5 big banks cut mortgage balances by $6.3B
LOS ANGELES — Five of the biggest American banks have cut struggling homeowners' mortgage balances by $6.3 billion, part of a total $26.1 billion in home loan relief provided under a landmark settlement over foreclosure abuses.
More than 309,000 borrowers received some form of mortgage relief between March 1 and Sept. 30, according to a report issued on Monday by Joseph Smith, monitor of the settlement.
That translates to roughly $84,385 per homeowner, according to the report, which is based on mortgage servicers' own account of their progress as they move to comply with the settlement terms.
“The relief the banks have reported is encouraging,” Smith said in a statement. He added that the banks won't get credit under the settlement until he can confirm their figures.
Smith said that $13.1 billion of the $26.1 billion in relief was in the form of short sales, in which lenders agree to accept less than what the seller owes on the mortgage.
Another $1.4 billion in relief was provided by refinancing 37,396 home loans with an average principal balance of $210,398. As a result, each borrower will save about $409 in interest payments each month, according to the report.
Banks also had $4.2 billion worth of loans under trial modifications. That could lead to permanent reduction in loan balances of $135,223 per borrower.
While borrowers can benefit from having their monthly payments lowered, having a portion of their balance forgiven is especially helpful. That's particularly the case when their home is worth less than what they owe on their mortgage, so-called underwater mortgages.
All told, banks erased about $2.6 billion in first-lien loans and $2.8 billion in second-lien loans. That amounts to an average reduction of $116,929 for the 21,833 borrowers with first-lien loans. The 50,025 borrowers with second-lien loans saw their balances reduced by an average of $55,534.
Lenders completed permanent reductions of about $1 billion before March 1, according to the report.
Department of Housing and Urban Development Secretary Shaun Donavan said that, while their job is not done, mortgage servicers are on track to fulfill their consumer relief commitments next year.
“Homeowners are finally beginning to see the light at the end of the tunnel,” he said during a conference call with reporters.
The federal government and state attorneys general for 49 states forged the $25 billion settlement in February with five banks: Ally Financial Inc., Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co.
The pact ended a painful chapter of the financial crisis when home values sank and millions edged toward foreclosure. Many companies had processed foreclosures without verifying documents.
The agreement will reduce mortgage loans for only a fraction of those Americans who owe more than their homes are worth. About 11 million households are underwater, and the settlement is expected to help about a million of them.
Of the $6.3 billion in reduced mortgage principal, according to Smith's report, Bank of America had provided $3.65 billion; JPMorgan, $1.3 billion; Citigroup, $551.3 million; Ally, $195.1 million; and Wells Fargo, $608.8 million.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Reagan shooter Hinckley closer to permanent freedom
- Steelers won’t be backed into a corner at NFL Draft
- Crosby’s 2 goals lift Penguins past Rangers, even series
- Fights reported, shots fired outside Monroeville Mall restaurant
- Marte jump-starts Pirates in win over Brewers
- Starkey: Taylor’s type fading away
- Defense shines in Pitt football spring game
- Coming off hill revives Seton Hill University, downtown Greensburg
- Sutter steps up for Penguins in series-tying victory
- Crosby says Edmonton would be good spot for prospective top pick McDavid
- Boscov’s could help sustain decade-old Pittsburgh Mills