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30 FORECLOSURE COMPLETIONS, STARTS ON GSE-BACKED LOANS CONTINUE STEADY DECLINE Both foreclosure completions and foreclosure starts on Fannie Mae and Freddie Mac backed loans continued their steady decline in the third quarter, according to the Federal Housing Finance Agency's (FHFA) Q 3 Foreclosure Prevention Report released recently. e GSEs completed 39,100 foreclosures in Q 3, down 9 percent from the 43,000 that were completed in Q2, according to the report. is number hit its peak in Q 3 2010 with 138,000 and took a while to begin its steady decline, but it has decreased quarter-over-quarter every quarter since Q 3 2012. Foreclosure starts declined from 86,000 in Q2 to 75,000 in Q 3, a drop of 13 percent, according to the report. With only a few exceptions (Q 4 2011, Q 3 2012, and Q1 2013), foreclosure starts have declined quarter-over- quarter in every quarter since hitting their peak of 339,000 in Q 3 2010. e number of foreclosure prevention actions for Q 3, 72,700, was more than double the number of foreclosures completed, according to the report. About 59,000 of these were home retention actions, most of which (45,700) came in the form of permanent loan modifications. ere were nearly 11,000 repayment plans and about 2,800 forbearance plans to keep borrowers in their homes in Q 3, according to FHFA. e number of home retention actions, 59,000, was about four and a half times the total of home forfeiture actions (12,878) for the third quarter, according to the report. Home forfeiture actions during the quarter consisted of short sales, which are sales for less than the outstanding balance of a mortgage (9,200) and deeds-in-lieu of foreclosure (3,600). Home retention actions are way down from 2013's pace, however. Nearly 342,000 home retention actions were completed for GSE loans in all of 2013; for the first nine months of 2014, only 199,000 home retention actions were reported. Home forfeiture actions are on the decline as well—nearly 106,000 such actions were reported for all of 2013, compared to just 42,300 for the first nine months of 2014. e total of GSE-backed 60-day delinquent loans in Q 3 was at its lowest level since the conservatorships began in September 2008, according to the report. About 666,000 such delinquent loans were reported for Q 3, and the number has steadily declined every quarter since hitting a peak of 1.77 million in Q 4 2009. e number of 60-day delinquent loans totaled 926,000 in Q 4 2008, the first full quarter after the conservatorships began, according to the report. OCC REPORT SHOWS IMPROVEMENT IN FIRST- LIEN MORTGAGE PERFORMANCE FOR Q3 e OCC Mortgage Metrics Report, ird Quarter 2014, released recently by the Office of the Comptroller of the Currency (OCC), showed improvement in the performance of first-lien mortgages serviced by seven national banks and one federal savings association. e report found that out of a portfolio totaling 23.6 million loans with a combined unpaid principal balance of about $4.0 billion (about 46 percent of residential mortgages in the United States), the percentage of current and performing mortgages increased both quarter-over-quarter (from 92.9 percent to 93.0 percent) and year-over-year (from 91.4 percent to 93.0 percent) in Q 3. Mortgages that were 30 to 59 days delinquent made up 2.4 percent of the portfolio, which was an increase of 1.9 percent from Q2 to Q 3 but a decline of 8 percent from the same quarter in 2013. e percentage of seriously delinquent mortgages, which are defined by OCC as 60 or more days past due or held up by bankrupt borrowers whose payments are 30 days or more past due, declined by 0.9 percent quarter-over-quarter and 14.5 percent year-over-year in Q 3 2014. Delinquent mortgages were not the only category that saw a decline in the report, however. e overall number of homes in the process of foreclosure took a big tumble year-over-year of 41.5 percent in Q 3, down to 353,906. is number represented 1.5 percent of all mortgages. Foreclosures initiated by servicers during the quarter also experienced a significant year-over-year decline of 36.7 percent in Q 3, down to 82,668. Completed foreclosures performed likewise, falling 45.4 percent year-over-year in Q 3 down to 45,245. OCC attributed the large decline in foreclosure activity to improved economic conditions and foreclosure prevention assistance. Another positive sign for the housing market in the OCC's report was the number of home retention actions implemented by servicers in Q 3, which outpaced the number of forfeiture actions by nearly a four to one ratio. Home retention actions, which include modifications, trial-period plans, and shorter- term payment plans, totaled 205,689 for Q 3, compared with 58,214 home forfeiture actions, which include completed foreclosures, short sales, and deeds-in-lieu of foreclosures. e disparity between home retention actions and home forfeiture actions was still nearly four to one despite a 1.2 percent decline quarter-over- quarter and a 34.3 percent decline year-over- year in Q 3. More than 90 percent of modifications in Q 3 reduced monthly principal and interest payments, and 55.1 percent of modifications resulted in a reduced payment of 20 percent or more. Modifications made under the government's Home Affordable Modification Program (HAMP) reduced homeowners' payments by an average of $284 per month. Out of the nearly 3.6 million modifications implemented during the six-and-a-half-year period between January 1, 2008 and June 30, 2014, about 57 percent of them were still active as of the end of Q 3 2014, while nearly 43 percent of them had exited reporting institutions' portfolios through either payment in full, involuntary liquidation (foreclosure, short sale, or deed-in-lieu of foreclosure), or transferring their loans to a non-reporting servicer. Of the approximately 2.04 million modifications that were active as of the end of Q 3 2014, nearly 69 percent were current and performing, according to OCC's report. About 25.6 percent of those modifications were delinquent and about 5.7 percent were in foreclosure. As of November 2014, four states (Nevada, Florida, Arizona, and Illinois) accounted for 33.1 percent of the nation's negative equity, according to CoreLogic. KNOW THIS

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