Five financial institutions that are part of the settlement provided $10.6 billion in consumer relief from March 1 to June 30, with $8.7 billion in the form of short sales in which customers sell their homes for less than the mortgage's value.

The report is the first update on how the five banks are doing in meeting the terms of the March settlement with federal agencies and state attorneys general. The settlement was meant to resolve allegations that they mishandled foreclosures, and the banks have three years to meet the requirements or face penalties.

Unlike its competitors, Bank of America did not modify any first-lien mortgages to reduce the amount of money the borrower owes, and it also did not complete any refinancings by June 30, according to the first report by Joseph Smith, the official monitoring the agreement.

Bank of America did allow $4.8 billion of short sales, the most of the five banks.

Bank of America spokesman Dan Frahm called the report an "early snapshot" and said the bank has made significant progress since June 30. The second-largest U.S. bank expects to meet all of its required targets in the first year, he said.

The bank has completed more short sales because they did not require new processes to be rolled out, he said.

The settlement requires banks to provide around $20 billion of consumer relief by reducing loan balances for struggling borrowers and refinancing loans for customers whose homes are worth less than the value of their mortgages.

JPMorgan Chase & Co completed $367 million in first lien modifications in which borrowers had their loan balances reduced, about half of all modifications.

Counting all types of relief, Bank of America provided $4.9 billion in assistance in the four-month period, followed by JPMorgan ($3 billion), Wells Fargo & Co ($1 billion), Citigroup Inc ($873.4 million) and Ally Financial Inc ($755.8 million.)

More than 137,000 customers have received an average of nearly $77,000 in relief under the agreement so far, according to the report.

While the banks have provided more than $10 billion in assistance, they are not necessarily halfway to meeting their obligations, since the settlement only provides for partial credit for certain kinds of relief. The banks only receive credit for $0.45 of every dollar of a writedown through a short sale, for example.

In an interview, Smith, the former North Carolina state banking commissioner, said it was too early to say whether the banks will meet their targets in the required three years. "My job is to make sure they do," he said.

Counting methodology helped banks tally more short sales in the report, he noted. Short sales can be recorded as soon as they are booked, while loan modifications are not tallied until borrowers have made about three payments.

Banks are required to meet at least 60 percent of their obligations through modifying first and second loans, so short sales are not expected to eventually be the bulk of the consumer relief.

The settlement required banks to reduce the amount of principal owed by borrowers when modifying loans, going beyond simply reducing interest rates or extending the time borrowers have to pay off their obligations. Combined, the banks wiped away $1.3 billion in principal, counting all types of modifications, including some in the works before March 1.

The report "indicates that the banks in general are heading in the right direction," Housing and Urban Development Secretary Shaun Donovan, who helped negotiate the settlement, said on a conference call with reporters.

If a lender does not meet its required relief within three years, it will be required to pay a penalty of no less than 125 percent of its unmet commitment, the report said.

The numbers published Wednesday were self-reported by the banks and have not yet been verified by the monitor's office.

'CAUTIOUSLY HOPEFUL'

The agreement required Bank of America, which bought major subprime lender Countrywide Financial in 2008, to provide the most consumer assistance. The bank so far has provided no relief through refinancings, according to the report. It has completed $54.2 million in second-mortgage modifications, which are home equity loans.

Bank of America, however, has offered about $2 billion in first-lien mortgage modification trial offers and has $803 million in trial offers in process.

Bank of America also appeared to bear the brunt of new complaints about servicing practices. It was the target of nearly half of new complaints from consumers and more than half the complaints from housing counselors tallied by the monitor.

As of August 21, the bank has increased its total consumer relief completed to about $8 billion from about $4.9 billion at the end of June, bank spokesman Frahm said. The bank has now completed a total of $596 million in first-lien modifications, $1.7 billion in second-lien modifications, $5.8 billion in short sales and $227 million in refinancings, he said.

The bank launched its refinancing program in August by initially making offers to 3,000 customers, Frahm said. About 1,000 of those refinancings have been completed.

Banks are taking different approaches in how they implement the settlement. For example, J.P. Morgan in some cases is automatically reducing interest rates for customers eligible for refinancings. At Bank of America, customers need to verify income, but "it's definitely a streamlined process," Frahm said.

Ira Rheinhold, who heads the National Association of Consumer Advocates, said he would expect to see banks providing more modifications that included principal reductions under the settlement, but was "cautiously hopeful" that the trial changes described in the report would soon convert to permanent modifications. He also said he did not yet see any noticeable improvement from servicers from the new standards.

Smith was not required to make Wednesday's report, but said he wanted to provide the public with an update on the settlement. The first report mandated under the agreement is due in the second quarter of next year.

(Reporting by Rick Rothacker in Charlotte, N.C., and Aruna Viswanatha in Washington; Editing by Gerald E. McCormick, Bernadette Baum, Matthew Lewis and Leslie Gevirtz)

By Rick Rothacker and Aruna Viswanatha