The nation's top ranked servicers completed 66,000 proprietary loan modifications in July, a 40% jump from June, according to a new report from the Hope Now alliance.

The group represents 31 residential servicers including the top five, which agreed to a $25 billion settlement with 49 states to increase their loan modification efforts and provide principal reductions when possible.

The sudden jump in proprietary modifications reported by Hope Now may reflect the impact of the state Attorneys General settlement.

Released last week, the first report by the settlement monitor found that the five mega-servicers offered 28,000 homeowners a first-lien principal reduction trial as of June 30. However, only 7,000 borrowers completed the trials by the end of June, receiving $749 million in principal forgiveness.

The AG settlement agreement also encourages large servicers to engage in short sales to avoid foreclosures.

Throughout 2011 and the first quarter of 2012, Hope Now servicers completed two foreclosure sales for every short sale. But the ratio of short sales moved higher in the second quarter. Hope Now servicers engaged in 107,400 short sales compared to 184,800 foreclosure sales.

The report does not include loan modifications completed under the Home Affordable Modification Act for July, which have not yet been released.

In July, the 31 servicers completed 36,260 short sales compared to 63,500 foreclosure sales.

Meanwhile, a big bounce in short sales should show up in the next Hope Now report.

The five mega-servicers reported to the AG settlement monitor that they approved 74,600 short sales from March 1 through June 30. 

It's likely that a large chunk of the short sales were not completed in time to be recorded in this week's Hope Now report.

The nation's top five servicers ranked by volume are Wells Fargo (WFC), Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (NYSE:C) and Ally Financial.

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