Relatively high late payments and foreclosure rates on newly modified mortgages prompted Fitch Ratings credit ratings agency to concede that residential mortgages still remain a credit risk for U.S. banks.

Overall, housing market conditions have improved, but when looking at loans modified in the two-year period stretching from 2008 through 2010, asset quality trends remain weak, the ratings firm said.

Fitch also warns that ‘inconsistent’ disclosure practices by servicers are making it harder to detect underlying asset quality risks tied to modified loans.

Data from the Office of the Comptroller of Currency recently showed that 10.6% of all serviced mortgages were not current as of Sept. 30, 2012. That percentage is tied to the 57% of all U.S. residential mortgages included in the study.

“According to the OCC breakdown of asset quality, 2.9% of all loans were 30-59 days past due, while 4.4% were ‘seriously delinquent’ (60 days or more past due). The share of OCC-surveyed loans at some stage of foreclosure as of 3Q12 was 3.3%,” Fitch said.

Fitch concluded servicers need to more careful in disclosing the performance of mortgages after they’ve been modified to more accurately detect risk.