(CBS News)

If lawmakers could design a housing policy from scratch what might it look like?

Today Fannie Mae and Freddie Mac–two government-sponsored enterprises originally designed to increase the availability of loans and thereby raise levels of home ownership–dominate the US mortgage lending market. Fannie Mae, which was established in 1938 as part of Franklin Delano Roosevelts New Deal, provides local banks with federal money to finance home mortgages. Freddie Mac, created in 1970, underwrites mortgages that fall below a certain size threshold with the intention of helping homeowners get access the housing market. These mortgages are cheaper since they implicitly–and after 2008 explicitly–benefited from a government guarantee.

In 2008, after incurring significant losses on their portfolios, Fannie and Freddie were taken over by the government; still, they finance the majority of mortgages in the US.

According to my latest research,* this arrangement is problematic. My research shows that houses financed with loans through Fannie and Freddie have higher prices than comparable homes bought with unsubsidized (jumbo) mortgages. In other words: the credit that Fannie and Freddie provide ostensibly to help homebuyers get a foot on the property ladder, has the unintended consequence of increasing house prices. That means a fraction of the lower cost of credit is passed on to the sellers of homes.

My colleagues, Manuel Adelino at Dartmouth College and Felipe Severino a PhD candidate at Sloan, and I looked at deed records from ten big US cities, including New York and Boston, for the ten-year span of 1995-2005. We compared the sale prices of houses that were eligible for financing through Fannie and Freddie with houses that were sold for prices just above the conforming loan limit (CLL). Fannie and Freddie underwrite home loans that fall beneath the CLL, an amount set by Congress each year. Mortgages for amounts greater than the CLL are considered non-conforming loans or jumbo loans.

We find that houses that were eligible for Fannie and Freddie loans cost $1.10 more per square foot than houses eligible for jumbo loans. Considering that the average home size is 1,800 sf, this represents a disparity of $1,980 or a .5% difference in price per square foot from year to year. This credit helps buyers afford a home, to be sure, but a big fraction of that subsidy goes to home sellers in the form of higher prices.

My concern is that the costs of Fannie and Freddie might vastly outweigh their benefits. On one hand, Fannie and Freddie provide a slight reduction in borrowing costs to homebuyers. On the other hand, the cost imposed on taxpayers through the bailout of Fannie and Freddie, and the lobbying efforts of these entities in the period leading up to the crisis, have proven to be humongous.

In February, the White House announced plans to reduce the governments outsized role in mortgage funding and wind-down Fannie and Freddie. This is a very welcome goal. But the findings from our study also caution that the winding down of government support for the mortgage market has to be gradual, since we would surely see a reduction in the average price of houses. In the short run a drop in asset prices could have negative multiplier effects, which is certainly not what we want in the current economic environment.

Unwinding Fannie and Freddie over a period of time seems the best way to go. This could happen through restructuring the overall loan support that is provided or by lowering the CLL every year by a preset amount. The influence on house prices would be smoother, and more incremental, as opposed to a big shock that might take place if the government were to, say, close down Fannie and Freddie tomorrow. Of course, the big question is whether the political process allows for such a smooth transition or if these efforts would be diverted over time by opposing political interests.

Bio: Antoinette Schoar is the Michael Koerner 49 Professor of Entrepreneurial Finance at MIT Sloan School of Management. The opinions expressed in this commentary are solely those of the author.

PRAGUE Jan 25 (Reuters) – The number of mortgages
provided by Czech banks rose by 40 percent last year from 2010,
data showed on Wednesday, confounding fears that credit in
emerging Europe would dry up due to the crisis in the
neighbouring euro zone.

Banks lent more than 119 million crowns($6.09 million) in
71,088 individual loans, the data from the Regional Development
Ministry showed, as interest rates charged on mortgages
gradually declined through the year.

Low official interest rates in the central European country,
coupled with strong competition in the sector dominated by
well-capitalised banks, has kept borrowing relatively cheap.

The average mortgage rate was 3.65 percent in November last
year and the rate has been gradually declining from 4.28 percent
seen in April, a consultancy Hypoindex data showed.

The Czech banking association said last week lending to
households would continue to lead lending growth this year.

Main Czech lenders are units of euro zone banks including
Belgiums KBC, Austrias Erste Bank and Frances
Societe Generale.

