Mortgage loan modifications rose 40% in 4Q: OCC

Serious delinquencies improved in the fourth quarter of 2021 but modifications and foreclosure starts rose as borrowers exited forbearance in droves, according to the Office of the Comptroller of the Currency.

Completed modifications and initiated foreclosures each increased by roughly 40% on a consecutive-quarter basis while the percentage of loans with payments 60 or more days late fell to 2.3% from 3.1%, the OCC’s Mortgage Metrics report found. Mods rose 40.8% to 47,488 and foreclosure starts jumped 39.9% to 1,294, according to the report, which reflects first-lien mortgage activity comprising 22% of all residential mortgage debt outstanding in the United States.

The numbers show that bank servicers in this group have worked to process relatively high volumes of mods and a smaller number of initiated foreclosures quickly as borrowers have departed from pandemic-related payment suspensions with continuing hardships.

More than 97% of the modifications tracked by the OCC reduced monthly payments, and also included other affordability features such as term extensions or interest rate reductions.

While banks had to process a higher number of mortgage borrowers with hardships during the fourth quarter of last year, the numbers were still far lower than they were in 2020, when the pandemic was at its height and vaccines were still pending. The percentage of performing loans in the fourth quarter of 2021 rose to 96.4% from 93.3% a year earlier, when the share of loans that were seriously delinquent was 5.2%.

The OCC’s report reflects the performance of approximately 12.3 million loans with principal balances totalling $12.3 trillion.