Bank of America appears poised to provide billions of dollars in consumer relief required by last year’s Justice Department settlement well ahead of the accord’s 2018 deadline.
In a report Monday, the independent monitor overseeing the pact said the bank has been given conditional approval for $3.3 billion in relief as of the end of June. That puts the bank at 48 percent of the required $7 billion, according to the third report by the monitor since the settlement was struck in August of last year.
The bank has been awarded credit for a variety of consumer relief. That includes modifying home loans to make them more affordable, making home loans to low- and moderate-income borrowers and donating money to housing-counseling agencies.
The $7 billion in relief is mandated under the $16.65 billion agreement, which also included $9.65 billion in cash payments to various federal agencies and six states. In reaching the accord, the second-largest U.S. bank by assets acknowledged government claims that the bank and companies it bought, including mortgage lender Countrywide Financial, misled investors of mortgage-backed securities.
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The monitor, Eric Green, told me Monday the “massiveness” of the consumer relief provided by Bank of America “this quickly into the settlement process” is what strikes him the most from his latest report.
But he also pointed out the bank is eligible to receive extra credit for consumer relief it provided by the end of this past August, thanks to the terms of the settlement. In addition, the bank was eligible for enhanced incentives for relief it provided by the end of this past May.
“I think they wanted to take advantage of the extra enhancement they get,” said Green, a Boston-based mediator and former professor at Boston University School of Law. “That’s a big incentive for the bank.”
In a statement, Bank of America spokesman Dan Frahm said Green’s report shows the bank “is extending meaningful relief to homeowners who, despite the economic recovery most Americans have felt, have continued to struggle financially.”
Frahm also said the bank estimates it has completed or is in the process of providing additional consumer relief worth $3.68 billion in credit, putting the bank at more than 90 percent of its requirement. That’s in addition to the $3.3 billion Green reported Monday.
Regarding the bank’s speed at providing the relief, Frahm said the bank is working “quickly get these solutions in the hands of customers in need of immediate assistance.”
In North Carolina, the bank has forgiven principal on 260 loans and forgiven past-due principal payments on 116 loans. Those are in addition to other forms of consumer relief the bank has provided North Carolina borrowers.
Green said Monday the consumer relief is going in large part to communities where the housing crisis led to some of the largest home price declines and highest unemployment levels. The settlement requires some of the relief to go to such areas.
Green said it appears to him that the bank will provide all $7 billion in aid at some point next year. He said complying with the settlement has not been cheap for the bank, which must cover the costs of the monitor and his team, which currently numbers about a couple dozen people.
“This is a big cost for the bank,” Green said. “They’ve got a lot of people in the bank working on this.”