Banks Give Mortgage Relief to 300K Under Deal
By Les Christie
NEW YORK (CNNMoney) — More than 300,000 homeowners have received $26 billion in relief under the terms of the foreclosure abuse settlement, according to a government report released Monday.
Five of the country’s largest home mortgage lenders — Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial — have modified home loans, reduced interest rates and forgiven debt as part of commitments they made in the settlement they reached in February with 50 attorneys general from 49 states and the District of Columbia and the federal government.
The settlement resolved allegations that banks used faulty paperwork to seize homes. Among the worst abuses — using robo-signers to sign thousands of legal documents, where they attested to facts they had no knowledge of.
The report was released by the Office of Mortgage Settlement Oversight, a watchdog agency, and included data from the banks. An official, fully vetted report will be released in mid-2013.
“The relief the banks have reported is encouraging,” said Joseph A. Smith, Jr., a monitor of the mortgage settlement. “But it is important to remember that no obligations will be met until I have reviewed, confirmed and credited them.”
The banks claim that 309,385 borrowers have received some kind of mortgage relief under the settlement. The total benefit of $26.11 billion, represents an average of about $84,385 per borrower.
Some 21,833 borrowers completed modifications that lowered their mortgage debt by an average of $116,929 each. Another 30,967 borrowers have been granted trial modifications that, if completed, will cost the banks $4.19 billion, an average of $135,929 per borrower.
Home equity loans and lines of credits were modified or erased for more than 50,000 borrowers to the tune of $2.78 billion, or $55,534 for each borrower.
The lenders also reduced interest rates on 37,396 loans by an average of 2.34 percentage points, a total of $1.44 billion in payment relief. Borrowers will save an average of $409 a month.
The banks will likely exceed what they agreed to pay out in some of the loan categories. They have already, for example, paid out more in debt forgiveness on short sales than the settlement called for. If they go over, it will not count against what the owe.
Smith said though the total amount is already larger than the banks’ $25 billion obligation, it might be misleading, because not all the claims filed by the banks will be credited to the terms under the settlement.
For their part, the banks seem to have given out more relief than anticipated. Originally, for example, principal reductions were expected to average about $20,000. The actual reductions are about six times higher.
Only mortgages held by the banks or owned by investors who approve the modifications are eligible for relief under the settlement. That means mortgages backed by the federal government agencies Fannie Mae or Freddie Mac are nor included, nor are those insured by the Federal Housing Administration.