According to the Office of the Comptroller of the Currency and Office of Thrift Supervision the delinquency rate on prime loans has doubled over the past year.

The delinquency rate is up 20% from the second quarter to 3.6% in the third quarter.

The third quarter report also shows continued deterioration in the performance of payment-option adjustable rate mortgages. Only 67.7% of options ARMs are performing, 16% are seriously delinquent and 11.9% are in the process of foreclosure. In the second quarter, 15.2% were seriously delinquent and 10% were in the process of foreclosure.

The national bank and thrift servicers completed more than 130,000 loan modifications in the third quarter. In total, more than 680,000 home loan modifications and payment plans, including those done on a trial basis, were implemented during the period. Despite the growth of loan modifications, more than half of all modifications are 60-days or more past due after six months.

In cases where the monthly principal and interest payment is reduced by at least 20%, the re-default rate is only 26.7%. After 12 months, the re-default rate is 38.6%, compared to 66% where the modification leaves the borrower’s payment unchanged.

Overall, 87% of the loans in the servicing portfolios of large banks and thrifts are performing and 6.2% are 60-days or more past due, according to the OCC/OTS quarterly Mortgage Metrics Report.

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Starting Today, Treasury/Fannie teams will visit the eight largest servicers for three days to monitor their Home Affordable Modification Program efforts and troubleshoot any problems.

One-third of the 375,000 borrowers have submitted all the necessary documentation to qualify for a permanent loan modification and they “deserve” a timely decision from their servicer, said Treasury Assistance Secretary Michael Barr to reporters. Meanwhile, 37% of the borrowers have submitted some documentation and more 20% have not submitted anything.

“Borrowers need to submit the necessary information or they could lose their eligibility for a permanent affordable modification,” said Phyllis Caldwell, who joined Treasury in November to oversee the conversion campaign.

“We are also working with 300 outreach partners — including state, local and community officials as well as homeownership counselors and advocacy groups,” Ms. Caldwell said. Several years ago she headed community development banking for Bank of America.

Servicers are expected to continue their outreach efforts while Treasury engages in a “robust” communications and outreach campaign to reach those borrowers.

In addition, each HAMP participating servicer will report to Treasury twice a day on their conversion progress during the month of December, according to Mr. Barr.

In a month-long campaign to convert 375,000 borrowers in payment trials into permanent loan modifications, Treasury Department and Fannie Mae staffers will be hounding servicers on a daily basis to achieve the highest conversion rate.

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Federal regulators have issued guidance that encourages banks to refinance or restructure commercial real estate loans despite declines in property values and rents.

A policy statement issued by the Federal Financial Institutions Examination Council provides examples of prudent CRE workouts. It also stresses the importance of the borrower’s willingness and capacity to repay the mortgage.

The guidance tells examiners not to adversely classify prudent workouts, even in cases where the borrower is associated with an industry that is facing financial difficulties.

“The financial regulators recognize that prudent loan workouts are often in the best interest of both financial institutions and borrowers, particularly during difficult economic conditions,” according to the policy statement.

CRE loans that are “renewed or restructured in accordance with prudent underwriting standards should not be adversely classified or criticized unless well-defined weaknesses exist that jeopardize repayment,” the guidance says.

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In a joint statement from the U.S. Attorney for the Eastern District of New York, and the HUD Inspector General’s office, the government says Lend America “falsely certified” that borrowers met FHA underwriting requirements. Using the civil courts, the government is seeking injunctive relief from both the company and its chief business strategist Michael Ashley.

Lend America issued a statement saying it was taken by surprise by the complaint and expects to continue doing business. It added that it plans to “respond more completely once all allegations are reviewed.”

The U.S. Attorney and Department of Housing and Urban Development are seeking a court injunction to ban Lend America, Melville, N.Y., from originating FHA loans, accusing the nonbank lender with fraud in regard to $14 million in product.

Lend America services about $850 million in GNMA-backed products and currently ranks 18th nationwide in GNMA MBS issuance. Lend America recently stepped up plans for expansion into correspondent mortgage banking and wholesale that included FHA production.

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The Obama administration is set to announce a new program to help troubled borrowers whose mortgages are deemed ineligible for modification.

“Maybe this week but certainly next week,” said Laurie Maggiano of the Treasury Department’s Office of Homeownership Preservation. Speaking at the Mortgage Bankers Association’s annual convention, Ms. Maggiano said Treasury would set out the parameters under which servicers can earn financial incentives if they offer borrowers the option of participating in a short sale and deed in lieu of foreclosure.

“We are hoping to set an industry standard so investors will know exactly what they can expect,” she said. “There’s really no magic. We haven’t reinvented the wheel,” Ms. Maggiano told industry executives in San Diego. To cut down on the paperwork, the program will provide a standardized set of forms.

The program will also cap the amount of money that can be paid to subordinate lien holders who agree to waive their interest in a property. The government expects that some second mortgage investors will “walk away” from the program because the compensation being offered will be too little. But Ms. Maggiano, who is director of policy in the preservation office, told a standing room only session that by setting a limit, the White House is hoping to eliminate time consuming back-and-forth negotiations between servicers, borrowers and investors.

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