Chase meets Florida mortgage settlement obligation -- Palm Beach PostNov 16, 2012 09:49 EST
Palm Beach Post Staff Writer
JPMorgan Chase says it has fulfilled its obligations to Florida under the landmark National Mortgage Settlement by providing $1.5 billion in relief to homeowners.
The Thursday announcement comes just eight months after the $25 billion agreement was signed by the nation’s five largest banks. Under terms of the settlement negotiated with 49 state attorneys general, banks had three years to meet requirements, which include offering debt forgiveness, refinances, short sales and relocation assistance.
Bank of America said Wednesday it expects to meet its nationwide commitment by March, and had already approved more than $2.6 billion in mortgage relief to struggling Florida homeowners.
The swiftness of the two large lenders in meeting their requirements led some some foreclosure defense attorneys Thursday to question whether the banks got off too easy for alleged foreclosure-related offenses. They included robosigning documents and foreclosing on property at the same time as negotiating loan modifications.
“If you give something up that you weren’t ever going to get, what are you really giving up?” said South Florida foreclosure defense attorney Roy Oppenheim.
Others, however, said they weren’t going to criticize something that’s helping their clients.
“This week alone, we have had five settlements with Bank of America which involved principal reductions of between $60,000 and $130,000,” said Wellington attorney Malcolm Harrison. “I would say the program has been hugely beneficial to those borrowers whose loans have qualified for help.”
A quarterly progress report from the banks, which include Wells Fargo, Ally Financial and Citigroup, was due Wednesday to the Office of Mortgage Settlement Oversight. Office spokeswoman Laura Brewer said the reports have not been confirmed yet and that no obligation is met until monitor Joseph Smith approves it.
Florida attorney general spokeswoman Jennifer Meale said Thursday that the office hadn’t received the reports.
Because lenders do not earn a dollar-for-dollar match on relief provided to borrowers, the $25 billion deal could mean up to $40 billion to homeowners. For example, for every dollar forgiven by a lender on a second mortgage, it receives only a 10-cent credit toward its required settlement amount.
Chase has been aggressive in soliciting homeowners with loan modifications. It reduced interest rates on its own for some underwater homeowners, sending borrowers their new lower payment amount with no effort needed on their part. As of August, the average savings was $300 a month for homeowners who were current on payments.
About 10,000 Florida homeowners received mortgage relief from Chase, including $243 million in first mortgage forgiveness.
But Oppenheim and Harrison said they don’t know how Chase or Bank of America chose who should get a loan modification.
“It was like hitting the lottery,” said Oppenheim, who has had clients receive “crazy” principal reductions from Chase.
Lake Worth homeowner Daniel Kleeberg has been unable to secure a loan modification to lower his monthly payment to Bank of America. Kleeberg said he’s tried for three years and hoped the national mortgage settlement would help.
“You just get frustrated,” Kleeberg said. “We want to keep our house. We want to work it out.”
Probably the biggest windfall for a homeowner is the reduction in the amount owed on the first mortgage. Bank of America said it has approved $1.4 billion in principal reductions on primary mortgages in Florida.
About 830 Bank of America borrowers in Florida have completed trial loan modifications to receive the mortgage write downs, which average $136,625 per homeowner. Another 3,650 Florida borrowers are in a trial period to receive a mortgage reduction. If completed, those reductions will equal a savings of $155,903 for each homeowner.
But there are questions about whether lender forgiveness on a second mortgage is more helpful to the bank or the homeowner. Although the lender only gets a fraction of every dollar it forgives on second liens, it would likely lose all of that money in a foreclosure.
“Second lien forgiveness is an empty bargain,” said Royal Palm Beach foreclosure defense attorney Tom Ice. “We’ve seen second liens voluntarily abandoned long before any settlement.”