More borrowers with mortgages serviced by national banks and savings and loans, which hold 34 million loans, or 65% of all outstanding U.S. mortgages, fell into arrears from July 1 to Sept. 30.

By Jim Puzzanghera

December 21, 2009 | 7:34 a.m.

Reporting from Washington – The number of home foreclosures for a major sector of the banking industry topped 1 million for the first time in the third quarter of the year as struggles spread to homeowners with prime loans and modified mortgage payments, according to new data released today by federal regulators.

The report covers mortgages serviced by national banks and savings and loans — about 34 million loans, or 65% of all outstanding U.S. mortgages. It showed that housing troubles continued to rise for the period from July 1 to Sept. 30, with the percentage of homeowners at least 60 days delinquent on their payments rising to 6.2%. That represented a 16.7% increase over the second quarter and a 73.8% increase from a year earlier, according to the report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

Of those seriously delinquent loans, the number in homes in the foreclosure process reached 1.09 million, or about 3.2% of all the loans surveyed.

The report highlighted some troubling trends as the housing market continues to struggle despite increasing sales and prices. Difficulties increased for holders of prime mortgages, with the percentage of those loans that were 60 days or more delinquent increasing to 3.2%, up almost 20% from the second quarter and more than double the rate of a year ago.

In addition, holders of mortgages whose payments had been lowered through government or private modification plans re-defaulted at high rates. More than half of all homeowners with modified loans fell 60 days or more behind in their payments within six months of the modification taking place.

But mortgage modifications continued to increase as the Obama administration pushed it servicers to participate in its Home Affordable Modification Program. The report said that servicers modified 680,000 loans through that program or their own efforts. Overall, mortgage servicers started almost twice as many mortgage modifications as new foreclosures.

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