U.S. mortgage servicers including Citigroup Inc. (C) and Bank of America Corp. have finished paying $20 billion in relief to borrowers under a legal settlement over botched foreclosures, the court-appointed monitor said.
Banks handed out most of the aid in the form of debt forgiveness and refinancing help, as required by the February 2012 settlement being overseen by Joseph A. Smith. The banks reduced principal on primary mortgages 37 percent of the time, and wrote off home-equity loans about 17 percent of the time, the monitor said in a statement today.
The results may show that the banks, also including Wells Fargo & Co. (WFC) and JPMorgan Chase (JPM) & Co., found cutting debt was an effective way to stem losses on defaulted loans, Smith said in an interview.
“They elected to do more in the way of first-lien principal forgiveness than was required,” he said. “They got the most bang for their buck for doing that.”
Lenders also allowed borrowers to sell their homes for less than the amount of their mortgages or to turn over the deeds for their properties. A fifth lender participating in the settlement, Ally Financial Inc. (ALYF), had previously completed its obligations under the agreement with the U.S. Justice Department and 49 state attorneys general.
The relief payments are only part of the settlement, which came after lenders were accused of using improper documents to foreclose on homes. Smith, a former North Carolina regulator, is continuing to oversee the banks’ mortgage-servicing practices and will issue reports on their progress next year.
He’s also monitoring an additional $2.1 billion settlement with Ocwen Financial Corp. (OCN) over faulty mortgage servicing that the Consumer Financial Protection Bureau and state attorneys general reached in December.
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