Banks speed up mortgage principal forgiveness

Report: 4,400 N.C. homeowners have relief through Sept.

adunn@charlotteobserver.comNovember 19, 2012 

  • By the numbers Through Sept. 30, the following relief had been given to North Carolina homeowners, according to a progress report issued Monday: •  Nearly $196 million in total relief, reaching 4,365 homeowners. •  The bulk, about $88 million, came from 1,200 short sales. •  $13 million in primary mortgage principal had been forgiven for 246 borrowers – an average of $53,000 per loan. •  Bank of America had made more progress than the other four banks combined, with $108 billion in relief to 2,300 homeowners. Nearly half were in short sales. ANDREW DUNN

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 spring’s $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. 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 we’ve received from the banks is encouraging,” settlement monitor Joseph Smith told the Observer. “It shows they’re 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 those getting help were the ones who needed it the most.

Smith’s 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 nation’s 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 Monday’s progress report.

This was the second progress report issued by Smith, who formerly was North Carolina’s 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 bank’s 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 mean only 10 cents worth of credit toward the bank’s obligation.

“It is a distorted picture of how the servicers are doing relative to their obligations,” Smith said.

Dunn: 704-358-5235 Twitter: @andrew_dunn

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