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) -- The five largest mortgage servicers have provided more than $45 billion in gross relief to nearly 550,000 consumers as part of a nationwide settlement over foreclosure violations,

settlement monitor

Joseph Smith said Thursday.

Still, banks' efforts to provide relief might not be enough to satisfy demands that more needs to be done for borrowers.

Consumer advocates and critics of the settlement would point to the fact that the bulk of the relief came in the form of short sales and forgiveness of second-home loans, which do little to keep borrowers in their homes.

And a

recent settlement

that abruptly put an end to independent foreclosure reviews promised to borrowers in an earlier enforcement action has raised concerns in Washington and increased calls for more justice related to the foreclosure abuses.

As a quick background,

Bank of America



JPMorgan Chase






Wells Fargo



Ally Financial

entered into a $26 billion settlement last March with 49 states over alleged foreclosure violations known as "robo-signing."

The settlement required banks to provide at least $20 billion in relief to consumers through a combination of principal forgiveness, loan modifications, refinancing and offer delinquent borrowers alternatives to foreclosure such as short sales and deeds-in-lieu of foreclosure.

Banks only get partial credit for every dollar of relief extended, so the $45 billion provided so far meets only a part of that obligation. However, the monitor recently said Ally Financial has completed its obligation under the settlement.

"I believe we have made progress, particularly as it relates to consumer 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," Smith said in a statement.

According to the latest report from the settlement monitor, banks conducted short sales totaling $19.5 billion between March 1 and Dec. 31, 2012.

In a short sale, the bank agrees to let the borrower sell the property for an amount less than what is owed on the mortgage. The proceeds are used to settle the debt and the remaining mortgage is forgiven.

Short sales are considered a better alternative to foreclosures as it minimizes cost to the banks while allowing borrowers time to find alternative accommodation.

Yet it has the same effect as a foreclosure in some ways. The borrower still loses his home and his credit score is damaged.

Critics of the settlement also point out that banks would have pursued short sales anyway and should not be given credit for doing so.

Banks also forgave $19 billion worth of principal. But, here again, most of the relief was on second mortgages, which in the event of foreclosure gets lower priority than the primary mortgage.

Banks forgave only $6.04 billion in primary mortgages. Forgiving the second loan may reduce the total amount of debt owed by the borrower but for those who are deeply underwater and struggling to make monthly payments, this does not help them avoid foreclosure.

Meanwhile, the servicers are racing to fulfill their obligations under the settlement and put it behind them.

Bank of America said Thursday it had completed $30 billion of "real and meaningful relief" and that it is on track to meet its obligations under the settlement by the first quarter of 2013.

But the big banks may find their foreclosure woes are not yet over.

A dozen of the largest mortgage servicers entered into another $9.3 billion settlement with regulators earlier this year over previous foreclosure abuses.

Under that agreement, banks will pay $3.5 billion in direct payments to eligible borrowers and over $5 billion in other assistance, such as loan modifications and forgiveness of deficiency judgments. The agreement covers about 4 million borrowers whose homes were in foreclosure in 2009 and 2010 with the participating servicers.

The settlement would allow lenders to cease the independent foreclosure review process that was mandated under an April 2011 enforcement action.

Regulators had determined that the foreclosure review process, which involved a case-by-case review of millions of loan files, was proving too expensive, time-consuming and ineffective.

But since then, questions have mounted on why regulators terminated the review process so abruptly, amid press reports that the review process was rigged from the beginning.

"The opaque nature of the consent order process and resulting agreement in principle raises many questions about the validity of the IFR and the appropriateness of settlement figures discussed in the news," Rep. Maxine Waters, the lead Democrat on the House Financial Services Committee said in a recent letter to regulators.

Banks may not be able to move on from the foreclosure problems as quickly as they would like to.

-- Written by Shanthi Bharatwaj in New York

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