Regulators report more aggressive mortgage mods

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A quarterly mortgage report out this week from U.S. Treasury regulators contained bits of encouragement for struggling borrowers along with the unsurprising finding that delinquencies and foreclosures rose in the second quarter.

A first-quarter report from the regulators had found that only 54% of what lenders described as loan modifications involved actually reducing borrowers’ payments.

That number rose to 78% in the second quarter as mortgage servicers increasingly cut payments due on principal and interest, rather than just adding missed payments back into the reworked loans.

The joint report from the Office of the Comptroller of the Currency, which regulates national banks, and the Office of Thrift Supervision, the federal overseer for savings and loans, surveyed 64% of all U.S. home loans.

The OCC and OTS said they had seen “a significant shift from earlier practices, in which the vast majority of loan modifications either did not change or increased monthly payments.”

The agencies also said “modifications that reduce borrowers’ monthly payments continue to show lower levels of redefaults and longer term sustainability than modifications in which payments are either increased or unchanged.”

Uh, could have guessed that one.

The 46-page OCC and OTS Mortgage Metrics Report report, which you can read here, said home retention actions by lenders rose nearly 22% from the first quarter and were up 75% from a year earlier.

Driving the increase were three-month trial loan modifications made under President Obama’s Making Home Affordable program to assist troubled homeowners.

-- E. Scott Reckard