On Feb. 24, Joseph Evers, the deputy comptroller for large bank supervision at the Office of the Comptroller of the Currency, testified before the House Committee on Financial Services about mortgage performance data. The OCC and the Office of Thrift Supervision, two of the federal government’s financial regulators, have been collecting data about mortgages from nine large national banks and five thrifts on a monthly basis. Here are some of the findings he discussed (or provided in written testimony) at that hearing.

In collecting and tracking the data, the OCC had to come up with some common definitions for terms because not all of the mortgage lenders used the same terminology. The data that the OCC and OTS collected represents 60 percent of first-lien mortgages – that is 35 million loans with principal balances in excess of $6 trillion. Of those loans, 88 percent were held by third-parties as a result of sales to Freddie Mac and Fannie Mae, originating banks and other financial institutions.

In the agencies’ December 2008 report, an unexpectedly high percentage of loan modifications from the first and second quarters of 2008 resulted in defaults. (And defaults lead to foreclosures.)

The possible reasons that Evers gave for these defaults were:

  • the loan modifications (mortgage restructurings) “did not result in affordable and sustainable mortgage payments”
  • home loan borrowers faced an excessively high debt burden, a negative equity position (they didn’t own much of their homes outright), and increasing levels of unemployment and underemployment

It’s kind of scary to think that loans may have been modified in a way that did not help the borrowers. What’s the point of that? Other than greed, perhaps.

Feb. 24, 2009.