Home loans continued getting healthier in the second quarter

A number of economic indicators have shown that consumers are generally feeling better about their finances and are therefore in an improved position when it comes to reducing their various outstanding debts. This was also true, to some extent, of home loans.

In general, credit health related to first-lien mortgages improved between the months of April and June, at least on an annual basis, according to the latest Mortgage Metrics Report issued quarterly by the U.S. Office of the Comptroller of the Currency. However, the data was less encouraging when judged quarter-over-quarter.

The OCC’s data covers roughly 30.5 million first-lien mortgages across the country, which accounts for about 60 percent of all of this type of credit, the report said. Combined, these home loans are worth approximately $5.2 trillion.

Improvements from last year

In all, 88.7 percent of mortgages were current during the second quarter of the year, up from 88.1 percent during the same period a year before, the report said. However, it was also down slightly from the 88.9 percent observed in the first quarter of this year.

During that time, just 2.8 percent of home loans were between 30 and 59 days past due, down 7.5 percent on an annual basis but up 12.1 percent from the previous quarter, the report said. However, the number of mortgages that were 60 days or more behind on payments fell on both an annual and quarterly basis to just 4.4 percent of home loans, the lowest point observed in the last three years. It was down 0.8 percent from the first quarter and 9.2 percent from the second quarter of 2011.

Why did the increase in mortgage health take place?

In general, it’s believed that there are several factors contributing to the housing market improvements, the report said. These include generally strengthening conditions across the entire economy, more transfers of mortgages between servicers, and perhaps most importantly, continuing expanded efforts to help current homeowners under financial duress of some kind to retain their properties through mortgage modification programs.

For instance, mortgage servicers worked harder to help homeowners avoid foreclosure on their properties, the report said. During the second quarter, these professionals started 416,036 new actions to help consumers stay in their homes, and simultaneously began just 302,636 new foreclosure processes. The number of retention actions was up 17.9 percent on a quarterly basis, though was still down 8.8 percent from the same three-month period a year prior.

Some success seen in modifications

During the second quarter of the year, modifications made to home loans for borrowers who owed more on their homes than the properties were worth were fairly successful, the report said. The average modification in the U.S. was able to successfully reduce a borrower’s monthly mortgage payment by 24.6 percent, or $381. Those alterations to mortgage terms issued through the government initiative known as the Home Affordable Modification Program were even more successful in cutting monthly payment obligations. HAMP-issued modifications slashed payments 35.3 percent on average, accounting for $576 per monthly payment.

Meanwhile, mortgage modifications were somewhat successful, particularly among those that were able to reduce payments by 10 percent or more, the report said. In all, 55.4 percent of these modifications made since 2008 were considered to be current and performing, compared with just 34.3 percent of modifications that reduced payments by less than 10 percent.

Mortgage servicers have been able to successfully modify nearly 2.65 million home loans across the country between the beginning of 2008 and the end of March 2012, the report said. Of that number, 48.6 percent were either current or had been paid off entirely. Meanwhile, 7.6 percent of those homes were 30 to 59 days behind on payments, and 14.9 percent were more delinquent than that. Another 10.5 percent had entered the foreclosure process, and 6.5 percent had completed it.

When you fall behind on your mortgage payments, you may see your credit score take a significant hit, and this is especially true if your loan becomes so delinquent that your lender or servicer enters it into the foreclosure process. To ensure your total credit health, you should try to stay current on all your various outstanding lines of credit.

However, you might also do well to order a copy of your credit report every once in a while. Doing so might allow you to identify any potentially unfair markings that may be having an adverse effect on your credit score. Fortunately, working with a credit repair service can help to clear up these potentially harmful entries and put you back on the right track where your borrowing and repayment efforts are concerned.

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