Fewer Delinquencies, But More Foreclosures

By:: Peter King | October 07, 2010

New loan modifications and the number of serious mortgage delinquencies both fell in August, even as foreclosures were on the rise, according to figures released today by the Hope Now Alliance.

Just over 149,000 permanent mortgage loan modifications were approved in August, down from 157,000 in July, while the number of mortgages past due by 60 days or more also fell. Approximately 3,257,000 mortgages were reported seriously delinquent, down from 3,298,000 the month before.

Both continue ongoing trends, with 60-day delinquencies falling each month since January. Meanwhile, both foreclosure starts and completed foreclosures rose for the month, also reflecting an ongoing trend as lenders work through a backlog of delinquent loans.

Seventy percent of loan mods done privately

More than seven out of 10 completed loan modifications in August were proprietary modifications conducted solely on the lender’s terms, as opposed to government-backed Home Affordable Modification Program (HAMP) modifications, which have been declining since last spring. However, proprietary modifications also fell by nearly 5,000 after peaking in June and July.

HAMP modifications generally provide better terms to homeowners than private loan modifications do, because the government requires that monthly payments be reduced to no more than 31 percent of the borrower’s income, whereas proprietary modifications sometimes actually increase a borrower’s payments to make up for arrearages.

Terms improving on proprietary modifications

However, the percentage of proprietary modifications that include a reduction or principal or monthly payments has been steadily increasing. Hope Now reports that 91 percent of all private modifications in August included such reductions, up from 86 percent in July and an average of 77 percent for the entire first quarter of the year.

Year-to-date, there have been more than double the number of proprietary modifications than permanent HAMP modifications, with nearly 874,000 private medications completed compared to 401,000 under HAMP.

Both foreclosure starts and completed foreclosures outnumbered loan modifications in August. There were 245,000 foreclosures started that month, up from nearly 227,000 in July, with 102,000 foreclosures completed, versus 98,000 in July. All told, there have been 1,723,000 new foreclosures begun through the first eight months of the year, with 775,000 foreclosures completed.

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