In one of today’s government reports at least two positive stats can be

• Foreclosure starts dipped 2.6% in the third quarter vs. the second quarter.
• For the first time this year loan modifications – started in Q3 – were 4% greater than completed foreclosures in the period. 

Unfortunately, other than those facts the report was fairly bleak.

The Office of Thrift Supervision and the Controller of the Currency reviewed 34.6 million first lien mortgage loans, or roughly 60 percent of all outstanding mortgages, from nine banks and five thrifts.

Some more positive facts:

• The lenders reviewed started 281,298 foreclosures in Q3, down 2.6% from Q2 but slightly higher than Q1.
• Of those lenders reviewed they initiated 133,106 loan modifications in the third quarter, up 83% from the first quarter and the 4% higher than the 127,738 completed foreclosures in Q3. In the first half of the year foreclosures surpassed loan modifications.

When a lender or loan provider agrees to change a loan’s term (by cutting the interest rate, extending the term, etc.) to make it more affordable it is considered a loan modification.

Sadly out of the borrowers getting the loan modifications, more than half started missing payments within six months.

Out of the loans that were modified in the first quarter, 37% were delinquent again in three months, and 55% were delinquent again in six months.  Loans modified in the second quarter fared even worse with 40% of borrowers becoming delinquent within three months.

Across the credit spectrum delinquencies increased, from prime (good credit) to Alt-A (fairly good credit often combined with stated income) to subprime (low credit score) through subprime.  The chart shows the proportion of loans 60 days or more past due, by type and by quarter.