The official overseeing the National Mortgage Settlement said today that assistance to more than 621,000 homeowners has reached $50.63 billion through March 2013 in the form of mortgage modifications, short sales, second-lien or other principal forgiveness, and refinancing help.
Monitor Joseph A. Smith, Jr. also said his office needs more time to determine if the five big lenders that are party to last year’s landmark agreement are adhering to more than 300 new mortgage servicing standards.
Smith said he will likely issue a report next month and won’t be rushed into a quick assessment, despite headline-grabbing complaints from consumer advocates and state attorneys general chronicling how the servicers continue to violate the rights of homeowners seeking to avoid foreclosure or reduce mortgage payments.
Delays in meeting required deadlines and wrongly pursuing foreclosure are among the most heard complaints.
(Meanwhile, $1.5 billion in payouts to mortgage settlement claimants — as many as 750,000 borrowers — are suppose to be mailed sometime in “mid-2013″ by the settlement’s paying agent, Rust Consulting. Previous official statements have put the average amount at $2,000. But the precise figure has either not been determined or not made public.)
“Based on my conversations with consumer professionals, elected officials and distressed borrowers, I know there are areas in which the banks still have work to do, and I am using that insight to determine if there are gaps that require future testing,” Smith said in a statement. “It is important to the integrity of this process that these compliance reports are thorough and accurate, and I will release them when I am confident they are complete.”
Smith also said he is developing “one or more of his discretionary metrics, or tests, to better measure the banks’ performance on certain servicing standards.” These new metrics are expected to be announced and implemented later this summer.
“We look forward to reviewing the Monitor’s compliance reports next month,” said Shaun Donovan, U.S. Secretary for Housing and Urban Development (HUD). “We will also continue to keep a close eye on the banks to ensure they live up to their end of the deal…”
Meanwhile, state AGs have provided a mixed response to the latest quarterly update on homeowner assistance by the lenders: Bank of America, CitiMortgage, JP Morgan Chase Bank, Residential Capitaland affiliates (formerly GMAC) and Wells Fargo Bank.
Illinois Attorney General Lisa Madigan said her office has found that mortgage servicers in 60 percent of the modification cases surveyed failed to comply with a requirement that they notify borrowers within five days of missing documents in their applications.
“The new servicing standards were supposed to eliminate headaches for homeowners,” Madigan said. “But unfortunately, it seems we’re hearing about the same frustrating experiences. Homeowners are getting the runaround, receiving multiple requests for the same information and experiencing continued delays that put them closer to foreclosure. It’s important that the independent monitor closely review the problematic patterns we’re seeing to ensure the banks are held accountable under the settlement.”
Earlier this month, New York Attorney General Eric Schneiderman announced plans to sue Bank of America and Wells Fargo for violating mortgage servicing terms that require the fair and prompt assistance to homeowners. Schneiderman today displayed a more milder tone.
“New York homeowners have received almost $2 billion in financial relief under the National Mortgage Settlement — far more than the federal government projected would flow to our state a year ago,” Schneiderman said. “While we are pleased that the benefits to homeowners — including reduced debt, lower mortgage payments, and averted foreclosures — have been substantial, our work is not finished. My office will continue to monitor the banks’ compliance with the settlement.”
Florida Attorney General Pam Bondi said that about 112,000 homeowners in her state have benefited from the settlement.
“Today’s report indicates that Floridians have benefited from $9 billion in relief, significantly more than the $8.4 billion that we expected when we entered the settlement,” Bondi said. “I will continue to hold the banks accountable by demanding full compliance with the settlement, including the requirements designed to ensure that banks treat homeowners fairly in the mortgage servicing process.”
The majority of aid in Florida — as in many other states — has come in the form of deficiency amounts forgiven through short sales — $3.3 billion — and the extinguishment of second mortgages — $3.1 billion. Those two categories of assistance — short sales and second-lien forgiveness — have been the subject of criticism from homeowner advocates who assert that more needs to be done to keep borrowers in their homes.
In March, HUD chief Donovan defended the use of short sales under the settlement.
“Short sales are helpful for borrowers who need to leave their underwater home or those who cannot make sustainable payments, even on a modified loan,” Donovan said. “When we negotiated this settlement, too many borrowers in those circumstances were forced into foreclosures and were left with a deficiency balance when a short sale would have been better for them, their neighborhood, and the loan’s investor.”
Here’s a breakdown of the assistance provided through the first quarter of 2013:
- 621,712 borrowers received some type of relief totaling $50.63 billion, which, on average, represents about $81,437 per borrower.
- 387,420 borrowers received a permanent or trial modification, an extinguishment, or refinancing to help them retain their homes, which amounts to $29,226 billion, averaging approximately $75,438 per borrower.
- 92,599 borrowers successfully completed a first lien modification and received $10.132 billion in loan principal forgiveness, averaging approximately $109,418 per borrower.
- 14,697 borrowers are in active first-lien trial modifications as of March 31, 2013, the total principal value of which is $1.966 billion. This represents potential relief of about $133,776 per borrower if the trials are completed.
- Second-lien modifications and extinguishments were provided to 206,727 borrowers, representing about $14.193 billion in total relief. The average amount of relief for borrowers whose second liens were modified or extinguished was approximately $68,655.
- Servicers refinanced 73,397 home loans with an average unpaid principal balance of $226,285, reducing the average annual interest rate by about 2.25 percent. The total estimated benefit to borrowers from refinancing over the average life of the loan is approximately $2.935 billion.1 On average, each borrower will save about $425 in interest payments each month.
A map with state relief totals can be viewed here.