As the number of troubled borrowers continues to grow within the U.S. mortgage market, two trends are becoming amply clear: a focus is emerging on loan modifications, and the housing mess is working its way well into prime credit categories. Both points were underscored by a press statement Monday morning from HOPE NOW, a private sector alliance of mortgage servicers, non-profit counselors, and investors. The group touted a 9 percent month to month increase in the total number of loan modifications during February, from 123,409 in January to 133,836 in February; but that increase was offset by a 11.3 percent decline in repayment plans. The result was that February’s total “workout plans” — repayment plans and loan modifications — were down slightly in February to 244,474 from January’s 248,175. But the volumes of workout plans — likely to easily top 700,000 during the first quarter of this year — speaks as much about the increase in the number of troubled borrowers as it does of servicer’s ability to manage an influx of such borrowers as effectively as possible. Foreclosure sales soared in February, HOPE NOW reported — reaching 87,346, compared to 68,114 in January, as various foreclosure moratoria wore off and servicers restarted their proverbial engines. The pace of foreclosures in the first two months of 2009 suggest a 52 percent increase in foreclosures is likely to be seen in the first quarter of this year compared to 2008’s totals. Almost all of that increase is being driven in the prime credit sector, which saw foreclosures jump from 30,413 in January 2009 to 55,530 in February — in fact, February’s prime foreclosure totals were almost equal to the 60,699 prime foreclosure sales reported by HOPE NOW for the entire first quarter of 2008. During the same time frame, subprime foreclosure sales have steadily decreased. And despite the increases in raw numbers, troubled prime borrowers remain far less likely to see their loans modified, a trend HousingWire first identified months ago. During February, 39.7 percent of loan workouts for prime borrowers were loan modifications; in contrast, 66.5 percent of subprime loan workouts were loan modifications. Servicers do appear to be focusing on the disparity, however — the prime loan modification percentage for February represents the highest monthly modification-as-a-percentage-of-workouts ratio since HOPE NOW first began reporting data in July 2007. “Currently 5.5 percent of the total mortgage market is 60 days or more delinquent,” HOPE NOW’s executive director Faith Schwartz said. “Because of this, HOPE NOW members are working hard to help the administration implement its recently-announced foreclosure prevention initiative as well as working on additional ways we can be more efficient in helping at-risk homeowners.” If the data is any indication, an increasing focus on the prime credit sector is likely to be the servicing sector’s next big move, and the focus of future HOPE NOW press statements covering loss mitigation efforts by the industry. Write to Paul Jackson at [email protected].