National Mortgage Settlement banks dole out $10.6 billion to needy homeowners

by Broderick Perkins

(8/31/2012) - The $25-billion National Mortgage Settlement has netted nearly 138,000 homeowners financial relief that averages from $4,600 to as much as $116,000 during the first four months of the program's official administration.

The averages vary widely depending upon the program and are typically not cash payments. Among the highest payments is relief in the form of forgiven or waived loan principal.

Also, it appears nearly half the $20-billion allotted specifically for consumers ($5 billion goes to governments) has gone to only 138,000 homeowners, which would make it unlikely the program will reach the millions originally targeted.

However, "First Take: Progress Report from the Monitor of the National Mortgage Settlement," by settlement overseer Joseph A. Smith Jr., explains.

"The consumer relief activities discussed in this report represent gross dollars that have not been subject to calculation under the crediting formulas in the settlement agreement. Therefore, the $10.56 billion in consumer relief reported here cannot be used to evaluate progress toward the $20 billion obligation in the settlement. Furthermore, neither I nor the professionals working with me have audited or confirmed these figures," Smith writes.

The report discusses relief doled out from March 1, 2012 through June 30, 2012 by the five banks named in the settlement - Bank of America, JP Morgan Chase, Citigroup, Ally Financial and Wells Fargo.

The National Mortgage Settlement, to adress faulty foreclosure practices servicers instituted shortly after the housing market crashed, is the largest ever federal-state civil settlement.

The agreement came in February this year, but wasn't official until April 5, 2012 with consent judgments filed in the Washington, D.C. U.S. District Court. Banks have until October this year to comply with 300 servicing standards mandates (only 56 were met with this report), but years to fulfill the terms of the agreement.

Along with the full report in pdf form, there's also an interactive version of the report on the Tumblr social networking site.

"It has been nearly five months since the settlement went into effect, and I believe it is important to report on our progress," said Smith.

"This report is not required by the settlement and contains information given voluntarily to me by the banks. It is intended to be the basis of a national conversation about the servicers' efforts to meet their obligations under the settlement," he added.

Along with a summary of the settlement and its terms, the report includes information on how Smith has set up the Office of Mortgage Settlement Oversight to carry out his duties as Monitor.

Here's a look at some of the relief efforts based on data banks voluntarily provided to Smith.

• Overall, 137,846 borrowers received some form of relief totaling $10.56 billion, with the average amount at $76,615 per borrower.

• First lien mortgage modifications went to 7,093 borrowers granted loan principal forgiveness amounts averaging $105,650 per borrower.

• Another 5,500 borrowers received forgiveness of pre-March 1, 2012 forbearance amounts, at an average of $63,445 per borrower.

• Second lien modifications and extinguishments went to 4,213 borrowers, at an average $54,930 per borrower.

• Servicers refinanced 22,073 home loans with an estimated annual interest rate reduction savings amounting to an average savings of $388 a month or $4,655 each year.

• For 74,614 borrowers with a short sale or a deed in lieu of foreclosure, lenders waved unpaid principal balances, on average, at $116,200 per borrower.

• Relief from other programs came in at an average $18,840 for some 24,353 borrowers.

Said Smith, "More hard work remains as the banks work to meet their obligations. My colleagues and I look forward to that work and to keeping policymakers and the public informed of our progress."