Mortgage servicers are pushing troubled Countrywide loans through the foreclosure and liquidation processes at a quicker rate since January, according to analysts at Barclays Capital. Countrywide is responsible for 15-to-20% of outstanding subprime and option adjustable rate mortgages (ARMs) in the US, a substantial enough portion to drive sector level performance, according to BarCap Countrywide, since acquired by Bank of America (BAC: 15.77 -1.38%) entered into a nationwide settlement agreement in October 2008 to provide $8.4bn in foreclosure relief after a slew of state Attorneys General filed similar lawsuits, including California, Connecticut, Illinois, West Virginia, Virginia and Texas. In a January 2010 report on these Countrywide loans, analysts found “abysmally low” liquidation and modification rates that were far below the industry average. Mortgage servicers weren’t pushing these loans through the REO pipeline fast enough. But, since then, more loans are rolling from 90-day delinquency into foreclosure, through the REO process and into liquidation. This has come as the annual default rate for Countrywide subprime loans climbed from just above 6% in February 2010 to 9% in April. BarCap analysts said it could keep climbing as more of these loans fail the three-month trial stages of the Home Affordable Modification Program (HAMP). Even though some will be pushed into short sales or other alternatives to foreclosure, higher HAMP rejection rates mean higher liquidation rates. In February 2010, the share of these loans hitting the REO pipeline passed the amount of Countrywide loans in 60-plus day delinquency and continued to climb. But it is taking longer to liquidate the properties. Since January, the amount of time it takes to liquidate a property through the REO process increased two months on average to more than 22 months total. Not all of these loans reach the REO process. Modification rates on Countrywide loans increased sharply since December, particularly under HAMP. Trial to permanent modification conversion rates remain at 25%, which could mean more Countrywide modifications are on the way. Since January, debt forgiveness has become a more popular option for servicers. More than 10% of all Countrywide workouts included some form of principal forbearance or forgiveness. Write to Jon Prior. Disclosure: the author holds no relevant investment positions.