BANKING

U.S. banks have provided $26.1B under foreclosure accord

BLOOMBERG FILE PHOTO/JIN LEE
THE FIVE LARGEST U.S. mortgage services - including Bank of America Corp. - provided roughly $26.1 billion for borrowers so far under a $25 billion settlement over abusive foreclosure practices.
Posted 11/19/12

WASHINGTON - The five largest U.S. mortgage servicers have provided about $26.1 billion for borrowers so far under a $25 billion settlement over abusive foreclosure practices, according to a court-appointed monitor.

The aid included $2.6 billion in principal relief for about 22,000 borrowers, the Office of Mortgage Settlement Oversight said in a report released today. Lenders including Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. aided a total of 309,385 borrowers, according to the report.

“I’m encouraged,” Joseph A. Smith Jr., the settlement monitor, said today in a telephone interview. “It looks like transaction relief of various kinds is being implemented by all the servicers.”

The report is required under the settlement agreement, filed in federal court in February, that was reached after attorneys general from all 50 states announced a probe into foreclosure practices following disclosures that banks were using faulty documents to seize homes. It is a preliminary estimate of banks’ efforts, not a formal assessment of progress toward meeting their obligation to spend $20 billion on borrower relief and an additional $5 billion in payments to states and the federal government.

The banks, also including Citigroup Inc. and Ally Financial Inc., negotiated the agreement with federal agencies, including the Justice Department, and 49 states.

Even as he cited progress, Smith said he has received thousands of reports from borrowers indicating that there are still problems with communication between banks and borrowers.

“I think we can work on ensuring that someone who is qualified is getting the proper responses and treated correctly and doesn’t get foreclosed on while they’re in modification,” Smith said in the interview.

About $17 billion of the agreement will pay for mortgage debt forgiveness, forbearance, short sales and other assistance to homeowners. Servicers will also provide $3 billion in refinancing to lower homeowners’ interest rates.

The settlement also sets new standards for servicing loans aimed at preventing foreclosure abuses.

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