A Third of U.S. Mortgages are Low-Doc or Worse, Regulator Survey Shows
Federal banking regulators said last week in a new report that nearly one-third of outstanding mortgages were approved with less than full documentation. Around one-fifth had credit scores below 660, and more than 90 percent were serviced by a third party. The findings came from the Comptroller of the Currency and Office of Thrift Supervision, which jointly surveyed the 14 largest mortgage servicers.
Banks surveyed were Bank of America, Citibank, First Horizon, HSBC, JPMorgan Chase, National City, U.S. Bank, Wachovia and Wells Fargo. Thrifts surveyed were Countrywide, IndyMac, Merrill Lynch, Wachovia FSB and Washington Mutual. All of these thrifts have either failed or been acquired since last summer.
The respondents serviced 34,877,891 mortgages for $6.1 trillion as of Sept. 30, 2008. Their combined portfolios accounted for around 90 percent of first mortgages serviced by banks and thrifts and more than 60 percent of all U.S. mortgages.
The servicers owned less than 10 percent of the loans they serviced, based on the number of loans outstanding. Those loans were owned by third parties through residential mortgage-backed securitizations and loan sales. The share of loans serviced for Fannie Mae and Freddie Mac was 62 percent.
Around nine percent of the loans serviced by the surveyed institutions were subprime. Borrowers with credit scores below 620 were considered subprime.
Alt-A loans amounted to 10 percent, the report said. Alt-A included borrowers with scores between 620 and 659. Low- and no-documentation loans made up 30 percent of loans serviced by the institutions.
Jumbo mortgages amounted to seven percent.
Recent Comments