Five of the major banks in the United States are following through with their promise to help thousands of troubled homeowners who have had problems paying their mortgage payments. According to reports from the government, more than 140,000 homeowners have received financial assistance that totaled $10.6 billion and there is more to come.
The five major banks involved in this mortgage relief are JPMorgan Chase, Wells Fargo, Bank of America, Ally Financial and Citigroup. In total, the five banks have agreed to offer as much as $25 billion in relief in order to settle cases against them that resulted from investigations of foreclosure abuse. The agreement was reached in February so the banks are making good progress on their efforts to hold to their word.
There was only one reported incidence of one of the banks faltering. Bank of America did not complete any modifications between March 1, the first effective date of the settlement, and June 30. But BofA responded to those reports quickly by saying that it completed more than 3,800 mortgage modifications between July 1 and August 21. Those modifications totaled nearly $600 million in financial help. One of the reasons cited for not getting modifications completed by June 30 was because homeowners had to wait until a three-month trial period before they were finalized.
The other four banks, however, completed a total of about 7,100 first mortgage modifications during the March 1 to June 30 time period. The total money spent among those four banks was about $749 million. About $367 million of that was for modifications made through JPMorgan Chase which helped almost 3,000 troubled homeowners during that initial four month period.
The banks are volunteering the information about how many homeowners they have helped since the agreement was put into place. The data is made public which is one of the motivations for them to keep good to their promise. Another motivation for helping homeowners with their mortgage modifications is due to the fact that each bank gets credits for their efforts. For instance, the bank is given a credit of 45 cents for every dollar that it forgives in a short sale if the bank owns that loan. If the mortgage loan is held by an investor, the bank gets a credit of 20 cents for every dollar. Short sales, which occur when the bank lets a homeowner sell their home for less than what they owe, account for the biggest debt forgiveness under this new settlement. In fact, the five banks forgave nearly $9 billion worth of mortgage debt as a result of short sales.
According to Katie Porter, a law professor at UC Irvine who has been following the settlement and the compliance of the banks, this is a great step in the right direction. However, she says more needs to be done. Do you feel the same way?
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