There have been fears that credit would dry up in emerging
Europe as west European parent banks withdrew liquidity from
local banks to improve their own capital buffers.
($1 = 19.5243 Czech crowns)

(Reporting by Jana Mlcochova; editing by Anna Willard)

According to the Mortgage Bankers Associations Weekly Mortgage Applications Survey for the week ending January 20, mortgage applications decreased 5.0 percent from one week earlier. The results include an adjustment to account for the Martin Luther King holiday.

The Market Composite Index, a measure of mortgage loan application volume, decreased 5.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 13.8 percent compared with the previous week. The Refinance Index decreased 5.2 percent from the previous week. The seasonally adjusted Purchase Index decreased 5.4 percent from one week earlier. The unadjusted Purchase Index decreased 9.7 percent compared with the previous week and was 6.5 percent lower than the same week one year ago.

The four week moving average for the seasonally adjusted Market Index is up 4.12 percent. The four week moving average is up 0.47 percent for the seasonally adjusted Purchase Index, while this average is up 4.85 percent for the Refinance Index.

The refinance share of mortgage activity decreased to 81.3 percent of total applications from 82.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.3 percent from 5.6 percent of total applications from the previous week.

In December 2011, among refinance borrowers, 56.6 percent of applications were for fixed-rate 30-year loans, 24.3 percent for 15-year fixed loans, and 5.3 percent for ARMs. The share of refinance applications for other fixed-rate mortgages with amortization schedules other than 15 and 30-year terms was 13.8 percent of all refinance applications. The share for 30-year fixed increased from the previous month while the 15-year fixed, ARM and the other fixed category shares decreased from last month.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.11 percent from 4.06 percent, with points decreasing to 0.47 from 0.48 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.39 percent from 4.40 percent, with points increasing to 0.40 from 0.37 (including the origination fee) for 80 percent LTV ratio loans. The effective rate also decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.97 percent from 3.91 percent, with points decreasing to 0.57 from 0.59 (including the origination fee) for 80 percent LTV ratio loans. The effective rate also increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.40 percent from 3.33 percent, with points increasing to 0.40 from 0.39 (including the origination fee) for 80 percent LTV loans. The effective rate also increased from last week.

The average contract interest rate for 5/1 ARMs increased to 2.91 percent from 2.90 percent, with points decreasing to 0.41 from 0.45 (including the origination fee) for 80 percent LTV ratio loans. The effective rate also increased from last week.

• Leeds Building Society puts fixed-rate mortgages into new year sale

  Anyone in need of a home loan may be heading to Leeds Building Society after it announced it is adding its three-year fixed-rate mortgages to the new year sale.

• Leeds Building Society reduces rates on fixed rate mortgages

  Leeds Building Society has reduced the rates and fees on some of its two and three-year fixed rate mortgages.

• Leeds Building Society announces new deals on offset mortgages
• Leeds Building Society launches two-year fixed rate mortgage at 2.29%

Adjustable rate mortgages or ARMs got a bad rap thanks to the 2008 housing meltdown, but these types of loans do make sense for some borrowers.

ARMs can be appealing to homeowners because they typically offer a lower interest rate for the first couple of years compared to fixed-rate mortgages, but the rate changes periodically, (usually in relation to an index), causing payments to fluctuate.

Many experts point to adjustable-rate mortgages made to unqualified homeowners as a main catalyst of the Great Recession. Many borrowers ran into trouble a few years back because they couldnt afford the monthly mortgage payment once the loan adjusted, leading to massive foreclosures, and causing major banks to write down millions-and in some cases, billions-of dollars of bad loans.
Variable-rate mortgages are still available today, but with record-low interest rates, the difference between the rate on a 30-year fixed rate mortgage and an ARM is not much different, making the product not as advantageous.

Its not nearly as popular as it was a couple years ago. You see them become popular when interest rates rise, says Bob Walters, chief economist at mortgage lender Quicken Loans. Even now though, there are always situations when ARMs make perfect sense.

According to mortgage experts, individuals who dont plan to stay in their home for a long period of time can benefit from an ARM because they can take advantage of the lower rate and not have to worry about affording the mortgage payment once the loan adjusts.

First-time home buyers historically will be in their home for three to five years or five to seven years, says Gene Lugat, senior vice president, eastern division, for mortgage lender PrimeLending. For people expecting to stay in a home for more than five to seven years, an ARM does not make financial sense, he says.

Other candidates for an ARM are people who expect their incomes to grow steadily over the course of the years. With any young professionals coming into the work force, their propensity for their income to increase is fairly significant, says Lugat, noting the growth of income should be able to match a higher monthly payment when the mortgage adjusts.

