More homeowners in the Carolinas and around the country are receiving help on their mortgages from Bank of America, Wells Fargo and three other large servicers as the banks accelerate the relief programs mandated by a national legal settlement.
About 4,400 North Carolina homeowners had seen some form of relief from this springs $25 billion mortgage servicing settlement through the end of September, including $13 million in first-lien mortgage principal forgiven, according to a progress report issued Monday. About 2,800 South Carolina homeowners had gotten help.
Nationwide, more than $2.5 billion in first-mortgage debt had been forgiven triple the amount that the banks had forgiven in the first three months of the settlement.
The report weve received from the banks is encouraging, settlement monitor Joseph Smith told the Observer. It shows theyre making fairly rapid progress to granting their required consumer relief.
But the numbers have yet to be reviewed, and the bulk of relief continues to come from short sales and second-lien forgiveness which are viewed less favorably under the terms of the settlement. A watchdog group also questioned whether the people getting help were the ones who needed it the most.
Smiths attention now will turn to the array of new servicing standards the banks have to follow. He will look into the banks compliance with the required single point of contact for homeowners seeking mortgage modifications. The lenders must also eliminate dual tracking, the practice of putting loans through a modification plan and foreclosure at the same time.
The settlement, reached with 49 state attorneys general and a few federal agencies, resolved long-running investigations into shoddy mortgage practices at some of the nations largest banks. Among the primary targets of investigation were allegations of robosigning, or bank employees signing hundreds of foreclosure documents without reading them.
State and federal government agencies received $5 billion in cash from the five banks. The other $20 billion is to be given directly to homeowners in the form of mortgage relief. Bank of America has the largest required payment, $11.8 billion.
After a relatively slow start, Bank of America accounted for more than half of the total relief through the end of the quarter, both in the state and nationwide, as its large-scale principal reduction program got underway, according to Mondays progress report.
It is a distorted picture
This was the second progress report issued by Smith, who formerly was North Carolinas commissioner of banks. The first, released in August, showed that mortgage relief had been slow to come to North Carolina.
The figures reported Monday do not represent the banks true progress toward complying with the settlement. Not all forms of relief receive full dollar-for-dollar credit toward the $25 billion total.
For example, a dollar of a seriously delinquent second-lien mortgage forgiven may receive only 10 cents worth of credit toward the banks obligation.
It is a distorted picture of how the servicers are doing relative to their obligations, Smith said.
A new watchdog group, called the Campaign for a Fair Settlement, said there wasnt enough data to determine whether the hardest-hit areas were getting enough help.
There are some encouraging signs, but the most vulnerable communities are reporting very few principal reduction modifications, executive director Brian Kettenring said in a statement. We need to ensure that these funds have a real impact on hardest-hit communities, and that banks arent just cleaning up their balance sheets.
Smiths office will soon begin the work of digging through the banks data to determine how the relief should be credited. But from what theyve seen so far, both the banks and the settlements architects say progress is on track.
Its developing the way we thought and hoped it would, Iowa attorney general Tom Miller said on a conference call.
Banks efforts accelerating
Bank of America released its numbers last Wednesday, the day they were required to be sent to the monitor. The bank said then that it was pleased with the progress it had made and that it would continue.
That momentum is not slowing down, and in fact, its accelerating, senior vice president Eric Telljohann said.
Wells Fargo said Monday that it is now more than halfway through the $4.3 billion in relief it is required to complete.
We are pleased with our progress in fulfilling our financial commitments under the National Mortgage Settlement, which builds on our previous consumer relief and refinance efforts, Wells Fargo spokesman Josh Dunn said in a statement.
The optimism was echoed by several attorneys general and Housing and Urban Development department secretary Shaun Donovan.
The report demonstrates significant progress in the broadest and most robust principal reduction program in the nations history, Donovan said Monday.
Colorado attorney general John Suthers said he and his peers expected short sales to make up the bulk of the relief at first because a loan modification can take as long as 90 days. He also pointed to the quickening pace of principal forgiveness in progress.
Theres every reason to believe that will continue, he said.
Smiths next report will provide the first details on how banks have implemented the 304 new servicing standards mandated in the settlement.
Banks had to have the new standards in place by October. Smiths office has already begun to evaluate their performance. A report will be issued in the first quarter of 2013.
Since it created an online form in May, the monitors office has received more than 3,000 complaints from homeowners who believe one of the standards has been violated. The office does not attempt to validate the complaint.
Ninety-one of the complaints came from North Carolina, and 38 from South Carolina.
A number of them involved being routed through foreclosure and loan modifications at the same time. Others complained of poor service in the single point of contact system.
Smith said the complaint system will be used to identify potential hot spots he needs to look into further. But he said he anticipates a number of the systems to improve, particularly the single point of contact.
I think its early days, and I think that will be perfected, Smith said.