Five huge lenders that signed a landmark 2012 settlement over foreclosure abuses have completed their obligation to provide billions of dollars in relief to troubled borrowers, according to the former bank regulator assigned to monitor their compliance.
Joseph A. Smith Jr. said Tuesday that he has credited Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc. and the so-called ResCap parties with a total of $20.7 billion in consumer relief. ResCap includes Ally Financial and GMAC Mortgage.
In their settlement with the federal government and 49 states, the banks had agreed to provide $20 billion in credited relief to consumers. They had previously reported reaching that goal; Smith’s statement made it official.
Some actions received less than 100 cents on the dollar credit, so the total relief delivered to distressed borrowers was about $50.4 billion, Smith reported.
(As an example, forgiving $100,000 in mortgage debt would earn a bank $100,000 in credit if it owned the loan, but just $45,000 credit if the bank was handling only customer service for a loan sold off to back a mortgage bond.)
A separate $5 billion under the agreement went to states, primarily for foreclosure prevention programs.
Ocwen Financial Corp., the largest non-bank mortgage servicer, also has agreed to provide $2 billion in consumer relief under a similar settlement.
The national mortgage agreement has drawn criticism from some quarters, including complaints that it allowed banks to earn credits for certain cases in which borrowers lost their homes.
However, Smith, a former North Carolina banking commissioner, said in an interview: “I think the settlement accomplished what it set out to do.”
For example, he said, the settlement required that at least 30% of the relief be delivered by reducing the balances on first mortgages, and that category wound up amounting to 37% of relief.
The other categories were short sales and deeds in lieu of foreclosure, 31%; refinancing assistance, 17%; and second mortgage forgiveness, 15%.