A person thats income is fixed or potentially declining wouldnt be a good candidate for an ARM. People in or nearing retirement, or a self-employed homeowner that cant guarantee a steady increase in income, are not good ARM candidates.

Homeowners planning to stay in a house for an extended period of time can still be a candidate for an ARM if they have money in the bank to handle the increased payment, says Walters. People who have more means tend to take ARMs. People with good jobs but zero money in the bank are candidates for a fixed-rate loan.

In the past, borrowers would enter into an adjustable-rate mortgage with an eye toward refinancing before the mortgage rate resets. But as history has proven, that strategy is fraught with risk. There is a good chance the homes value drops, making the owner unable to refinance because theres not enough equity in the home. Whats more, the requirements to refinance have become a lot stricter, limiting individuals ability to move into a fixed loan to avoid the rise in monthly payments. You shouldnt go into an ARM if you need to refinance in the future, warns Lugat.

New York (Rate Wire) — The benchmark 30-year fixed mortgage rate in NY has moved down since the beginning of the year. In our first reading for the year on Jan. 7 the rates averaged 5%; this week the average stands at 4.19%, a drop of 81 basis points. The state average is higher than the national average of 4.12%, which is 7 basis points lower than in NY. If you are looking for the best rate in the area, then you should focus on banks, as the average rate that you can find at a bank is 4 basis points lower than the average credit union. Since our last report, rates have increased 6 basis points. The shorter term 15-year fixed mortgage in NY rates have dropped from 4.37% to 3.52%, a drop of 85 basis points.

FDIC settlements with Washington Mutual (WAMU.PK) executives are much in the news today (Sunday, Dec 18). The news focuses on ideas like whether or not the amounts paid by the executives hold them sufficiently accountable. None of the stories that I read focuses on the fact that the business of borrowing short to lend long and competing against government-created behemoths like Fannie (FNMA.OB) and Freddie (FMCC.OB) is a failed business planand has been a failed business plan, like forever. As investors, we should not back such business plans, even if from time to time they may look profitable. (I was lucky. I made money on WAMU stock and sold it all. I should have known better and not have bought it at all.)

Coincidentally, the SEC has brought suit against top officers of Fannie and Freddie this week, as well. The SEC suits allege basically that the two federal mortgage giants guaranteed vastly more subprime mortgage loans than they disclosed they had guaranteed. The complaints make interesting reading, especially since the agencies significantly increased their exposure to subprime or subprime-like loans from 4th quarter 2006 through 4th quarter 2007, a period when anyone paying attention knew that the entire sector was in trouble. (The first significant failures of subprime lenders occurred in the 4th quarter of 2006, and they were followed by several significant failures in the 1st quarter 2007.) What were they thinking?!! See here for links to the complaints and related documents.

A Brief History of Home Lending

Home loans have been a problem at least since the Great Depression. At that time, commercial banks did not make home loans. Home loans were the province of savings and loans (sometimes also called building and loans and similar names), essentially cooperatives set up mostly in rural areas to pool savings and make home loans. When the real estate market, farming and employment all went south at the same time, savings and loans failed by the bushelful.

The New Deal. One of the reforms instituted under the New Deal program was the formation of Fannie Mae, which was a federal agency designed to foster the making of long-term fixed rate mortgage loans that the market seemed unwilling to make. As Fannie grew, its liabilities became a significant part of the liabilities on the Federal Governments balance sheet, and in 1968 the Government made a public offering of Fannies common stock in order to transfer control and get the liabilities off the Federal books. Freddie was created with a similar structure in 1970 (its common stock originally was owned by the Samp;Ls) and went public in 1989. By a wink and a nod, however, all market participants assumed that the Federal Government would, in practice, as it eventually did in fact, guarantee Fannies and Freddies obligations by preventing the agencies from failing. Thus, several trillion dollars of Fannie and Freddie exposure that in practice was guaranteed by the Federal Government was not on the Governments books, and both the markets and the Congress knew this. Only the Governments accountants, hiding behind corporate formalisms, did not.

In the 1960s, despite the presence of Fannie, mortgage money was tight. Government addressed this situation in a number of ways, adding to the subsidies that it paid to the mortgage market. Mortgage interest already was deductible for borrowers. The Government now gave tax incentives to institutions that would invest a substantial part if their funds in mortgages. This induced mutual savings banks, most of which had already been around for close to a century, to become home lenders, as opposed to more diversified purchasers of bonds. (Due to the maturity mismatch between the home loans and their deposits, many savings banks failed in the early 1980s. We should count that as part of the second wave of mortgage-market failures.)

