Short sale sign image via Shutterstock.

Banks are relying heavily on short sales to meet their obligations under the terms of a $25 billion settlement with the nation’s five largest mortgage servicers over so-called “robo-signing” practices. That’s according to a progress report from the settlement’s monitor detailing the first four months of implementation.

The terms of the settlement require the five servicers — Bank of America, Citi, JPMorgan Chase, Wells Fargo and Ally Financial — to provide about $17 billion in homeowner relief, including short sales, loan modifications and principal reductions; and $3 billion to help underwater borrowers refinance.

As a group, the five banks reported providing a total of 137,846 borrowers with $10.56 billion in relief during the four months through June — an average of about $76,615 per borrower.

The vast majority of that relief was in the form of short sales, in which the servicer agreed to allow borrowers to sell their homes for less than the amount owed on the mortgage, or deeds in lieu of foreclosure, in which borrowers hand over all interest in the property to the lender to avoid foreclosure proceedings. Servicers waive any unpaid principal balance under either option.

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A total of 74,614 borrowers received about $8.67 billion in relief, an average of $116,200 per borrower, in the form of a short sale or deed in lieu of foreclosure.

Because the settlement allows loan servicers to receive credit when they approve sales that include forgiveness of a portion of underwater homeowners’ debt, some industry observers predicted the settlement would boost the number of short sales offered by banks.