Banks scaled back loan modifications and stepped up foreclosures during the third quarter, with foreclosure starts and completions both up sharply from the previous three months, a new report by banking regulators shows.
During the three months ending Sept. 30 — before the robo-signing controversy was in full swing — the number of foreclosure starts was up 31 percent from the previous quarter, to 383,000. Another 187,000 homes completed the foreclosure process, a 15 percent increase from the second quarter and up 57 percent from a year ago.
(Foreclosures are considered completed when ownership of a home transfers to loan servicers or investors.)
The quarterly report, from the Office of the Comptroller of the Currency and the Office of Thrift Supervision, is useful for spotting trends, but understates the total number of foreclosures because it covers only about two-thirds of first-lien mortgages.
The report showed loan servicers approved 470,321 home retention actions during the third quarter, a 17 percent drop from the quarter ending in June. Modifications undertaken through the government-backed Home Affordable Modification Program (HAMP) were down 46 percent from quarter-to-quarter, while non-HAMP modifications were up 10 percent.
More recent reports show loan modifications were up in November and that foreclosure filings dropped dramatically from October to November as loan servicers reviewed foreclosure procedures.
The OCC and OTS report showed modifications have had some success in slowing the flow of properties through the foreclosure pipeline, even in cases where borrowers have redefaulted.
While only 26 percent of the 421,000 loans tracked by the report that were modified in 2008 were still current, only 10 percent had completed the foreclosure process.
Another 30 percent of loans modified in 2008 were seriously delinquent, and 14 percent were in the foreclosure process. The rest were newly delinquent (7 percent) or no longer being serviced (9 percent) because they had been paid off, sold to another investor, or removed from the system through foreclosure, short sale or deed-in-lieu of foreclosure.
Among 587,000 loans modified in 2009, 43 percent were still current, and only 3 percent had completed the foreclosure process. Another 28 percent were seriously delinquent, newly delinquent (10 percent) or in the foreclosure process (11 percent).
Most loans modified in the first half of 2010 were still current at the end of September (69 percent), although 27 percent were delinquent and 3 percent were in the foreclosure process.