The Samp;Ls Fail. But the tax incentives were not enough to spur mortgage lending. One of the problems was that in order to attract deposits, the Samp;Ls had to pay too high a rate of interest to make mortgage lending both profitable and attractive to borrowers. So the Fed and the other regulatory agencies instituted amendments to Regulation Q that were designed to keep deposit costs down. Basically, Reg Q, that originally had applied only to checking accounts at commercial banks, became a price fixing mechanism for the mortgage market. That worked for a few years until it blew up in the mid-and-late 1970s when market interest rates skyrocketed due to inflation, and money started flowing out of the Samp;Ls and savings banks. The rates on the mortgages they owned were fixed, so they basically became insolvent without suffering any losses of principal on the mortgages. It may look to many people like the Samp;Ls failed in the 1980s. But that is because the Government kicked the can down the road for a few years. The failures occurred when interest rate spiked in the 1970s.

Fannie and Freddie Ascendant. But after the Samp;Ls failed, there was a sort of vacuum in the mortgage market. Fannie and Freddie stepped in. Indeed, they stepped in before the Samp;Ls actually had been declared failed, and by doing so, they sealed the fate of many Samp;Ls that might have had a chance of survival. By the mid-1990s, Fannie and Freddie were accounting for more than half of the mortgage market. A number of mortgage specialists did, however, compete with them. Many of those were small institutions that had survived the Samp;L carnage of the 1970s-80s. Others were fast-growing Samp;L-type lenders or mortgage companies that sought to make large volumes of mortgage loans. Countrywide, WAMU, Golden West and Indy Mac were among these lenders. Countrywide, WAMU and Indy Mac were among the 2007-2008 failures. Golden Wests management was smarter (and older) and sold out to Wachovia in 2006, which contributed to Wachovia almost failing in 2008. The remains of Countrywide were bought by Bank of America (BAC) in 2007, and BofA almost failed as a result of that (would have failed but for government bailout). Why these commercial banks thought mortgages were a good business, I have no idea. I have to guess that the commercial banking business is not so good, either. See my articles Bank Lending is Dangerous: The Federal Government Should Stop Subsidizing It.

Private Label Securitization Stumbles. For a time, it looked like securitization might be the best form for supporting the mortgage market. It is flexible and it does not require the ultimate funders to mismatch their assets and liabilities. Standing back from the details of the subprime failures that triggered the Great Recession, I think one can see that the private label securities market could compete with Fannie and Freddies government-guaranteed low costs only in the jumbo sphere and in the higher-risk subprime and alt-A spheres. (Securitization expert Janet Tavakoli said that the term alt-A was coined to put lipstick on the pig.) Thus the private label market forced itself further and further up the risk scale, with the inevitable results. The basic problem is not the securitization architecture; it is the inability of any private party to compete with Fannie and Freddie.

Some Conclusions

At the current time, Fannie and Freddie are practically the only ultimate lenders to the mortgage market. In the most classic sense, they have crowded out all private competition for loans that meet their criteria because they are charging below-market rates (as Government policy). No private mortgage market can begin to flourish until Fannie and Freddie either stop lending or charge market rates.

That brings us back to the officers of WAMU and Fannie and Freddie. They did do things that appear to have been imprudent. But for the officers of WAMU, at least, they were in competition with Fannie and Freddie and Countrywide. As they saw the world, their stockholders, in the form, largely, of institutional investors and Wall Street analysts, were demanding that they achieve higher rates of return. In order to achieve such rates of return in the mortgage market, they had to do more business, and in order to do that, they had to take greater risks.

In the Fannie and Freddie cases, they had a double whammy. They had stockholders demanding that they grow market share and profits; but they also had Congress and HUD demanding that they serve the riskier parts of the marketlower-income borrowers who had almost no money for down payments. Both avenues turned out to lead to disaster for institutions that had been permitted to maintain extremely high ratios of liabilities to equity capital and therefore had little cushion for credit losses.

