Ben Hallman has an informative piece on who is starting to get relief from the foreclosure fraud settlement. The short answer, despite incentives to write down loans in the first year of the program, is not that many people.

As part of the national mortgage settlement signed in March, five large banks — Chase, Bank of America, Citigroup, Wells Fargo and Ally Financial — agreed to offer at least $10 billion in loan forgiveness, or principal reduction, to some of the estimated 11.1 million homeowners who owe more on their mortgage than their home is worth.

But three months later, the banks’ progress in distributing that relief is slow, said housing counselors at 12 agencies, mostly in Florida, surveyed by The Huffington Post. At nine of the agencies, counselors reported that the banks had granted just one or two principal reduction offers out of dozens requested. Counselors at three other agencies — in North Carolina, Ohio and Florida — said that they had no clients who had received a bank’s loan forgiveness offer as a result of the settlement. Banks are not saying how much principal they have written off, though a report to the government on their efforts is due in September.

Servicers are simply much more likely to use forbearance – deferring principal to a lump sum payment at the end – rather than principal reduction. This has been Ed DeMarco’s mantra, and it’s largely the industry standard. The difference is that these five banks in the settlement are required to provide principal reductions for their customers who qualify, and early on, they’re just not doing it. They’re certainly not using any Fannie or Freddie-backed loans for that purpose, because the GSEs still reject the practice. So far, they’re not using private label security loans for write-downs either, except for Bank of America, who seems to think they have delegated authority from the investor repurchase settlement on those loans, even though that settlement isn’t done, and even though a federal judge just allowed Attorneys General Eric Schneiderman of New York and Beau Biden of Delaware to intervene in the case. The fact that BofA is the only servicer giving out hard numbers – they claim to have started 10,000 trial modifications with principal reductions – and the only servicer using investor loans for the settlement, seems more than a little correlated.

So the good news is that 4 of the 5 servicers aren’t using someone else’s loans to pay off their penalties. The bad news is they don’t appear to be using practically anyone’s loans at all. And as we learned yesterday, the scant few loans getting modified are being run through HAMP’s principal reduction program, which allows them to get cash incentives.

This is why I have begun to believe that on-the-ground, grassroots efforts to stop evictions and secure meaningful relief is now the best way – perhaps the only way – to progress. At Netroots Nation I was inspired by the work of my fellow panelist Malcolm Chu of Springfield No One Leaves, a foreclosure defense organizer who said that eviction represents the beginning of the process for justice, not the end. Malcolm mentioned on the panel several stories of successful principal reductions, more than what we heard from an array of housing counselors through the settlement.

There were more foreclosure defense activists at the conference. One of them was Nick Espinosa of Minneapolis, who works with the Occupy Homes Minnesota movement. His mother, Colleen McKee Espinosa, a registered nurse and single mother of three, faces a sheriff’s sale of her home tomorrow. She has been struggling with a foreclosure with Citibank for the last several years, on a home she has lived in since 1996. She actually has the money to pay all the back payments, but Citi won’t take it. Colleen plans to not move from her home if the sheriff’s sale goes through. Here’s a quote from her, via press release.

“I have decided that I’m not leaving my home until we get a good faith negotiation. I’m fighting to send the message to other people not to give up, because if you’re isolated you can’t fight these people,” said McKee Espinosa. “I’d tell the banks they better watch out because people are catching on to their game and a lot of people are going to fight back now.”

There are a couple petitions you can sign to help. But really I want to make the point that this is a far greater opportunity for relief and justice than anything coming out of the state or federal governments at this point. These foreclosure defense groups are getting organized, talking to one another about best practices, and stepping up their aggressiveness. And in this fashion, they can grow and succeed.

UPDATE: I’ve just been informed that Colleen McKee Espinosa won her fight. Hours before a scheduled foreclosure sale, Citibank canceled the auction and committed to a loan modification for Espinosa. This is what I was saying about where to place your hope. Great work by Occupy Homes Minnesota.