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Bank of America has begun to deliver its $7 billion consumer-relief obligations under its Aug. 20, 2014, settlement agreement with the U.S. Department of Justice and six states, Eric D. Green, independent monitor of the agreement, reported.
In the first of his required reports on the bank's consumer relief activities, Professor Green said that he and his team of legal and auditing professionals found that Bank of America had correctly claimed credit of $8,948,684 for an initial batch of 100 first-lien mortgage modifications and that the bank was employing a logical and appropriate approach to seeking credit for its consumer relief efforts.
Under the agreement, Bank of America is required to provide consumer relief valued at $7 billion by a deadline of Aug. 31, 2018. The categories of relief include not only loan modifications but new loans to low- and moderate-income borrowers, donations toward community reinvestment and neighborhood stabilization, and support for affordable low-income rental housing.
Professor Green noted that the first 100 loan modifications are being used mostly to test monitoring standards and procedures, but are too small a sample from which to draw conclusions about the consumer relief Bank of America will deliver in the future.
"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," Professor Green said. "The bank is extending relief to tens of thousands of homeowners, and in coming months we should get a clearer picture of how quickly the bank has delivered on its consumer relief obligations, how much of what kind of relief has been delivered, and where relief has been distributed."
The 2014 settlement agreement, totaling nearly $17 billion, settled claims that Bank of America and affiliates had violated federal and state laws in connection with their activities involving residential mortgage-backed securities and collateralized debt obligations. Bank of America's is the largest of a number of settlements stemming from federal and state investigations into the causes of the mortgage crisis of the last decade. Bank of America's $7 billion consumer-relief obligations are nationwide, but the bank is required to direct at least $1.25 billion of relief collectively to the six states—California, Delaware, Illinois, Kentucky, Maryland and New York—that participated with the U.S. Department of Justice in the legal action that led to the settlement.
"For many, if not most, Americans, family and the family home are core values, at the center of the lives they hope to live. Owning a family home is the dream. Losing that home is the nightmare," Professor Green said. "This settlement agreement acknowledges that the bank has committed to do its part to help repair the dream and avert the nightmare for those still in their homes but struggling with their mortgage payments."
A unique aspect of the Bank of America agreement is that the bank deposited $490 million into a tax relief fund, from which the Monitor is empowered to make payments of up to $25,000 apiece to assist homeowners who incur federal income tax liability as a result of receiving mortgage modifications. If Congress decides to extend a tax exemption to such homeowners, the money in the fund will go instead to community outreach and legal aid groups identified in the agreement.