Courtesy of Mortgage Orb

The number of foreclosures completed by the nation’s largest bank and thrift mortgage servicers fell by nearly 50% to 95,067 in the fourth quarter of 2010, according to a report released this week by the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS). The huge drop was caused by a slowdown in overall foreclosure activity as servicers reviewed their processing procedures.

New foreclosures decreased by almost 8% to 352,318. As fewer loans rolled out of the foreclosure bucket than rolled into it, the inventory of foreclosures in process grew by more than 7% to approximately 1.29 million loans in the fourth quarter, which represented about 3.9% of all serviced loans, the OCC and OTS report.

Overall credit quality of first-lien mortgages improved slightly, with 87.6% of the 32.9 million loans in the portfolio current and performing at the end of the fourth quarter. At the end of the third quarter, 87.4% of loans were current and performing. The percentage of seriously delinquent loans declined for the fourth consecutive quarter to the lowest level since the second quarter of 2009.

Servicers implemented 473,415 home-retention actions (loan modifications, trial period plans and shorter-term payment plans) during the quarter, compared with 146,132 completed home forfeiture actions (completed foreclosures, short sales and deed-in-lieu-of-foreclosure actions). Home retention actions increased slightly from the prior quarter, driven primarily by new trial-period plans under the Home Affordable Modification Program (HAMP) and other programs, the OCC and OTS say.

Those actions included 208,696 modifications. Nearly 90% of modifications reduced borrowers’ monthly principal and interest payments. HAMP modifications reduced payments by an average of $587 (35.9%), compared with a payment reduction of $351 (21.6%) from other modifications.

Modifications that significantly reduced monthly principal and interest payments continued to perform better than earlier modifications that did not emphasize sustainability and affordability, the regulators add. More than 57% of the modifications made since 2008 that reduced payments by 10% or more were current and performing at the end of the fourth quarter of 2010. In contrast, 34% of modifications made during the same period that reduced payments by less than 10% were current and performing.