Bank of America said Wednesday that it has so far offered $15.8 billion in consumer relief under the national mortgage settlement and that it expects to meet all of its financial obligations by the end of February – two years ahead of its deadline.
Most of the relief continues to come in the form of short sales, though principal reductions given to delinquent or underwater borrowers now account for about one-third of the total, BofA said in a conference call detailing its progress on the settlement, which stemmed from banks’ so-called “robo-signing” of foreclosure documents.
The Charlotte, N.C., lender also said that more than half of the nearly $5 billion in principal reductions will be paid for by investors, not the bank itself. That matters little to delinquent borrowers who saw their monthly payments reduced, but it is sure to anger investors who have argued that they should not have to be punished for banks’ mistakes.
Whether BofA’s report is indicative of progress other banks are making in complying with the landmark settlement won’t be known until Joseph A. Smith, the settlement’s monitor, issues his own progress report on Monday.
The top five mortgage servicers – Ally Financial, BofA, Citigroup, JPMorgan Chase and Wells Fargo – all filed reports Wednesday with the monitor and state attorneys general but only BofA held a conference call with reporters to discuss its progress.
The settlement was designed to address servicing abuses that led to the robo-signing of foreclosure documents and requires banks to reimburse borrowers who were harmed. Under terms of the deal signed with state attorneys general, the servicers have three years to provide relief to borrowers in the form of principal reductions, short sales, second-lien forgiveness and refinancings.
The servicers, though, are eager to put the settlement behind them and are moving at breakneck speed to meet their targets.
"We’re on path to deliver all of our responsibilities on consumer relief and servicing standards by the end of February," said Eric Telljohann, a BofA senior vice president.
Telljohann also said on the call that, when all is said and done, relief will be roughly divided equally between short sales, debt forgiveness and refinancings.
Investors who bought loans from BofA, though, are frustrated that they are being forced to take a haircut on their investments.
The settlement was structured to give servicers 45 cents of credit for every dollar of principal reductions paid for by investors. Banks will receive $1 of credit for every dollar of principal write downs on mortgages they own.
“Investors remain very concerned about the implementation of the settlement,” said Chris Katopsis, executive director of the Association of Mortgage Investors, a bondholder trade group.
“The attorneys general have no problem letting the banks pay their fines with other people’s money,” added Bill Frey, principal and CEO Greenwich Financial Services.
But Telljohann said the goal of the settlement is to prevent foreclosures regardless of who took the loss for principal write-downs. He added that BofA had already received approval from the majority of investors to take principal write-downs and avoid losses from foreclosures.
“We’re not doing any movement against one portfolio or another,” Telljohann said. “This is not a hit per se. It is our belief that by providing this payment relief we are preventing a foreclosure event from happening.”
Telljohann said BofA made offers to all eligible borrowers who had a delinquent or “underwater” mortgage, in which the borrower owed more on the loan than the home is worth.
BofA also modified or extinguished $2.5 billion in home equity loans or lines of credit for 45,000 borrowers. The bulk of its relief came from $7.4 billion in short sales or deeds-in-lieu of foreclosure. It gave another $617 million in relocation assistance and deficiency waivers and $250 million in interest rate reductions through the end of September.