Mortgagees See Benefits in Bank Plan

 (not me ofcourse, but then JPMC would HAVE TO TALK WITH ME!!! RIGHT?!?!?!)

 

Mortgagees See Benefits In Bank Plan

By SHAILA DEWAN

Published: August 29, 2012

More than 130,000 homeowners have received $10.5 billion in relief under the national settlement over foreclosure abuses, according to a preliminary report issued Wednesday by the settlement monitor.

Under the settlement in February, reached in response to evidence that the foreclosure process had been riddled with fraud, the country’s five largest mortgage servicers promised $25 billion to help stem the tide of homeowner losses. About $20 billion of that was to be in relief to homeowners, primarily through various forms of debt forgiveness. Although it may seem that banks have already satisfied more than half of their commitment, only a portion of the $10.5 billion will count, because of the way the relief is tallied.

The banks — Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo — reported that the bulk of the help so far had come in the form of short sales, in which lenders allow homeowners to sell for less than what they owe. Many homeowners have been stuck in their homes because they have lost so much value. The banks reported $8.7 billion in debt written off through short sales.

But far less progress has been seen under the central provision of the settlement, reducing the principal owed on homes. Banks reported a total of only $750 million in principal reduction, and Bank of America, which has the highest obligations under the settlement, reported none.

Still, Joseph A. Smith, the independent monitor, said, “I think this is a good first step.”

When it was announced, the settlement, initially described as $26 billion, was expected to help roughly one million homeowners get their mortgage debt reduced by lenders or obtain refinancing at lower rates. An additional 750,000 who lost their homes to foreclosure from September 2008 to the end of 2011 were to receive checks for about $2,000.

The information in Wednesday’s report was submitted by the banks and was not verified. In November, the banks will make state-by-state reports, and in the spring, the monitor will submit his first review of their performance to the courts.

Short sales are among the simpler forms of relief to provide because banks already have systems in place to handle them and homeowners who want to sell are motivated to seek them out. Principal reduction, on the other hand, requires banks to engage delinquent borrowers who may or may not be able to pay even a reduced amount, and for willing borrowers, it requires paperwork as well as a successful three-month trial period before banks can count them toward the settlement.

The settlement is aimed at encouraging principal reduction through a series of quotas and credits, and banks earn more toward their commitments through principal reduction than through short sales, which earn at most 40 cents on the dollar. So even though homeowners have received $10.5 billion in benefits, that does not mean that $10.5 billion of the settlement has been satisfied. Those whose principal was reduced got an average of $106,000 off their balance, substantially more than some critics of the agreement predicted.

Dan Frahm, a spokesman for Bank of America, said the bank had made significant progress after the period covered by the report, March 1 through June 30. As of Aug. 21, he said, the bank had granted $600 million in principal reduction and had tripled the number of households in the trial period, to 16,000.

“We’re confident that we’re going to meet or exceed all of our commitments under this agreement within the first year,” even though the bank has three years to do so, Mr. Frahm said.

In California, some 43,000 homeowners have received relief from the five banks in the form of principal reduction on their mortgages or home equity loans, short sales and lowered interest rates, among other measures. In New York, 2,160 homeowners have been helped.

Shaun Donovan, the secretary of housing and urban development, said the settlement would provide “the most significant principal reduction that we’ve seen since the housing crisis began.” He said it was already demonstrating that debt forgiveness was a useful tool that did not lead to widespread default by homeowners who could still pay their mortgages, and said banks were increasingly using it as part of their loan modifications.

The progress report also provided a breakdown by state and subject of some 1,400 complaints already received by the monitor through a Web site, primarily about faulty modifications or failure to modify, or about the banks’ customer service.

Asked if she had seen improvement, Marietta Rodriguez, the national director of homeownership and lending for NeighborWorks America, an affordable-housing group, said bank behavior varied widely, with some affiliates reporting continuing problems like lost documents or poor communication and others saying banks were more receptive to modifying loans.

Ms. Rodriguez applauded the monitor for issuing the report. “I’m pleased that results are being shared broadly in a report like this,” she said. “I think it’s a positive sign that this is real, that they’re holding servicers accountable to results.”