Is the National Mortgage Settlement Delivering Relief to Borrowers?
By Consumers Union on Tuesday, November 27th, 2012
In February, we wrote about the National Mortgage Settlement, in which five major lenders, Ally Financial, Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo pledged $20 billion to mortgage holders affected by illegal foreclosure practices. Nine months later, we’re beginning to get a better sense of how well the banks are living up to the agreement.
The National Mortgage Settlement Monitor, Joseph A. Smith, who oversees the banks’ progress in fulfilling the terms of the settlement, has just released a new report that presents the banks’ settlement activities from March 1 to September 30, 2012. In a press release, Smith noted, “The relief the banks have reported is encouraging. But it is important to remember that no obligations will be met until I have reviewed, confirmed and credited them.” While Attorneys General such as J.B. Van Hollen of Wisconsin and Rob McKenna of Washington State have offered at least measured praise for the banks’ efforts in their states thus far, as early as September of this year The New York Times’ editorial page has identified problems with the banks’ relief distribution.
A new editorial by The New York Times criticizes the banks’ failure to focus on providing forms of relief that help mortgage holders actually hold on to their homes. The Times notes that many of the funds provided by the banks have taken the form of “short sales,” which force borrowers to leave their homes, rather than loan modifications, which allow homeowners to stay in their homes while paying reduced monthly payment amounts. The editorial staff is also troubled by the possibility that relief is not being targeted to the most vulnerable mortgage holders. We agree that the monitor should determine whether homeowners of all income levels are receiving benefits from the banks. Above all, we agree that the banks need to stop the abusive practices that pushed many homeowners into foreclosure. The banks should instead work with homeowners to find acceptable, less drastic alternatives to foreclosure.
What do you think – are the banks doing their part to meet the goals of the National Mortgage Settlement?