The independent monitor overseeing Bank of America’s compliance with requirements of its landmark mortgage settlement agreement released his first report on the bank’s consumer relief activities Tuesday.
A team of legal and auditing professionals led by Eric D. Green, the agreement’s independent monitor, found that the bank had correctly claimed credit of nearly $9 million for a batch of 100 first-lien mortgage modifications. Bank of America must provide $7 billion in consumer relief by the end of August 2018 as a condition of its settlement.
Loan modification options include principal forgiveness, interest rate reductions and making delinquent loans current without penalty. Under the settlement, the bank can pursue other methods of relief beyond loan modifications, such as issuing new loans to low- and moderate-income borrowers and support for affordable low-income rental housing.
While Green and his team found that the bank’s approach to seeking credit for its consumer relief efforts was logical and appropriate, he advised caution against using these initial efforts to determine what to expect from Bank of America moving forward.
“Examination of the first batch of 100 loans amounts to a test drive, assessing Bank of America’s plan for delivering much-needed assistance to homeowners and its methodology for calculating how the assistance qualifies for credit under the settlement agreement,” Green said in a press release. He added that a clearer picture should emerge in the months ahead as to the method, timing and distribution of the bank’s relief efforts.
At least $1.25 billion of the relief must go toward six states: California, Delaware, Illinois, Kentucky, Maryland and New York. These states joined with the U.S. Department of Justice in the legal action that resulted in the settlement with Bank of America.
In addition to the $7 billion in consumer relief that Bank of America must dole out, the bank was also required to pay around $10 billion in cash as part of the settlement. The settlement addressed Bank of America’s alleged violations of federal and state laws due to their involvement with residential mortgage-backed securities and collateralized debt obligations.
Green, a lawyer and former professor who is well known for pioneering dispute resolution strategies, became the settlement agreement’s independent monitor when it went into effect in August 2014. Per the terms of the settlement, he will continue to issue quarterly reports on Bank of America’s progress toward completing its consumer relief, with the next reports scheduled for June 30 and Sept. 15.