We come out at the end of this excursion into economic history with two basic conclusions: (1) In the United States, no institution of size has made money holding mortgages over the last 80 years, which suggests that something is basically wrong with the business model. (2) Throughout that period, the Federal Government has subsidized mortgages in various ways in support of home ownership as a significant aspect of the American Dream. To what extent those subsidies have caused the mortgage business to be non-viable I do not know. It is clear that at certain times and in certain ways, the subsidies have done so. But whether the business model of using high leverage to make home mortgage loans is viable at all, I have my doubts.

Based on these two conclusions, I have hopes that eventually some form of securitization, some form of peer-to-peer lending, some form of crowd funding can take over from the highly leveraged lenders that have failed to be able to build a stable mortgage lending business. If the only surviving lenders are on constant government support and guaranteed, I have to believe the business must change.

(Some of the officers of WAMU and Freddie Mac have been my friends in years past when I was active as a banker and as a lawyer representing banks. I believe that those relationships have not influenced my views about these cases, but one never can be certain.)

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Bank of America, the firm perhaps hardest hit by mortgage-related lawsuit woes, might have some company in the courthouse soon.

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Lawyers representing investors that settled billions of dollars of mortgage bond claims with Bank of America last summer announced on Friday that they had opened investigations into $95 billion worth of mortgages held in JPMorgan Chase securities.

The investors are concerned that there were mortgages put inside those securities before the housing bubble burst that were subpar from the beginning, and they are investigating whether JPMorgan should repurchase those loans.

JPMorgan is among the banks with the most mortgage-related litigation and claims, having inherited much of its exposure from its acquisitions of Bear Stearns and Washington Mutual, which both ran into trouble partly because of troubled mortgages. Of the 243 mortgage bonds at JPMorgan that the investors are targeting, at least half were created by Bear Stearns or Washington Mutual.

For the banking sector in general, mortgage bond investigations have left a looming question mark over the industry’s prospects. Banks face investigations and potential litigation from private investors as well as state attorneys general and also from the Federal Housing Finance Agency, which oversees the mortgage financing giants Fannie Mae and Freddie Mac.

The potential dollar cost of the mortgage mess has kept growing this year; many analysts estimate it may be more than $100 billion for the industry. But as a team of bank analysts at FBR, a firm in Arlington, Va., put it in a report that estimated the liabilities: “Does anyone really know?”

For banks, the continuing doubts about their old mortgage businesses also makes it difficult to move on with new mortgage origination, because the companies may be concerned about the way they describe new mortgages in filings, analysts say. The lack of lending, in turn, is seen as a drag on the economy.

“It is inhibiting people from lending,” said Tom Cronin, a managing director of the Collingwood Group, a housing consulting firm in Washington. “You’re only going to make the very best loans, if you don’t know how enforcement is going to be handled.”

Joseph M. Evangelisti, a spokesman for JPMorgan, declined to discuss the bank’s mortgage liability exposure in depth, saying only: “We stand by our obligations under the agreements in question and we will honor our obligation to repurchase any loan that should be repurchased under the terms of those agreements.”

Banks like JPMorgan have benefited in recent years from the slowness of investors to investigate the bonds they bought before the financial crisis.

Under the terms of those bonds, investors who own small slivers of mortgage bonds — as most investors do — have been stymied from obtaining much data on the mortgages within the deals. The rules vary for each bond, but typically banks have to turn over detailed information only to investors who own more than a quarter of a bond. That has meant that large investors like Pimco, BlackRock and even the Federal Reserve Bank of New York have had to combine their interests to cross that threshold.

Many of the investors are coordinating their efforts through Gibbs & Bruns, a law firm in Houston. That firm announced its plans to investigate the 243 JPMorgan deals on Friday.

It was also that firm that struck an $8.5 billion settlement with Bank of America to settle similar issues with $424 billion of mortgage bonds in July, though that settlement has yet to be approved by a court.

Gibbs & Bruns did not return requests for comment.

It will most likely take months for the investors to determine how much money they think they are owed, but when they do, they may try to reach a settlement with JPMorgan or they may take the bank to court.

JPMorgan is currently in litigation with the Federal Deposit Insurance Corporation over the terms of its deal to acquire Washington Mutual, and it is unclear if it would be the F.D.I.C. or JPMorgan that would pay out on claims related to the failed bank’s mortgage bonds.

JPMorgan has set aside billions in reserves to cover mortgage-related litigation, according to a recent company presentation.

If the bank settled with the investors using the same loss ratio that was applied in the Bank of America settlement, it would cost JPMorgan about $1.9 billion. Still the bank would have other exposure outstanding. JPMorgan faces about $31 billion in class-action cases, according to McCarthy Lawyer Links, a legal consulting firm.

