Subprime Mortgages are the Highest Risk Segment in Seriously Delinquent Loans, OTS Says

I thought you should see this article about subprime mortgages. Subprime mortgages account for the highest foreclosures of all loan types. This is a good target market to find foreclosures.

D.C. Fawcett

Jacqueline Gilbert | 07.07.08

While the proportion of mortgages that were current and performing remained relatively constant during each month of the first quarter at approximately 92 percent, subprime mortgages were of the majority of seriously delinquent loans and of the highest risk, according to the latest data from the Office of Thrift Supervision (OTS). The agency’s initial Mortgage Metrics Report released last Thursday showed that while subprime mortgages made up 9 percent of the total portfolio examined, they experienced twice the rate of serious delinquencies in Alt-A mortgages and nearly eight times the rate of prime mortgages.

The OTS’ report, which covers activity by OTS-regulated mortgage servicers during the first quarter ending March 31, is based on data from the five largest servicers of residential mortgages among OTS-regulated thrifts and their affiliates: WaMu, Countrywide, IndyMac Bank, Wachovia FSB, and Merrill Lynch. Combined, the five institutions serviced 11.4 million first-lien residential mortgages, with a total of $2.3 trillion in outstanding balances. Their portfolios also equal approximately 21 percent of all U.S. mortgages outstanding on a dollar value basis.

Additional key delinquency and foreclosure findings in OTS’ initial report:
- Seriously delinquent mortgages, defined as all delinquencies 60 days or more past due or borrowers in bankruptcy who are 30 days or more delinquent, also remained relatively constant during the quarter, declining slightly from 3.65 percent to 3.61 percent of all serviced mortgages.

- Foreclosures in process rose from January to March, with the total number outstanding increasing through the reporting period from 1.49 percent to 1.73 percent of all mortgage loans in the portfolio. New foreclosures during the month, as a percentage of seriously delinquent loans increased from 8.69 percent in January to 11.21 percent in March.

Home retention efforts were not a sight unseen. While subprime mortgages made up 9 percent of the total loans serviced, subprime mortgages made up 41 percent of all loss mitigation actions at the end of March. In addition, workouts increased by 26 percent from February to March—which, according to the agency, outpaced new foreclosures, which grew only 8.5 percent during the same period. Loan modifications made up 71 percent of all loans undergoing some sort of workout solution, outnumbering new payment plans by 2.5 to one.
According to the OTS, this report provides a basis for assessing the industry’s effectiveness of foreclosure prevention initiatives, along with similar efforts by the Office of the Comptroller of the Currency (OCC) and the HOPE NOW Alliance.

“It is important that thrifts and their affiliates work to help qualified borrowers stay in their homes,” said OTS Director John Reich. “During this serious housing downturn, the more tools in the toolbox, the better for helping distressed borrowers who have the capacity to repay their mortgages.”

The OTS hopes to coordinate future efforts to collect and report the data with the OCC and HOPE NOW. The OTS plans to issue future reports quarterly in conjunction with the OCC, who is also collecting similar data from its nine largest national bank servicers.