications remained current or had been paid off.  Another 7.6 percent were 30 to 59 days delinquent, and 14.9 percent were seriously delinquent.  There were 10.5 percent in the process of foreclosure and 6.5 percent had completed the foreclosure process.