Elizabeth Nowicki, a professor of securities law at Tulane University and a former lawyer at the Securities and Exchange Commission, said that the efforts by investors might turn out to be the costliest and most important way that banks are held accountable for their mortgage security creations, because the push for accountability is coming from bank clients. For instance, in the one mortgage security case the S.E.C. has brought against JPMorgan, the bank settled the allegations in June for $153.6 million.

“I think this is going to have much more of an impact in terms of fear and Wall Street sort of shaking in its boots than anything the S.E.C. or Congress can do,” Ms. Nowicki said.

“Without a confident client base, the banks can’t make any money, and now that the client base is really trying to probe into these packages to see what really went on, they are going to have to give some answers.”

(Source: OCC) – The performance of first-lien mortgages serviced by large national banks and federal savings association was stable, but delinquencies remained elevated during the third quarter of 2011, according to a report released today by the Office of the Comptroller of the Currency (OCC).

The quarterly OCC Mortgage Metrics Report showed delinquencies remained elevated but stable during the third quarter of 2011 but have declined from a year earlier.  However, the number of new foreclosures increased by 21.1 percent during the quarter as servicers lifted voluntary moratoria implemented in late 2010 and exhausted alternatives to foreclosure for the large inventory of seriously delinquent mortgages working through the loss mitigation process.  The increase in new foreclosures and the increase in average time required to complete foreclosures sales has resulted in the number of foreclosures in process increasing to 4.1 percent of the overall portfolio, or 1,327,077 loans, at the end of the third quarter of 2011.

At the end of the third quarter of 2011, 88 percent of the 32.4 million loans in the portfolio were current and performing at the end of the third quarter, almost unchanged from the previous quarter.  The percentages of mortgages that were 30-to-59 days delinquent and mortgages that were seriously delinquent (loans 60 or more days delinquent or delinquent mortgages to bankrupt borrowers) did not change from the previous quarter.  However, both categories of delinquencies have declined from a year earlier.

Other key findings of the report included:

On average, the modifications implemented in the third quarter of 2011 reduced borrowers’ monthly principal and interest payments by 24.4 percent, or $382.  Modifications made under the Home Affordable Modification Program (HAMP) reduced payments by 35.1 percent on average, or $567.
Modifications that reduced payments by 10 percent or more performed better than those that reduced payments by less.  At the end of the third quarter of 2011, 58.8 percent of modifications made since the beginning of 2008 that reduced payments by 10 percent or more were current and performing, compared with 36.4 percent of modifications made during that time that reduced payments by less than 10 percent.
Since the beginning of 2008, servicers have modified 2,258,026 mortgages through the end of the second quarter of 2011.  At the end of the third quarter of 2011, 50.8 percent of those modifications remained current or had been paid off.  Another 8.8 percent were 30-to-59 days delinquent, and 17.8 percent were seriously delinquent.  Eleven percent were in the process of foreclosure and 5.8 percent had completed the foreclosure process.

The report covers about 62 percent of all first-lien mortgages in the United States, worth $5.6 trillion in outstanding balances.  The complete report can be downloaded from the OCC Web site, www.occ.gov.

Source: OCC

After three consecutive months of declines, the national mortgage delinquency rate increased in November, while the amount of homes entering foreclosure slightly decreased. The mortgage delinquency rate accounts for all loans currently thirty days or more past due, but have yet to enter the foreclosure process.

The amount of properties with delinquent mortgages increased to 8.15% in November, from 7.93% in October, according to a recent report by Lender Processing Services (LPS). This accounts for a total of about 4.14 million properties with mortgages 30 days or more past due, and about 1.8 million homes that are delinquent 90 days or more.

However, the total amount of homes entering the foreclosure process decreased from 2.21 million in October, to about 2.11 million in November, a decrease of almost 100,000 properties.

Therefore, the total amount of homes entering foreclosure, or are now 30 days or more passed due, is 6.26 million, down from 6.298 million the month prior.

The report shows that Florida, Mississippi, New Jersey, Illinois, and Nevada have the largest amount of delinquent loans (including those entering foreclosure), while Wyoming, Alaska, North Dakota, Montana, and South Dakota have the lowest amount of delinquent mortgages in the nation.

A few weeks ago we reported that the total amount of underwater mortgages decreased in the third quarter to a total of 10.7 million properties, or a little more than 21 percent of all homes attached to a mortgage.