The settlement with state and federal authorities to which Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo agreed is meant to provide about $20 billion in mortgage relief to homeowners to make up for a foreclosure fraud scandal that surfaced in 2010.
Law firms hired by the banks to push foreclosures through the court system were found to be cutting so many corners, they were, essentially, cheating homeowners of due process.
Since the agreement was reached in February, the five banks have granted homeowners about $10.5 billion worth of benefits, mostly through short sales, which involve the banks allowing the homeowner to sell a home for less than what is owed on the mortgage, The New York Times reported Thursday.
The audit of the settlement by Joseph Smith, an independent monitor, said the banks had provided $750 million through principal reduction.
"I think this is a good first step," Smith said.
The banks are allowed to count losses written off from short sales against the settlement, but only at a rate of 40 cents on the dollar.
The settlement includes payment of about $2,000 to 750,000 homeowners displaced by foreclosure. Monthly payments for an additional 1 million homeowners were expected to be reduced through refinancing that may or may not include reductions in principal.
Of the $10.5 billion credited toward the settlement, $8.7 billion has been provided by short sales. Still, the settlement was set to prompt "the most significant principal reduction that we've seen since the housing crisis began," said Shaun Donovan, the secretary of housing and urban development.
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