(English) Mortgage settlement helps lenders more than homeowners, critics say

The banks, meanwhile, say they are providing meaningful relief to customers through debt forgiveness, modified loans and short sales. But some critics believe lenders are not paying a stiff-enough price for botching millions of foreclosures across the country.

“The compensation being paid is minimal compared to the damage that has been done, and the amounts that people have lost through the fraud committed by the banks in these foreclosure filings,” said Jack McCabe, a real estate analyst in Deerfield Beach.

So far, more than 100,000 Florida homeowners have received $7.7 billion in relief from five major banks through a landmark settlement over foreclosure abuses. That averages to $75,949 per person.

Another $3.6 billion in relief, for 26,446 Florida borrowers, is in the works.

Nationwide, 550,000 borrowers shared in $45.8 billion worth of mortgage relief between March 1 and Dec. 31, 2012, according to a status report last month by settlement monitor Joseph Smith. About $20 billion of that aid has come in the form of short sales. The figures are based on the banks’ own accounts of their progress. Smith said he must confirm the banks’ data before they will get credit.

Under the settlement, lenders — including Bank of America and Wells Fargo, the two biggest banks in Florida — agreed to reduce balances on mortgages on which the borrower owes more than the home is worth, and to refinance some loans. They also are required to make foreclosure a last resort, and they cannot foreclose on a homeowner who is being considered for a loan modification. Chase, Citi and Ally, the former financial arm of General Motors Co., are the other lenders involved in the nationwide settlement.

Some $3.2 billion in relief for 36,500 borrowers in Florida came from short sales, in which lenders accept less than what the seller owes on the mortgage.

Banks increasingly favor short sales rather than waiting out the lengthy foreclosure process. They get credit in the settlement for forgiving that debt, which critics like McCabe say is largely uncollectible.

“Those were losses that the banks would have ended up having to absorb,” he said. “Instead of losing money, they in essence ended up paying themselves.”

Another 29,250 Florida homeowners saw $2.4 billion in second-mortgage and home-equity debt completely wiped out.

But McCabe believes that money, too, would not have been collected. “In most cases, the value of the home is down to less than what the first mortgage is, so there is nothing for the second mortgage holder to go after.”

But the banks insist they are helping customers with loan modifications and refinances. Wells Fargo said it has fulfilled 73 percent of its $4.3 billion commitment to the settlement.

“It’s clear that the expanded modification and refinance programs are providing meaningful relief and payment reductions for our customers,” said Michael DeVito, executive vice president at Wells Fargo Home Mortgage. “Those who have obtained a modification on their first-lien mortgage loan have reduced their monthly payments by an average of nearly 44 percent and, on average, borrowers who have refinanced have seen principal and interest payment lowered by approximately $420 per month.”

Meanwhile, federal banking regulators have finalized a settlement with 13 mortgage servicers that will provide $9.3 billion to resolve complaints that they foreclosed on homeowners who should have been allowed to remain in their homes.

That agreement, orchestrated by the Federal Reserve and the Office of the Comptroller of the Currency, includes $3.6 billion in cash payments and $5.7 billion in loan modifications and forgiveness of deficiency judgments.

More than 4 million homeowners whose homes were in some stage of foreclosure in 2009 or 2010 are covered. Cash payments will range from several hundred dollars to up to $125,000.

The lenders are Aurora, Bank of America, Citibank, Goldman Sachs, HSBC, JPMorgan Chase, MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust, U.S. Bank and Wells Fargo.

Some consumer advocates have bashed that settlement, though, because it ends a review of the lenders’ foreclosure files required under a 2011 enforcement action. Without that review, they say, the public will never know the full extent of the banks’ actions.