Orange County Register

There are two arguably positive stats in a government report today:

• Foreclosure starts dipped 2.6% in the third quarter vs. the second quarter.
• Loan modifications started in Q3 were 4% greater than completed foreclosures in the period. That’s the first time that happened this year and by itself suggests the most ambitious efforts to stem foreclosures are finally outpacing actual foreclosures.

Other than that, however, the report was fairly dismal.

The Comptroller of the Currency and the Office of Thrift Supervision reviewed 34.6 million first lien mortgage loans, or roughly 60 percent of all mortgages outstanding, from nine big banks and five thrifts.

Here’s more on the “good” news:

• Those lenders started 281,298 foreclosures in Q3, down 2.6% from Q2 but a tad higher than Q1.
• They initiated 133,106 loan modifications in the third quarter, up 83% from the first quarter and 4% higher than the 127,738 completed foreclosures in Q3. In the first half of the year foreclosures surpassed loan modifications.

Loan mods refer to when a lender or loan servicer agrees to change a loan’s terms (cut the interest rate, extend the term, etc.) to make it more affordable.

Here’s where the bad news starts: More than half the borrowers getting a modification started missing payments within six months. (That inconvenient truth was previously released.)

The breakdown:

• Of the loans modified in the first quarter, 37% were delinquent again in three months, and 55% were delinquent again in six months.
• The trend appears worse for loans modified in Q2: within three months 40% were delinquent again.

And delinquencies increased across the credit spectrum, from prime (good credit) to alt-A (pretty good but often with stated income) to subprime (low credit score). Reports earlier this year found a plateau, or even slight decrease, in subprime loans going bad. This report seems to refute those conclusions. (On the other hand, perhaps the 40% of loans not included in the report are behaving differently.)

Here’s the proportion of all loans 60 days or more past due, by type and by quarter:

The report is heavy on numbers but light on analysis. It doesn’t attempt to explain the trends driving the numbers. Still, it’s packed with data. Read it  HERE.

And more on foreclosure front…

• 8 million foreclosures seen through 2012
• CA banks drop protection against bad loans
• Mortgage aid scheme a failure
• Bad house, car debts mount in O.C.
• 44% of O.C. home resales were foreclosures
• O.C. home seizures in free-fall
• The next mortgage crisis
• O.C. distressed-home listings take year’s biggest drop
• One way to tackle foreclosure eyesores
• Bad-loan fix: Model or Myth?
• More on homeowners defaulting a second time
• Homeowners who got a break often defaulted again

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