Over 15% of Option ARM Mortgages Seriously Delinquent

According to this Office of the Comptroller of the Currency Office of Thrift Supervision news release, OCC and OTS Release Mortgage Metrics Report for Second Quarter 2009, in the 2nd quarter of 2009 15.2% of the 900,000+ Payment Option Adjustable Rate Mortgages (Option ARM’s) were seriously delinquent and 10% were in the process of foreclosure. Both of these figures are approximately triple the rates for all mortgages. The release defined Option ARM Mortgages as mortgages which “allow borrowers to choose from a variety of payment options each month, including payments that reduce principal, cover interest only, or result in unpaid interest being added to the balance of the loan, resulting in an increased amount owed.”

Other important points covered in the release regarding default rates and foreclosures are:

• The percentage of current and performing mortgages fell by 1.4 percent to 88.6 percent of the 34 million loans in the portfolios of reporting servicers.
• Economic factors continued to adversely affect credit quality, with delinquencies up across all risk categories—prime, Alt-A, and subprime. The percentage of serious delinquencies increased to 5.3 percent of all loans in the portfolio.
• Although delinquencies rose, the number of new foreclosure actions remained about the same as in the previous quarter. Total foreclosures in process continued to grow and reached 993,000 mortgages, or about 2.9 percent of the portfolio.

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