The Office of the Comptroller of the Currency and the Office of Thrift Supervision have just released a report showing that the home loan modification programs in the third quarter of 2009 have been increasing in popularity, and have helped homeowners make some very specific steps to avoid preventable foreclosures. There has been, according to the report, an increase of 69 percent in home retention actions from the second quarter.

This represents action on the part of national banks and thrift servicers to implement over 680,000 home loan modifications. These modifications help to prevent foreclosure, and represent a significant degree of progress.

The report wasn’t all good news, however. Overall, the amount of mortgages in the servicing portfolio that were current dropped again, which represents the sixth consecutive quarterly drop. Currently, only 87 percent of mortgages in the servicing portfolio were current and performing. Approximately 3.2 percent, or over one million mortgages, were in foreclosure. Another 6.2 percent of the home loans were in a state of serious delinquency. Prime mortgages, which represent the biggest home loan category, were up nearly 20 percent from the second quarter. Today, prime mortgage delinquencies were at twice the levels of the same quarter in 2008.

The other problem with these numbers is that the rate of re-default seems to be staying pretty high overall. While the most recent home retention actions have had much lower re-default rates that actions taken previously in the year, the rates are still way too high. Around half of the loans modified find themselves under re-default within just six months of the modification. The report defines “re-default,” as being 60 or more days past due or in foreclosure.

Overall, home loan servicers implemented a whopping 274,000 trial plans. These trial plans were set up under the Home Affordable Modification Program. In addition to these trial plans, over 400,000 other actions involving home retention were done by servicers. This includes things like payment plans, trial plans and loan modifications. These actions don’t require any incentive from the federal government and are handled purely by the loan servicers themselves.

The vast majority of home loan modifications served to reduce monthly payments on the home loan, both in terms of interest and principal.

This is also a trend in the right direction. Home loan servicers implemented around double the number of actions as they did new foreclosures. For every two home loans that were lost in a foreclosure sale, home loan servicers made home retention actions for nine other families.

You can download the complete report from the OCC web site at www.occ.gov or the OTS website www.ots.gov.

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