"Severe felony" mortgages stay elevated, says OCC

Home mortgage default rates held by the country's top banks remained elevated in the third quarter but showed some improvement over the second quarter, the currency auditor said on Wednesday.

The percentage of cumbersome mortgages that are 60 or more days past due was 5.8% in the third quarter, compared to 1.5% last year, according to the OCC's Mortgage Ratio Report. However, the decline in the third quarter was an improvement over the second quarter when 6.8% of mortgages were severely criminal.

The Coronavirus Aid, Aid, and Economic Security Act allowed 180 days of forbearance and, if necessary, an additional 180 days to get borrowers into trouble while waiving late fees and additional interest. While this relief only applied to loans backed by Fannie Mae, Freddie Mac, the Federal Housing Administration, and other smaller agencies, the OCC said that "banks have implemented the CARES Act for Forbearance Moratoria on All Covered Loans."

CARES law prohibits servicers from reporting borrowers as felons if they have asked for indulgence. Some borrowers have stopped paying their mortgage and not asked their servicer for relief, resulting in higher crime rates.

Despite the financial devastation caused by the coronavirus pandemic, foreclosures have largely been suspended due to a national moratorium extended by the Federal Housing Agency until the end of the year.

Mortgage service providers initiated only 329 new foreclosures in the third quarter, up from 249 in the second quarter and nearly 20,000 in the first quarter. The numbers include loans from bankrupt borrowers whose payments are 30 days or more past due, the OCC said.

"Events related to the COVID-19 pandemic, including foreclosure moratoriums that began March 18, 2020 and were extended through January 31, 2021, have resulted in a significant decrease in these metrics," the report said.

In addition, servicers completed 14,097 mortgage modifications in the third quarter, around 71% of which included several measures such as a rate cut and a term extension. Around 41% of loan changes in the third quarter reduced a borrower's monthly payments, according to the OCC.

The OCC data relates to residential mortgage loans serviced by seven national banks: Bank of America, Citigroup, HSBC, JP Morgan Chase, PNC Financial Services Group, US-Bancorp, and Wells Fargo. Banks were servicing approximately 14.4 million loans as of September 30, or 27% of all outstanding home mortgage debt.

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