Serious mortgage delinquencies jump in Q4

NEW YORK (Reuters) - Serious delinquencies among U.S. mortgages jumped in the fourth quarter from the previous quarter, led by a sharp increase in serious delinquencies by the most creditworthy borrowers, U.S. banking regulators said on Thursday.

The report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision, which are part of the Treasury Department, said the percentage of current and performing mortgages fell to 86.4 percent at the end of the fourth quarter of 2009, marking a seventh consecutive quarterly decline.

The drop in current and performing mortgages was attributed to an increase of 21.1 percent in mortgages 90 days or more 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.

The report defined "serious delinquencies" as those loans 60 days or more past due and loans to delinquent bankrupt borrowers.

Prime mortgages are granted to the most creditworthy borrowers, a sector that had initially raised few worries when the housing bubble burst as problems surfaced with the subprime mortgages offered to the riskiest borrowers.

The ongoing decline in performance of prime mortgages is a significant trend, given that those mortgages accounted for 68 percent of all mortgages within the portfolio.

Without the help of government, state and private loan modification programs, many of the homes backed by these delinquent loans could go into foreclosure.

Foreclosures are one of the biggest threats to the U.S. housing market, which remains highly vulnerable to setbacks and heavily reliant on government intervention.

"While servicers reported that HAMP (Home Affordable Modification Program) and proprietary foreclosure prevention programs will help a significant number of distressed homeowners, they indicated these programs are not expected to help all delinquent borrowers," the report said.

"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," it said.

The report covers nearly 34 million loans totaling almost $6 trillion in principal balances and provides information on their performance through the end of the fourth quarter.

The OCC and OTS Mortgage Metrics Report provides performance data on first-lien residential mortgages serviced by national banks and federally regulated thrifts. The report covers all types of first-lien mortgages serviced by most of the industry's largest mortgage servicers.

The mortgages in this portfolio comprise more than 64 percent of all mortgages outstanding in the United States.