The top five servicers claim to have provided more than twice the relief mandated in the settlement, though some have not yet met all the requirements and the settlement monitor still has to confirm the results. The companies last year signed the settlement with 49 state attorneys general and federal regulators to address servicing abuses that led to the robo-signing of foreclosure documents.
The five servicers have reported a combined $51.3 billion in relief to more than 643,000 delinquent or underwater borrowers in the 15 months ended in June. That is roughly $79,742 per homeowner. It includes more than $25 billion in principal reductions to help homeowners avoid foreclosure, well beyond the $17 billion mandated.
Joseph A. Smith Jr., the settlement's monitor, said he has not yet conducted a detailed review to determine if B of A and JPMorgan have satisfied their obligations but will do so by yearend. Ally Financial, formerly known as GMAC, is the only bank so far that Smith has said completed its obligations. Citigroup and Wells Fargo have not yet completed the requirements of the settlement.
B of A, which was required to provide the bulk of consumer relief under the settlement, said it has "opted not to report" further relief efforts to Smith's office, saying it met its total obligations in the first quarter. B of A says it will continue to offer first lien principal forgiveness to customers, still provide "free interest rate reductions to qualified homeowners," and encourage the use of short sales.
To date short sales have dominated the overall relief efforts, making up $20.9 billion in total aid. The two forms of principal reductions were next: second-lien modifications and extinguishments at $15.3 billion and first-lien principal forgiveness at $10.3 billion. Refinancing provided $2.9 billion in benefits, and various other consumer relief programs contributed $1.6 billion in total aid to borrowers.
Smith and a cadre of accounting and consulting firms are reviewing the banks' progress and will release a report in mid-September detailing how the banks are credited under the settlement.
"Over the past year, we have seen the amount of relief and number of borrowers it helped steadily increase," Smith said in a press release.
Because the servicers receive credit for different types of relief, there could be a significant difference between what the servicers report and what ultimately gets credited by Smith. For example, servicers receive $1 in credit for each $1 in principal reductions, but only 45 cents of credit for each $1 in principal forgiven on a short sale, and only 20 cents of credit if the loan is owned by an investor.
"This information is self-reported by the banks and will not be credited under the settlement until each bank requests a review by me and I confirm their work," Smith said.
Consumer advocates have criticized the process, saying there is no way to determine if the servicers' numbers are accurate and which borrowers are getting the relief.
Kevin Whelan, the national campaign director at the nonprofit Home Defenders League, questioned the servicers' claims of providing billions in relief given that three times as many borrowers completed a short sale in the second quarter as received a first lien modification.
There is no sign that the banks have fixed basic servicing problems that Smith identified just a few months ago, Whelan says. "There is no update on the violation of servicing standards, so we don't know if the servicers have improved or if there are consequences for not doing so," he says.
The league, made up of 30 housing-related nonprofits nationwide, has supported the city of Richmond, Calif., in its efforts to restructure underwater mortgages or seize them through eminent domain.
In June, B of A, Citigroup and JPMorgan Chase each got dinged for multiple violations of the settlement including improperly canceling force-placed insurance policies, failing to notify loan mod applicants of missing documents and moving to foreclosure without telling the borrower.
Moreover, last week the Consumer Financial Protection Bureau released the results of a study detailing massive failures among mortgage servicers, including "sloppy" and "poor" practices that have led to wrongful foreclosures and evictions.
Attorney General Eric Holder also announced plans to file new cases stemming from the foreclosure crisis.
In October the servicers all claimed they had met each of the 304 different servicing standards and reforms required under the settlement. Even if Smith determines that an institution is in violation, he creates a corrective plan and only after the servicer fails to meet that plan would any penalties be imposed.