J.P. Morgan Chase Considers Expanding Home Loan Modifications
Now, in an even bigger way, one of the largest mortgage lenders in the U.S. has gotten even more aggressive on attempting to halt the rising tide of foreclosed homes on their books. According to the Wall Street Journal, lender J.P. Morgan Chase – one of the largest banks by retail presence in Chicago and in many other markets nationwide – is expanding its loan modification program for distressed homeowners. It now plans to modify loans for buyers whose loans have been sold to other investors, and are no longer owned by the lender itself.
It's important to note that the banks are not writing off losses here, but instead, they are attempting to reduce applicable interest rates – sometimes, drastically – and lengthening the term of many delinquent mortgages. The end result is lower monthly mortgage payments and the increased likelihood that many homeowners will end up staying in their homes, as opposed to losing them to foreclosure.
Renewed efforts by Chase Bank come amidst efforts by the U.S. Senate to allow bankruptcy judges to set new repayment terms for delinquent mortgagors. Big bank Citigroup Inc. supports the new plan, while others are balking.When Bank of America proposed a plan to modify the loans of many holders of Countrywide Home Loan mortgages, after buying the company last year, their investors protested over the $8.4 Billion loan modification program.
J.P. Morgan Chase services two types of mortgage loans – those they keep in their own portfolio, and those they sold to investors. These sold, or 'securitized' mortgages, make up about 75 percent of the lender's $1.5 Trillion in mortgages it services. As expected, some Chase stockholders are not in agreement with the new modification program, fearing reduced financial returns. The opponents of the modifications are arguing that they should not pay for the poor decisions in loan underwriting by someone else.
But the bank is moving forward with its loan modification plans. It has delayed foreclosure filings on more than $22 Billion of mortgages it owns already, and has begun to examine mortgage modification on these loans, according to the Wall Street Journal. More than 80,000 homeowners are impacted here.
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