Barack Obama’s mortgage modification plan entailed paying mortgage servicers who agreed to lower a borrower’s monthly payment to 31% of the homeowner’s gross monthly income. The plan’s intent was to stem falling real estate prices by making monthly mortgage bills more manageable and therefore causing fewer foreclosures. Here are five things to know about how Obama’s loan modification program is working in practical application, courtesy of findings by the Office of the Comptroller of the Currency (OCC). Keep in mind that the Obama administration’s loan modification plan was implemented after the conclusion of the first quarter, so its impact is not reflected in this report.

1. More Modifications
There has been a sharp increase in the number of loan modification proposals. “Newly initiated loan modifications reached 185,156 during the quarter—rising by 55.3% from the previous quarter and 172.3% from the first quarter of 2008,” the regulators said in the report. “The impact of this increase in modifications on reducing foreclosures and enabling borrowers to remain current on their loans will only be seen in future data.”

2. Rate reductions most popular
The Obama administration’s plan gives lenders various options to help bring their borrowers’ monthly mortgage payments down to 31% of their monthly income. The OCC has discovered that the most popular way of lowering the payment was through reducing the interest rate and extending the terms of the loan. “Of the modifications made in the first quarter of 2009, 70.2% included a capitalization of missed payments and fees, 63.2% included a reduction in interest rate, and 25.1% included an extended term,” the regulators said in the report. “By comparison, 12.6% of the mortgages received modifications that froze the interest rate, 1.8% included a reduction of principal, and 1.1% included a deferral of principal.”

3. More monthly payments reduced
Supporters of loan modifications argue that the approach has not been effective in the past on account of poor execution. Specifically, they note that oftentimes a modified mortgage actually results in a higher monthly mortgage payment for the borrower. Lowering monthly payments is a key component of the Obama plan. But even before it was implemented, servicers were already taking steps to bring down monthly payments. Here are some modification stats:

* Lower monthly principal and interest payments on 54.1% of all modified loans
* Modifications that cut payments by 20% or more nearly doubled
* Modifications that increased monthly payments declined to 18.5*, down from 25% in the fourth quarter and 33.5% in the third quarter
* Actions that didn’t change the payment amount increased to 27.3%.

4. Bigger reductions, better performance
This isn’t terribly surprising, but it’s worth pointing out that loan modifications that reduce monthly payments significantly have lower redefault rates.

5. Performance
It’s still too soon to tell if the reduced-monthly-payment approach will drive down redefault rates significantly. Nevertheless, here is a breakdown of how mortgages that were modified last year have performed so far: