Foreclosure Home News and Opinion $26.1 Billion Paid By National Mortgage Settlement, Report Claims

$26.1 Billion Paid By National Mortgage Settlement, Report Claims

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The nation’s largest lenders have distributed $26.1 billion in direct relief to nearly 310,000 borrowers, or roughly $84,385 per homeowner as part of the National Mortgage Settlement, according to a progress report released recently by Joseph A. Smith, Jr., who monitors the settlement.

The nation’s five biggest mortgage servicers — Ally/GMAC, Bank of America, Citi, J.P. Morgan Chase, and Wells Fargo — entered into the $26 billion settlement  with federal and state regulators earlier this year over alleged fraudulent foreclosure practices, better known as “robo-signing.” Under its terms, a minimum of $17 billion goes directly to borrowers nationally through a series of homeowner relief efforts, including principal reductions.

The agreement requires the banks to offer various forms of mortgage relief to borrowers. They must also adhere to stricter standards regarding foreclosure. The lenders must identify homeowners who are eligible for various forms of relief, such as first and second mortgage principal write-down modifications, short sale relief and refinancing options. More than half of the $26.1 billion went to short sales ($13.3 billion).

In states where banks need to prove a borrower is in default in the courts, the scrutiny of foreclosure cases has been heightened.Other states such as Nevada and California have enacted tough laws protecting borrowers from wrongful  foreclosure practices.

The result has led to a slowdown in foreclosures, with banks increasingly preferring to pursue alternatives such as short sales and loan modifications. New rules outlined by this year’s National Mortgage Settlement are causing foreclosure cancellations to surge in California, after dual tracking was outlawed in the Golden State. Dual tracking refers to the practice by banks of pushing a borrower through the foreclosure  process while simultaneously negotiating a loan modification.

Foreclosure starts have also plummeted too, especially in non-judicial foreclosure states.

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