WASHINGTON – The nation’s four biggest banks slashed billions of dollars from mortgages and other debts, enough to satisfy their obligations under a national mortgage settlement that stemmed from so-called robo-signing.
A report on Tuesday from the monitor overseeing the settlement says Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc., and Wells Fargo & Co. have provided some $50 billion in relief to more than 600,000 borrowers.
The settlement, reached in February 2012, was prompted by disclosures that some mortgage-servicing companies had processed foreclosures without verifying documents. The problem became especially severe after housing prices crashed around the time of the 2008 financial crisis and the number of foreclosures soared.
Because of the settlement, banks cut the size of mortgage balances, modified loans and allowed homeowners to sell their house for less than they owed. It also let some borrowers refinance even though they wouldn’t usually qualify because they owed too much.
The settlement with the federal government and 49 states “resulted in an unprecedented amount of consumer relief,” monitor Joseph Smith wrote. He said the deal gave banks an incentive to provide relief early, so borrowers who were in trouble got help within 18 months of the effective date of the settlement.
The $50 billion in relief counts as $20 billion under the scoring system of the settlement. Lenders got a bonus of 25 per cent for mortgages reduced before Feb. 28, 2013, and penalties if they missed deadline. Other variables also increased or decreased the amount they were credited with.
According to the report, Bank of America was credited with $9.61 billion in relief, covering 317,028 loans; Wells Fargo provided $4.57 billion on 122,719 loans; Chase provided $4.46 billion on 125,553 loans, and Citi provided $1.79 billion, covering 58,822 loans.
Chase said it finished its loan changes two years early and forgave an average of $121,000 in principal on first mortgages.
Wells Fargo said the loans it was credited with changing were “only a small percentage of what we have done to assist customers over the past several years. We remain committed to helping customers who face payment challenges find options wherever possible.”
Smith said he is continuing to monitor some mortgage-servicing practices under separate agreements those companies have with some states. He said he will file another report in the spring.