WASHINGTON (AP) — Five of the biggest U.S. lenders have provided $10.6 billion in relief under a landmark settlement over foreclosure abuses, including reducing struggling homeowners' mortgage balances by $1.3 billion.
The monitor overseeing the $25 billion settlement says the banks provided the relief in the first four months of the three-year program. In his first progress report, Joseph Smith Jr. disclosed Wednesday that $8.7 billion of the $10.6 billion in relief was in the form of short sales, in which lenders agree to accept less than what the seller owes on the mortgage.
Lenders are increasingly favoring short sales rather than waiting for troubled loans to go through the foreclosure process.
Bank of America Corp., which is required by the settlement to provide the largest portion of the relief, $8.6 billion, hadn't completed any modifications of first-lien mortgages or refinancings as of June 30, according to the report.
Smith's report covers the period from March 1 through June 30.
Bank of America said, however, that from July 1 through Aug. 21, it completed $596.2 million in modifications of first-lien mortgages and $227.2 million in refinancings. It also noted it has taken on $5.8 billion in short sales and completed $1.7 billion of second-lien modifications.
"We believe we will reach or exceed all program targets" within the first year, said Dan Frahm spokesman for Charlotte, N.C.-based Bank of America. "We continue working to reach eligible borrowers with these programs to prevent foreclosure, help our customers save money and support the recovery of the housing market."
The other four banks, and the amount of relief they are obligated to provide, are Wells Fargo & Co., $4.3 billion; JPMorgan Chase & Co., $4.2 billion; Citigroup Inc., $1.8 billion; and Ally Financial Inc., $200 million. They also will pay about $5.5 billion to the U.S. and state governments.
The settlement between the banks and the federal government and 49 states was struck in February, ending a painful chapter of the financial crisis when home values sank and millions edged toward foreclosure. Many companies had processed foreclosures without verifying documents.
The agreement will reduce mortgage loans for only a fraction of those Americans who owe more than their homes are worth. About 11 million households are underwater, and the settlement is expected to help about a million of them.
Of the $1.3 billion in reduced mortgage principal, according to Smith's report, Bank of America had provided $54.2 million as of June 30; JPMorgan, $428.2 million; Citigroup, $429.5 million; Ally, $168.8 million; and Wells Fargo, $249.3 million.
"More hard work remains as the banks work to meet their obligations," Smith said in a statement.