A watchdog’s report released Tuesday endorses Bank of America’s initial efforts to comply with the consumer-relief requirements of a nearly $17 billion mortgage settlement it reached last year with the U.S. government and a half-dozen states.
The report by federally appointed monitor Eric Green is based on his study of whether the Charlotte bank properly claimed $8.9 million in credit for an initial batch of 100 loans it modified as part of a “test drive.” Green’s determination that Bank of America correctly claimed the credit essentially clears the way for the bank to ramp up its efforts to meet its consumer-relief obligations under the settlement.
“I’m really pleased with the start that the bank has made,” Green told the Charlotte Observer on Tuesday.
Of the $16.65 billion settlement, Bank of America must provide $7 billion in the form of consumer relief, which can include loan modifications and new loans to lower-income borrowers, among other things.
The bank has four years to meet the consumer-relief obligations after reaching the settlement in August with the Department of Justice and attorneys general in six states.
The accord resolved claims over toxic mortgage bonds sold in the run-up to the financial crisis. In reaching the settlement, Bank of America admitted that it, Countrywide Financial and Merrill Lynch took part in faulty mortgage-backed-securities practices. Bank of America bought Countrywide in 2008 and Merrill Lynch in 2009.
The report gives the first glimpse into the bank’s compliance with the settlement’s consumer-relief requirements.
“The initial progress report validates that our process is compliant and the meaningful relief we are actively extending to mortgage customers in need of assistance can proceed,” Bank of America spokesman Dan Frahm said in an email.
Green, who is required to report quarterly on the bank’s progress toward providing the consumer relief, said it is likely the bank will provide “a great amount” of relief in 2015. The settlement grants the bank incentives if it provides certain relief this year.
He said it’s likely Bank of America won’t take until its deadline of Aug. 31, 2018 to provide all the relief.
“I think there’s a good chance they’ll beat that deadline by a lot,” he said.
Green, a Boston-based mediator, can give or withhold credit as Bank of America provides consumer relief. But he can’t tell the bank when, to whom and how it provides consumer relief.
Loan modifications can include principal forgiveness, reducing interest rates and bringing delinquent loans current without any penalties against a borrower.
Under the settlement, the bank is required to provide a total of at least $1.25 billion in consumer relief to six states — California, Delaware, Illinois, Kentucky, Maryland and New York — as part of deals reached with attorneys general in those states.