Five U.S. banks have provided about $22-billion (U.S.) in mortgage relief to customers under a deal to settle borrowers' accusations over foreclosures, a report by the settlement's monitor said on Monday.
The report said that Bank of America Corp., which owes the most, improved in delivering first-lien mortgage modifications to customers, trailing only JPMorgan Chase & Co. through September.
Bank of America provided $889.2-million in first-lien modifications that reduced loan balances for consumers, a turnaround from August when the bank had completed none. JPMorgan Chase & Co.'s total was $903.1-million in modifications, the most of the five banks.
Monday's report by Joseph Smith, the former North Carolina Banking Commissioner who is serving as the settlement's monitor, said the five banks together have completed about $22-billion in customer relief, up from $10.6-billion in August.
Mr. Smith said in an interview that he was "encouraged" and that February's settlement between five banks and federal and state officials had "made significant progress." But he cautioned that no banks have met their obligations until their numbers are reviewed and credited.
Counting $4.2-billion more in active trial modifications, the five banks have provided $26.1-billion in relief through September to 300,000 borrowers, according to the report.
A coalition of national and local consumer, housing and financial reform groups, the Campaign for a Fair Settlement, said it is disappointed that the banks did not show more progress on first-lien mortgages modifications compared to August. For example, it said about 31,000 borrowers were in active trial first-lien modifications at the end of September, a slight increase from 28,047 at the time of the last report.
"There is a big gap there," said campaign representative, Dan Petegorsky.
The settlement, to resolve allegations of faulty foreclosures, requires banks to provide around $20-billion of consumer relief by taking actions such as reducing loan balances for struggling borrowers and refinancing loans for customers whose homes are worth less than the value of their mortgages.
The banks, however, have not necessarily met their obligations yet because the settlement only provides for partial credit for certain kinds of relief. The banks only receive credit for 45 cents of every dollar of a writedown through a short sale, for example.
Short sales – in which borrowers sell their homes for less than the value of the mortgage – accounted for the largest portion of the total relief, about $13.1-billion.
The banks reduced consumers' first-lien mortgage and home-equity debt by $6.3-billion through loan modifications and other actions. They also completed $1.4-billion in refinancings.
Bank of America delivered $11.8-billion in total relief to consumers, the most of any bank, with short sales accounting for $7.4-billion of its total. JPMorgan provided the second most relief – about $6-billion.
The other banks in the settlement are Wells Fargo & Co. ($2.5-billion in total relief), Citigroup Inc. ($1.1-billion) and Ally Financial Inc. ($587.8-million).
Bank of America, which acquired troubled lender Countywide Financial in 2008, owes about $11.8-billion in consumer relief and other payments. The bank has said it will meet its obligations within the first year. If a lender does not meet its required relief within three years, it will be required to pay a penalty of no less than 125 per cent of its unmet commitment, the report said. Mr. Smith said he expects the banks will complete their requirements earlier than three years.
Banks are required to meet at least 60 per cent of their obligations through modifying first and second loans, so short sales are not expected to eventually be the bulk of the consumer relief, on a credited basis.
Short sales comprise a lion's share of the relief because they can be counted as soon as a sale is completed, Mr. Smith said. Modifications aren't considered complete until after the borrower has made three payments.
The coalition's Mr. Petegrosky said the group is concerned that banks are not required to report the race and income level of the borrowers receiving modifications. He said lower-income and minority borrowers received the worst loans during the housing boom.
"Our counsellors and attorneys on the ground are scratching their heads at these stats because their clients aren't getting" modifications, he said.