Q4 mortgage performance down due to pandemic and CARES Act actions, OCC reports; modifications, foreclosures up sharply from Q3

The percentage of mortgages that were current and performing in the fourth quarter of 2020 declined 3.2% to 93.3% from a year earlier, the Office of the Comptroller of the Currency (OCC) reported Thursday based on a portion of loans outstanding.

The OCC attributed the decline in performance to the COVID-19 pandemic and actions taken by banks to comply with the Coronavirus Aid, Relief, and Economic Security (CARES Act). The OCC noted in its Mortgage Metrics Report that under the CARES Act, customer relief and forbearance can extend up to 18 months.

The report covers 25% of all residential mortgage debt outstanding in the U.S., or approximately 13.8 million loans totaling $2.74 trillion in principal balances, and is not a statistically representative, random sample.

Of these loans, the report states, in the fourth quarter 5.2% were seriously delinquent – 60 or more days past due or held by bankrupt borrowers whose payments are 30 or more days past due. That is down some from 5.8% in the third quarter but up markedly from 1.5% a year ago.

Fourth-quarter servicer actions included the following:

  • Servicers initiated 789 new foreclosures in the fourth quarter of 2020, an increase of 113.8% from the previous quarter and a decrease of 96.5% from a year earlier. Home forfeiture actions during the quarter – completed foreclosure sales, short sales, and deed-in-lieu-of-foreclosure actions – decreased 87.4% from a year earlier to 1,248. “Events associated with the COVID-19 pandemic, including foreclosure moratoriums that began March 18, 2020, and have been extended to June 30, 2021, have caused significant decreases in these metrics,” the OCC report states.
  • Servicers completed 41,030 mortgage modifications in the fourth quarter of 2020, an increase of 191.1% from the previous quarter’s 14,097 modifications.
  • Of the 41,030 mortgage modifications, 13,364, or 32.6%, reduced borrowers’ monthly payments, and 34,403, or 83.8%, were “combination modifications.” The OCC said these modifications included multiple actions affecting affordability and sustainability of the loan, such as an interest rate reduction and a term extension. Of the remaining 6,627 loan modifications, it said, 6,533 received a single action and 94 were not assigned a modification type. Of the 6,533 modifications with a single action, 6,190, or 94.8%, received a term extension.
  • Among the 34,403 combination modifications completed during the quarter, 69.7% included principal deferral, 62.6% included an interest rate reduction or freeze, 51.4% included capitalization of delinquent interest and fees, 32.5% included a term extension, and 0.1% included principal reduction.

OCC Reports Decline in Mortgage Performance for Fourth Quarter 2020