Banks Cough Up $26.1 Billion in Mortgage Relief
NEW YORK (TheStreet) -- Banks continued to make progress in meeting their obligations under the national mortgage settlement, the Office of Mortgage Settlement Oversight said in a report released Monday.
Banks have extended $26.1 billion in mortgage relief to over 300,000 borrowers between Mar 1, 2012 and Sept.30, according to reports submitted by each of the servicers to the state reports.
The nation's biggest mortgage servicers- Bank of America(BAC) , Citigroup(C) , Wells Fargo(WFC) , JPMorgan Chase(JPM) and Ally Financial are required to provide upto $20 billion in mortgage relief, including principal reductions, forbearance, refinancing and other foreclosure alternatives to borrowers over a three-year period, as compensation for improper foreclosure practices followed in the wake of the crisis.
Banks do not receive full credit for every dollar of relief they extend, with some forms of aid such as principal forgiveness on loans receiving more credit than forbearance activities. So the $26.1 billion reported does not meet the full obligation of $20 billion under the settlement.
The data in the reports are yet to be validated and credited by Settlement Monitor Joseph Smith.
The bulk of the relief comes in the form of short sales, totaling $13.133 billion. Banks are increasingly pursuing short sales given long foreclosure timelines, while a rising housing market has also enabled short sale transactions to process more quickly.
Banks also offered more than $2.5 billion in first-lien principal forgiveness, $2.8 billion in second-lien extinguishment, $1.4 billion in refinancing relief. More than $4 billion active trial modifications are in process.
Bank of America reported last week that it has offered it has offered $15.8 billion in mortgage relief to customers as part of its obligation under the National Mortgage Settlement.
As of Sept 30, the bank had approved 30,000 homeowners for first lien principal reductions totaling $4.75 billion. About 5,800 had successfully completed their three-month trial and converted to permanent modifications.
The bank faces the biggest commitment under the settlement at $8.5 billion. The company is rushing to meet its obligation within the very first year. Banks get higher credit for reductions for first or second lien principal reductions or credited refinancing activities in the first year of the settlement.
Failure to meet obligations by the end of the three-year period will result in a penalty of 125 or 140 percent of the unmet commitment amount.
Separately, New York Attorney General Eric Schneiderman said banks reported $625 million in relief to more than 7,000 borrowers in New York.
Read state-by-state relief efforts here .
--Written by Shanthi Bharatwaj in New York
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