Are We There Yet?

Are We There Yet?

On December 21, 2009, the Office of the Comptroller of the Currency and the Office of Thrift Supervision released their mortgage metric report for the third quarter of 2009. These offices report on data from the nine national banks and three thrifts that have the largest mortgage servicing portfolios among all national banks and thrifts, 65% of all first-lien mortgages in the country. In the 49 page report there are some key points:

Modifications made during the third quarter lowered monthly principal and interest payments in 80.1% of all modified loans(78.3% in the prior quarter).  Servicers reduced interest rates in 81.1% of all loan modifications. Term extensions were used in 48% of the modifications. There were 13.2% of modifications that included a principal reduction. If you are trying to complete a loan modification, the fact that the principal is being reduced also is important to keep in mind when you are negotiating with the bank.

The percentage of modified loans that are 60 or more days delinquent or in the process of foreclosure have increased steadily. The good news is that while the earlier modifications are not performing well, the ones that have been modified more recently, Quarter 2, 2009, have a re-default rate of 18.7% vs 30.7% for Quarter 1, 2009(three months after modification). While to early to say it is a trend, the good news here may be that the banks are getting more realistic as to what will help borrowers stay out of foreclosure.

The percentage of newly initiated home retention actions increased 68.7% from Quarter 2, 2009. The newly initiated foreclosure action remained the same.

Short sales are on the increase. Quarter 3, 2009 saw an increase of 22.4% from Quarter 2, 2009. And up 127.1% from same quarter last year. This also is good news, banks are getting more serious about making short sales work.

It is too soon to tell whether these are trends, leading us towards stability or just a blip. If you are an owner trying to do a loan modification, look at these numbers and be realistic in your negotiating with your bank. Make sure your loan mod is workable for you!

If you own a home and think you might want to sell, but want to wait to see if the market will be better in the next few months, don’t count on it. With the foreclosures, newly defaulted and the loan mods that are re-defaulting there will still be a lot of distressed homes that will be keeping prices from going up.

If you are considering buying a home, I do think now is the time to get serious. Home prices and interest rates are lower than we have seen in years.  While home prices will continue to be low, I have some concern that later this year interest rates might go up.

If you would like to know how the current conditions effect you and your own situation, contact me.