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Major Banks Cut Mortgage Debt for Troubled BorrowersMillions of homeowners across the country faced financial difficulties during the economic downturn, and as a result had trouble paying their mortgages. But because a number of major banks seriously mishandled their foreclosure processes, many consumers who are still struggling under negative equity may now be getting some relief.

Five of the nation’s largest financial institutions — Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo — gave $45.8 billion in assistance to struggling homeowners between March 1, 2012, and the end of the year, according to a report from the Associated Press. Of that total, $19.5 billion — the largest portion — has come in the form of short sales, which allowed underwater homeowners to get out of mortgages on which they owed more than their home was worth. These moves have come as part of a settlement with 49 states’ attorneys general.

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Another $19 billion worth of relief came as reduced mortgage principals, $13.5 billion of which was done by Bank of America alone, the report said. In addition, $2.2 billion more was also the result of some 56,400 home loans receiving refinances that saved their homeowners an average of $417 per month in lower payments.

Free Credit Check ToolIn all, more than 550,000 borrowers received some form of mortgage relief through these efforts, equating to an average savings of $82,668 per person, the report said. However, all the above numbers are based on reports from the banks themselves, and have yet to be verified by the settlement’s official monitor.

“I believe we have made progress, particularly as it relates to (mortgage) relief, but I know from my regular conversations with advocates across the nation that the banks and I have much more work to do on behalf of borrowers,” said Joseph Smith, the man tasked with monitoring the situation, according to the news agency.

Currently, about 11 million homeowners across the country are still underwater on their mortgages, the report said. By the time the efforts under this settlement have concluded, about 1 million of them will have received some sort of assistance from their lenders.

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Homeowners getting out from under negative equity in general is good not only for the individual but the housing market as a whole, as it may allow those borrowers to put their properties up for sale and meet the rising tide of buyer demand, which itself has been spurred by lower home prices for some time.

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