5 Big US Banks Have Cut Mortgage Balances By $6.3B

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5 Big US Banks Have Cut Mortgage Balances By $6.3B

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Piggybankblog posted on 11/19/12

Cross linked with huffington.com

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LOS ANGELES — Five of the biggest U.S. 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 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 also completed permanent reductions of about $1 billion before March 1, according to the report.

U.S. 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.

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6 Comments

  1. I would like to know what percentage of the principle reduction was off the first and not the second. The second was dischargable in BK and not secured by the property. From what I have seen noted in articled on the web is this principle reduction was always the second on the house. Money the banks would not see anyway. and some are short sales in states mostly non judicial were deficency funds are not sanctioned against the homeowners therefore money the banks would have lost in foreclosure anyway.

  2. I would like to know what percentage of the principle reduction was off the first and not the second. The second was dischargable in BK and not secured by the property. From what I have seen noted in articled on the web is this principle reduction was always the second on the house. Money the banks would not see anyway. and some are short sales in states mostly non judicial were deficency funds are not sanctioned against the homeowners therefore money the banks would have lost in foreclosure anyway.

  3. Meant to add the banks fail to state they are going after the mortgages any how on the first. They are not intending to allow the homeowner to keep the house. I would like to see just how this money was really up to the settlement agreements.

  4. Meant to add the banks fail to state they are going after the mortgages any how on the first. They are not intending to allow the homeowner to keep the house. I would like to see just how this money was really up to the settlement agreements.

  5. There is a similar article from 4closure.org that tells about the principle reduction on the second being used as a scam on the settlement also.

  6. There is a similar article from 4closure.org that tells about the principle reduction on the second being used as a scam on the settlement also.

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