By Aruna Viswanatha
WASHINGTON, March 18 Top U.S. banks including
Bank of America Corp and Citigroup provided more
than the $19 billion in help to struggling borrowers they were
required to offer under a landmark 2012 deal with the U.S.
government, a watchdog said on Tuesday.
Bank of America, for example, cut loan balances and helped
homeowners in other ways that added up to $9.6 billion in
relief, even though the bank was only obligated to provide
around $8.6 billion in such aid under the settlement, the
monitor of the deal said in a report.
"I will say, as we have come to the end of all of this, I am
satisfied and actually, happy," Joseph Smith, the person
assigned to monitor banks' compliance with the settlement terms,
said of the value of the mortgage debt the banks agreed to
reduce for distressed borrowers.
The obligations stem from a $25 billion deal between federal
and state authorities and five top mortgage servicers, announced
in February 2012 and designed to end foreclosure abuses. The
other banks on the deal are JPMorgan Chase, Wells Fargo
& Co and Residential Capital LLC.
The report marks the end of the consumer relief portion of
the settlement. The rest of the funds were paid to foreclosed
borrowers and as cash to the states and the federal government.
The banks are still being monitored over their compliance with a
third portion of the deal that subjected them to new standards
for servicing mortgages.
At the time the deal was announced, top U.S. officials said
it could help 1 million borrowers, and President Barack Obama
said it could help turn the page on the housing crisis.
But critics said the complicated structure of crediting the
banks' efforts to aid consumers could allow the banks to fulfill
the settlement obligations through things they would have done
anyway -- waiving deficiency judgments or processing short
sales, for example.
Mortgage bond investors also worried they might end up
shouldering many of the costs of the deal.
In the first report to audit the banks' full relief efforts
under the settlement, Smith said the banks got credit for $20.7
billion in relief to borrowers. They were required to offer
$19.1 billion in help under the deal, he said.
The majority of that came from loans the banks themselves
owned, he said.
Banks only get partial credit for some things, such as short
sales of homes, so the total amount of aid to borrowers was
actually considerably higher, he said.
Only around 600,000 families wound up receiving help, fewer
than officials initially projected. But Smith said he was still
satisfied with the extent to which banks cut borrowers' loan
"I viewed our goal as to providing...neutral facts on the
basis of which this discussion about dealing with distressed
loans could continue," Smith said of his report.
"We now have a complete picture of what actually happened,"
In statements, Wells Fargo and Bank of America said they
were pleased to have provided the relief to customers and have
continued to give assistance.
JPMorgan said it was proud of its efforts and is investing
in improving its customer experience. A Citi representative said
the bank was pleased Smith found it had fulfilled its consumer
relief obligations under the deal.
Smith had previously certified that ResCap, which was put
through bankruptcy and whose servicing business is now owned by
Ocwen Financial Corp, had completed its consumer relief
obligations under the deal.
SERVICED FOR OTHERS
When the deal was announced in 2012, investors in mortgage
backed securities worried that many of the mortgages modified
were those they ultimately owned, since the banks could get
credit for loans they serviced on behalf of others.
In fact, the vast majority of all the banks' credit came
from addressing loans they owned themselves, Smith said. For
Wells Fargo and Citi, that number stood at more than 99 percent.
Bank of America earned the most credit from loans it
serviced for others - around 39 percent, according to Smith's
report. JPMorgan earned around 29 percent of its credit from
loans it serviced on behalf of other investors.