Re-default rates on Home Affordable Modification Program (HAMP) modified loans are half the rate of other permanent modifications, according to second quarter servicing figures complied by the Office the Comptroller of the Currency (OCC) and Office of Thrift Supervision (OTS).
The OCC/OTS Mortgage Metrics Report shows that the Home Affordable Modification Program's track record is better than proprietary modifications completed through the first quarter of 2010.
"At six months after modification, 10.8% of HAMP modifications were 60-days or more delinquent compared to 22.4% for other modifications," the regulators said.
The regulators also point that each new batch of quarterly modifications appears to perform better as a larger percentage of the mods stress reductions in monthly payments by 20% or more.
OCC and OTS collect the data from 12 of the largest bank and thrift servicers.
Since the advent of the HAMP program in the summer of 2009, these servicers have completed twice as many proprietary modifications as HAMP restructurings.
The OCC/OTS report says the servicers completed 273,400 modifications in the second quarter — an 18% increase over the previous quarter. However, number of borrowers entering trial payment plans "decreased significantly."
Meanwhile, number of completed foreclosures, short sales and deeds-in-lieu of foreclosure increased 14% from the first to the second quarter and 67% from a year ago.
Short sales in the second quarter totaled nearly 57,000, up 42% quarter over quarter and 127% from a year ago.
Meanwhile, ASR sister publication American Banker reporter Sara Lepro said that federal regulators implicitly rebutted the view that banks are refusing to take losses on second mortgages that are current but at risk of default.
For one thing, the volume of junior mortgages that are performing but tied to troubled first liens "remains relatively small," the OCC/OTS report stated.
The agencies estimated that of the $293 billion of second liens attached to first mortgages, 6%, or less than $18 billion, are current yet standing behind delinquent or modified firsts.
Nevertheless, the agencies said they have stressed to banks and thrifts the need to properly reserve against potential losses on second liens that are in this situation — or, where appropriate, to charge off the loans.
The agencies also said national banks have recognized $43.5 billion of losses from nonperforming second mortgages over the past two years — more than five times the losses recognized over the previous five years.
Second lien holders have been widely blamed for impeding government efforts to prevent foreclosures through loan modifications and short sales.
For example, first lienholders are reluctant to allow mods without the second mortgage also taking a hit. Also, borrowers whose first liens are modified without changes to the second mortgage often redefault because their debt loads remain heavy.
And proposed short sales have been scuttled when second lienholders insisted on the right to pursue deficiency judgments.
According to the regulators' report, the performance of second-lien mortgages improved slightly during the second quarter. About $21.7 billion, or 3.7% of second liens held by national banks, were 30 or more days past due at the end of the period.
The analysis encompassed both closed-end second mortgages and home equity lines of credit.
