Before a house is foreclosed on, the mortgage goes delinquent. If one leads to another then the real estate bust is about to get a lot worse.
The percentage of current and performing mortgages fell to 86.4 percent at the end of the fourth quarter of 2009, down 0.9 percent from the previous three months, marking a decline for the seventh consecutive quarter, the report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision said.
The decline was attributable to a 21.1 percent jump in mortgages 90 or more days past due, to 4.7 percent of all mortgages in the portfolio at the end of 2009.
The increase in seriously delinquent mortgages was most pronounced among prime borrowers, with an increase of 16.5 percent in seriously delinquent mortgages during the fourth quarter.
What is most interesting here is how the real estate bust continues to work its way up the food chain. The subprime bust is over, but the disease continues to spread to previously safe areas. From the report:
“In this regard, servicers reported that they expect new foreclosure actions to increase in the upcoming quarters as many of the mortgages that are seriously delinquent may eventually result in foreclosure as alternatives that prevent foreclosure are exhausted,” according to the report.
Meanwhile, government efforts to forestall foreclosures is failing miserably. More than half of all loans that get modified default again.
The re-default rate of loans modified in the first quarter of 2009 was 51.5 percent by the end of the year, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in a joint report. The figure, which measures payments at least 30 days late, climbed to 57.9 percent for changes made in the prior 12 months.
Modifications are ``clearly not working well, and it's not a surprise,'' said Sam Khater, a senior economist at First American CoreLogic in Tysons Corner, Va. ``It's pointless to rewrite these loans because they're underwater.''