Loan quality on first-lien mortgages improved significantly in the fourth quarter of 2012, with the Office of the Comptroller of the Currency reporting that the number of loans in some stage of foreclosure fell below one-million for the first time in three years.

The OCC report evaluates first-lien mortgages serviced by large national and federal savings banks and covers roughly 29 million mortgages with a total outstanding balance of $4.9 trillion. The loans evaluated in the survey account for 57% of all first-lien mortgages in the U.S.

In the fourth quarter of 2012, servicers initiated 156,773 new foreclosures, the lowest number recorded since the first quarter of 2008, the OCC claimed.

The number of completed foreclosures in the fourth quarter also fell 8.9% from a year earlier, reaching 105,875 foreclosures altogether.

The OCC credits improving economic conditions, home retention efforts and servicing transfers to institutions outside federal banking for improvements in loan performance.

During the same fourth-quarter, servicers enacted 367,169 home retention actions, compared to 169,064 a year earlier.

“Servicers have modified 2,878,228 mortgages since the beginning of 2008 through the end of the third quarter of 2012,” the OCC said. “At the end of the fourth quarter of 2012, 47.7% of these modifications were current or paid off.  Another 7.1% were 30 to 59 days delinquent, and 14.2% were seriously delinquent. There were 7.7% in the process of foreclosure, and 7.3% had completed the foreclosure process.”

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