Bank of America Corp. and JPMorgan Chase & Co. say they have satisfied their obligations to help troubled borrowers under last year’s landmark mortgage settlement with state and federal officials.
Another bank that signed the settlement, Wells Fargo & Co. said it is “90% of the way” to meeting its obligations, while Citigroup Inc. said it “remains committed to fulfilling the terms” while declining to characterize its progress.
The self-reported information will not be credited officially until Joseph J. Smith Jr., the national monitor for the settlement, reviews the data. So far Smith has certified completion only by the fifth and final lender to settle: Residential Capital, a mortgage subsidiary of Ally Financial Inc., which was once known as General Motors Acceptance Corp., or GMAC.
The updates were made Tuesday as the five banks reported their progress in meeting the agreement they signed early last year. At the close of the first quarter, more than 600,000 borrowers had received relief totaling $50.6 billion, the banks told Smith.
The banks entered the agreement to settle widespread allegations of illegal foreclosure practices, including “robo-signing” of documents and other improprieties.
California, battered by the housing collapse, had received the most aid of any state. The banks said about 205,000 Golden State consumers were granted more than $24 billion in principal reductions, interest-rate reductions, short-sale relief and other assistance as of March 31.
Short sales, in which borrowers are allowed to sell their homes for less than what they owe, had made up about two-thirds of the financial assistance to California borrowers in the first months of the settlement.
The latest figures shifted that equation, with the banks more often giving homeowners principal or interest reductions on their loans or refinancing them into new loans, enabling them to stay in their homes. Those benefits totaled $29.2 billion to 387,420 homeowners since the program began in March 2012, according to Smith’s tally of the bank reports.
By comparison, aid in the form of short sales totaled $20.1 billion to about 175,000 borrowers.
One prominent critic, Kevin Stein of the California Reinvestment Coalition, said the assistance still involved too little reduction of first-mortgage balances — the action, he said, that was “meant to be the heart of the agreement.”
In California, Stein said, relief skewed too heavily toward short sales and writing off second liens — delinquent credit lines and second mortgages that would be worth little or nothing if an underwater home went through foreclosure.
Stein gave Bank of America, which is required to deliver by far the most assistance to borrowers, good marks during the latest quarter, saying its assistance was delivered almost entirely by reducing principal on first mortgages.
Wells Fargo, by contrast, continued to use short sales heavily, Stein said. It dispensed aid about equally through short sales and principal reductions, he said.
Chase focused on second liens far more than first mortgages, he said. And at Citigroup, relief on second mortgages and short sales outnumbered reductions in first-mortgage balances.
The settlement required the five big servicers to provide $25 billion in relief — $20 billion for consumers and $5 billion for states, mainly for foreclosure prevention programs.
But consumers actually received more aid because banks received only partial credit for much of the relief under the settlement. For example, forgiving a second mortgage that is more than 180 days delinquent earns a bank just 10 cents of credit for each dollar forgiven.
The reports from the banks did not address compliance with another part of the settlement. That involves hundreds of new standards that banks, accused of abusing borrowers, agreed to follow in collecting bills, pursuing delinquencies and foreclosing.
Surveys of housing counselors by the California Reinvestment Coalition turned up many complaints that banks have not complied with those standards, and the New York attorney general has threatened to go to court to force banks to improve.
Smith plans to submit a long-awaited report next month assessing the banks’ progress in adopting the new servicing standards.
“Based on my conversations with consumer professionals, elected officials and distressed borrowers,” Smith said, “I know there are areas in which the banks still have work to do.”