Home / News / Foreclosure / Servicers Provide $26.1B in Mortgage Relief Through Settlement
Print This Post Print This Post

Servicers Provide $26.1B in Mortgage Relief Through Settlement

Five mortgage servicers have provided over 300,000 borrowers with some form of mortgage relief as part of a settlement agreement, according to a ""report"":https://www.mortgageoversight.com/reports/ from ""settlement monitor Joseph A. Smith, Jr"":https://www.mortgageoversight.com/.


Bank of America, Chase, Citi, Wells Fargo, and Ally reached a $25 billion ""mortgage settlement"":http://nationalmortgagesettlement.com/ with state and federal officials in February 2012 over foreclosure practices. The agreement requires the banks to provide $20 billion in relief, but the servicers are not always credited on a dollar-for-dollar basis.

Thus, the gross amount of relief actually provided will be higher than what is credited.

As of September 30, 2012, banks reported they have provided $26.11 billion in actual consumer relief, which represents a value of $84,385 for each assisted borrower, according to the monitor.

""The relief the banks have reported is encouraging,"" said Smith in a release. ""But it is important to remember that no obligations will be met until I have reviewed, confirmed and credited them.""

The report explained some principal forgiveness on loans both owned and serviced by a servicer is credited on a dollar-for-dollar basis, but forbearance activities provide a credit of 5 cents for every dollar.


Smith added the information provided in the report ""cannot be used to evaluate progress toward the banks' $20 billion obligation"" since it represents the gross amount.

While servicers can receive credit through a variety of forms of relief, at least 60 percent must be through first and second lien principal reduction modifications and no more than 10 percent can be deficiency waivers.

Servicers also have three years to meet the minimum relief requirements, but they are being encouraged to offer relief sooner through additional credit. If servicers provide first or second lien principal reductions or provide credited refinancing activities, they receive an additional 25 percent credit if the relief is completed within a year starting March 1, 2012.

Bank of America recently ""announced"":http://dsnews.comarticles/bofa-reaches-158b-in-mortgage-relief-through-settlement-2012-11-14 that it anticipates fulfilling consumer relief requirements in the first year.

If servicers don't complete their requirements within three years, they will pay 125 or 140 percent of their unmet commitment amount.

Out of the $26.11 billion, $2.55 billion is from principal writedowns through first lien modifications, while $2.77 billion comes from second lien forgiveness or modifications. The majority came from short sales, $13.13 billion. Another $1.44 billion went towards refinancing.

As part of the agreement, servicers also had to ""implement"":http://dsnews.comarticles/major-servicers-report-implementing-320-servicing-standards-2012-10-02 more than 300 servicing standards by October 2.

*Consumer relief obligations under settlement*
Ally $200 million
Bank of America $8.5 billion
Chase $4.2 billion
Citi $1.7 billion
Wells Fargo $4.3 billion

*Types of relief servicers can offer*
-First and second lien modifications
-Enhanced borrower transitional funds
-Facilitation of short sales
-Deficiency waivers
-Forbearance for unemployed borrowers
-Anti-blight activities
-Benefits for members of the armed services
-Refinancing programs

About Author: Esther Cho


Check Also

2023 Was the Least Affordable Year on Record. Will 2024 Follow Suit?

The least affordable markets included Anaheim and San Francisco, where homebuyers with the typical local income would’ve needed to spend over 80% of their pay on monthly housing costs.