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Mortgage settlement wipes out $614M in debt in Illinois

Published: Thursday, Feb. 21, 2013 9:55 a.m. CST

(MCT) — Almost half of the 20,000 Illinois consumers who have participated so far in the year-old national mortgage foreclosure settlement have received loan principal writedowns or the debts have been extinguished, new data released Thursday shows.

Of the 20,044 Illinois borrowers who have received assistance from the nation's five largest servicers between March 1 and Dec. 31, 3,794 received principal writedowns on first or second mortgages while another 5,928 borrowers saw their second lien obligations erased, according to a report released Thursday by the independent mortgage monitor overseeing the settlement. Altogether, those principal writedowns and extinguishments totaled $614.5 million.

Another 5,831 Illinois homeowners have sold their homes through short sales and 2,629 completed mortgage refinancings, with an average interest rate reduction of 2.32 percent.

The settlement, announced in February 2012 by the Justice Department, state attorneys general and the nation's five largest servicers - Ally Financial, Bank of America, Citigroup, Chase and Wells Fargo - was designed to offer various forms of assistance to homeowners who may have been victimized by shoddy mortgage servicing and foreclosure practices or who found themselves with unaffordable mortgages. It also set new servicing standards for how mortgage servicers interact with financially struggling homeowners.

The lenders are expected to provide a combined $20 billion in consumer relief over the pact's three years and they are not credited dollar-for-dollar on the various forms of assistance provided.

Nationally, banks have provided $42.24 billion in permanent relief and $3.49 billion in active trial modifications to more than 550,000 borrowers, according to the report. Relief can include trial and permanent modifications.

The settlement also called for the establishment of systems to monitor the way in which mortgage servicers work with consumers, and Joseph Smith, Jr., the settlement's monitor, said progress needs to be made on that front.

"Since my last progress report, I have continued to receive valuable insight from counselors, lawyers, advocates, and other professionals around the country," Smith wrote in the report. "This information has highlighted continuing areas of concern with the banks, such as dual tracking and issues relating to single points of contact."

Last week, Smith said that Ally Financial, which was required to provide $200 million of consumer relief,  had satisfied its obligation and had substantially complied with the modification and refinance programs it had to establish as part of the settlement.

Commitments for consumer relief from the other four lenders in the settlement are Bank of America, $8.6 billion; Chase, $4.2 billion, Citi, $1.8 billion, and Wells Fargo, $4.3 billion.

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