The mega banks that were subjected to last year's $25 billion National Mortgage Settlement have made significant progress toward meeting their consumer relief and refinancing obligations, according to a report released Wednesday by Joseph A. Smith, monitor for the settlement.
As of Dec. 31, 2012, four of the five banks named in the settlement – Bank of America, Wells Fargo, Citigroup and Chase – had earned $4.1 billion in credit for principal reduction on primary mortgages, $2.2 billion for principal reductions in second mortgages and $5.4 billion in short sales or deeds in lieu of foreclosure. In addition, they were credited $2.6 billion for allowing underwater borrowers to refinance at lower interest rates.
In total, the banks had earned $15.4 billion in credit toward the $19 billion they must reach by March 2015. The rest of the $25 billion comprised cash payments to states and individuals who had already lost their homes to foreclosure.
‘The banks have made significant progress toward satisfaction of their total obligations, providing borrowers across the nation with much needed relief,’ Smith wrote in the report.
Relief that ResCap provided to consumers is not included in Smith's report, as it had already met its full settlement obligation as of February.
The report shows that as of Dec. 31, the four banks had provided a total of $38.7 billion in both consumer relief and refinancing. However, because not every type of relief is counted the same way under the settlement's terms – for example, short sales are worth only $.20 to $.45 on the dollar, compared with $.55 to $1.00 for principal reduction – they had fulfilled only about 80% of their total obligation.
As the report shows, none of the four banks had fully met its consumer relief obligation as of Dec. 31. However, Bank of America had met 97% of its total consumer relief obligation. In the case of refinancing, three of the banks – Chase, Citi and Wells Fargo – had exceeded their obligation, while Bank of America had met 41% of its obligation.
The four banks have since reported to the monitor that they have fully met their obligations.
As of Dec. 31, Bank of America had provided more than $25 billion in consumer relief, for which it received credit for $7.4 billion, thus meeting 97% of its total consumer relief obligation of $7.6 billion. In addition, Bank of America had provided more than $321 million in refinancing, earning it $392 million in credit (or about 41%) toward its total refinancing obligation of $948 million.
Chase bank had provided about $7.3 billion in total consumer relief, of which it earned $2.7 billion in credit, thus meeting about 76% of its total consumer relief obligation of about $3.7 billion. In addition, Chase had provided more than $478 million in refinancing, earning it $606 million in credit (or about 113%) toward its total refinancing obligation of $537 million.
Citi had provided more than $1 billion in consumer relief, earning it more than $655 million in credit, thus bringing it to 46% of its total consumer relief obligation of $1.4 billion. In addition, Citi had provided nearly $405 million in refinancing, earning it more than $519 million in credit (or about 137%) toward its total refinancing obligation of $378 million.
Wells Fargo had provided about $3.3 billion in refinancing, earning it nearly $1.9 billion in credit, thus bringing it to about 55% of its total consumer relief obligation of more than $3.4 billion. In addition, Wells Fargo had provided about $890 million in refinancing, earning it credit of about $1.1 billion (or about 122%) toward its total refinancing obligation of $903 million.
It should be noted that the consumer relief and refinancing activities that helped the banks earn credit toward the settlement represent only a fraction of their broader efforts to modify troubled loans. In a New York Times report, Vickee J. Adams, a spokesperson for Wells Fargo Home Mortgage, said consumer relief and refinancing actions that the bank earned credits for was ‘slightly less than 2 percent of our total consumer relief and refinance activity since 2009.’
In the same report, Kevin Whelan, national campaign director for the Home Defenders League, asserted that the settlement was giving the banks credits for activities that they would have been doing anyway.
‘What's being counted as relief under this settlement has more families being put out of their homes,’ he told the newspaper.
The monitor continues to track the banks' progress toward meeting their obligations and is auditing all settlement-related activities.
The report showed that the four banks had failed to meet one or more of 29 metrics that the Office of Mortgage Settlement Oversight developed to test compliancy with the criteria. These include measures to provide greater transparency into how the banks handle requests for loan modifications. Lenders and servicers must now provide customers with access to all documentation – further, they must proactively notify homeowners when required documentation is missing.
Banks must also provide borrowers with a single point of contact to handle all mortgage-related questions or transactions. In addition, they must ensure that all customer data is accurate – and further, must quickly correct any errors in account or personal information.