The nation's top four mortgage servicers got credit for providing $15.4 billion in consumer relief last year to roughly 420,000 distressed borrowers and are inching closer to completing their obligations under the national mortgage settlement.
Joseph A. Smith Jr., the settlement's monitor, on Wednesday released an interim report that detailed the amount of principal reductions, short sales and refinancings each servicer had completed through the end of 2012, and how much credit they received for each type of relief offered to borrowers.
The $25 billion settlement was designed to encourage servicers to provide relief to underwater borrowers by giving them credits based on the type of relief offered. Each dollar forgiven in a short sale, for example, results in a credit of 45 cents if the bank owns the loan and 20 cents if it is held by investors. Servicers get $1 of credit for every $1 of principal forgiveness.
All told, Bank of America (BAC), Citigroup (NYSE:C), JPMorgan Chase (JPM) and Wells Fargo (WFC) have received credit for 40% of the total consumer relief they had provided to borrowers through the end of the last year. Ally Financial was also part of the settlement agreement with federal regulators and 49 state attorneys general that was struck in early 2012 to address servicing abuses that led to the robo-signing of foreclosure documents.
Smith has been releasing periodic reports on the servicers' progress since, but those reports were largely based on information provided by the servicers themselves. The latest report is the most comprehensive to date because it scrutinizes the servicers' data to determine if they are as far along in their progress as they claim.
Smith's report only covers servicers' activities through the end of 2012. Bank of America, Citigroup, JPMorgan Chase and Wells Fargo have all told Smith that, in the 10 months since, they have completed all the requirements of the settlement.
Smith, though, has said that the data still needs to be reviewed. Only Ally Financial, formerly known as GMAC, has completed its obligations under the $25 billion settlement, Smith said.
At the end of 2012, Bank of America had completed 97% of its consumer relief obligations, JPMorgan Chase had completed 76%, Wells Fargo 55% and Citi 46%, the monitor said.
B of A was credited with providing $4.4 billion in first-lien principal reductions, forbearance forgiveness and extinguishment of second liens, and another $2.9 billion in short sales. B of A, which shouldered the bulk of the settlement's requirements, continues to offer relief including principal forgiveness modifications to eligible customers, said B of A spokesman Dan Frahm.
JPMorgan Chase got credit for $3.4 billion, including $1.5 billion in short sales. Wells Fargo gave $3 billion in total consumer relief and Citi provided $1.2 billion to distressed borrowers at year-end.
The settlement requires that at least 30% of each servicer's total consumer relief come from first-lien mortgage modifications, and 60% from first- and second-lien modifications.
The monitor's report included a scorecard that highlighted errors found in the monitor's exhaustive review process, in which 50 accountants and consultants spent 12,000 hours testing the data submitted by the servicers.
JPMorgan Chase, for example, was forced to remove a population of 478 second liens that totaled $5.7 million in credits because it claimed more credit on a handful of loans than was accurate, the monitor found. The bank also had to retest its entire population of first-lien loans because it incorrectly calculated the number of days past due, affecting the eligibility and crediting of certain loans, the report found.
B of A had a handful of loans in which it inaccurately claimed credits for first- and second-lien modifications. Citi got dinged in two separate areas for miscalculating credits on short sales. Wells was cited for using an improper unpaid principal balance on 34 loans to calculate loan-to-value ratios, and for claiming credits for first-lien modifications using an incorrect incentive amount.