WASHINGTON - The nation's largest banks have almost met their obligations to provide relief to struggling homeowners under the $25 billion national mortgage settlement, even as government officials question the way some institutions have handled the process.
The court-appointed monitor of the settlement said this week that Bank of America, JPMorgan Chase, Wells Fargo and Citigroup were more than halfway done with their requirements to offer borrowers aid in the form of loan forgiveness, short sales, forbearance or refinancing.
Mortgage servicers, under the landmark agreement to clean up shoddy foreclosure practices, had to provide $20 billion in relief to borrowers, with different types of relief assigned different credit toward that figure. The monitor, Joseph Smith Jr., audited each bank's files through December and submitted the results Wednesday to federal judges in the District of Columbia.
"The banks really got to work on this part of the agreement and have accomplished a lot," Smith said.
According to the report, Bank of America surpassed other mortgage servicers by completing 97 percent of its required $7.6 billion in borrower relief. JPMorgan has met 76 percent of its $3.6 billion obligation, Wells Fargo has doled out 55 percent of its $3.4 billion in required aid, and Citigroup has provided 46 percent of the $1.4 billion it pledged.
Ally Financial, the fifth mortgage servicer named in the settlement, has fulfilled all its obligations. Considering that the report covers activity only through the end of last year, Smith said other servicers may also be done. He said he expects to complete his audits of all the files in the coming months.
Although consumer advocates praise this progress, some wonder whether the aid has reached the hardest-hit communities. The monitor said his office does not have the authority to track demographic data.
The settlement was the culmination of more than 16 months of negotiations between lenders and a cadre of 49 state attorneys general and several federal agencies. It arose from allegations that lenders used forged and shoddy paperwork to quickly foreclose on struggling homeowners, a practice known as "robo-signing."
But advocates say not much has changed.
"The financial part of the settlement was important to the extent that it promoted the notion that principal reduction was a good thing, but issues around servicing have not been resolved," said Ira Rheingold, executive director of the National Association of Consumer Advocates.
Florida's Pam Bondi is among at least three of the attorneys general involved in negotiating the mortgage deal who have accused the banks of violating the servicing standards.