Mortgage settlement brings relief to 25K in Illinois
More than 25,000 Illinois residents have received approximately $1.8 billion from the landmark national mortgage settlement, but servicer compliance with the pact remains an issue for several companies, according to a report from the settlement's independent monitor issued Tuesday.
Since March 1, 2012, the settlement has enabled 3,513 Illinois homeowners to receive permanent mortgage modifications with principal writedowns that reduced their indebtedness by an average of $118,235. Another 8,439 consumers had second liens on their homes extinguished. Almost 6,000 consumers completed short sales, selling their homes, with their lender's permission, for less than the amount owed. Additional homeowners received other forms of assistance.
The settlement, announced in February 2012 by the Justice Department, state attorneys general and the five largest mortgage lenders was intended to help homeowners who may have been victimized by shoddy mortgage servicing and foreclosure practices or who found themselves with unaffordable mortgages. It also detailed 304 new standards for how mortgage servicers were supposed to interact with struggling homeowners.
The information in the report is self-reported by lenders and will not be credited by the monitor until banks request a review of the data. So far, according to the report, only ResCap, formerly known as GMAC, has received credit for its participation in the settlement.
Joseph A. Smith Jr., the settlement's independent monitor, said he will issue his review of the other four banks that were party to the settlement -- Bank of America, Citigroup, Chase and Wells Fargo -- in coming weeks. Chase said Tuesday that it had satisfied its requirements, helping 7,913 borrowers in Illinois and about 126,000 consumers nationally.
Smith will issue his first report on banks' compliance with the settlement's servicing standards next month, and said he is developing additional tests to determine how well banks are adhering to the settlement. "Based on my conversations with consumer professionals, elected officials and distressed borrowers, I know there are areas in which the banks still have work to do, and I am using that insight to determine if there are gaps that require further testing," Smith said in a statement.
Illinois Attorney General Lisa Madigan said she has seen what she calls an "alarming"pattern of potential violations of those servicing standards, based on an initial review of loan modification files by her office. In 60 percent of the files, servicers did not, as they are required, notify borrowers within five days that their applications included missing documents. In 45 percent of the files reviewed, servicers asked homeowners for documents multiple times.
"The new servicing standards were supposed to eliminate headaches for homeowners," Madigan said in a statement. "But unfortunately, it seems we're hearing about the same frustrating experiences. Homeowners feel that they are on a hamster wheel of unending document requests, which causes some homeowners to drop out of the process and, ultimately, lose their homes."
Nationally since March 1, 621,712 borrowers nationally have received some sort of relief amounting to $50.63 billion, or an average of $81,437 per borrower. Only 15 percent of those consumers successfully completed a loan modification of their primary mortgages and received $10 billion in principal forgiveness. Others were in trial modifications, second lien modifications or loan refinancings, actions that enabled the consumers to keep their homes.