Banks Aim To Help Struggling Homeowners

JPMorgan, Bank Of America Modifying Some Mortgages To Stave Off Foreclosures

(CBS/AP)  JPMorgan Chase & Co. on Friday became the latest major bank to beef up its mortgage modification efforts as the government also considers a plan to help homeowners avoid foreclosure.

JPMorgan's expanded program aims to help avoid foreclosures on an estimated $70 billion in loans, which could help as many as 400,000 customers. The New York-based banking giant has already modified about $40 billion in mortgages, helping 250,000 customers since early 2007.

JPMorgan will not put any loans into foreclosure as it implements the expanded program over the next 90 days.

"Lenders lose between $40,000 and $50,000 on every single foreclosure that they do," Francis Creighton of the Mortgage Bankers Association told CBS News. "Lenders are not set up to be property managers. We don't want to own these properties."

The $70 billion estimate is projected over a two-year period, but could be larger and last more than two years - as long as the company sees a need among troubled borrowers, said Charlie Scharf, JPMorgan's chief executive of retail financial services.

"We think it's the right thing to help as many people who want to stay in their homes," Scharf said in an interview.

Scharf said the modifications at JPMorgan will range from reducing rates to extending terms to completely replacing products. Modification options will be given to customers based on their current product and needs, Scharf added.

The program will also be offered to customers with loans held by Washington Mutual Inc. and EMC. JPMorgan acquired Washington Mutual last month after the bank became the largest in the nation's history to fail. EMC was a mortgage unit of Bear Stearns Cos., which JPMorgan acquired in February.

JPMorgan shares jumped $3.63, or 9.7 percent, to $41.25 on Friday.

With defaults mounting, lenders like JPMorgan and Bank of America Corp. have an incentive to get more aggressive about modifications, particularly because both lenders want to protect their brand image.

"These are very big, large retail banks," said Dain Ehring, chief executive of Dorado Corp., a San Mateo, Calif.-based mortgage technology company. "There's a vested interest in keeping their customers."

Bank of America has said that starting Dec. 1, it will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion, legal settlement reached with state officials in early October.

Meanwhile, the Bush administration is expected to soon announce a new plan to help about 3 million homeowners avoid foreclosure, though administration officials say several different ideas are on the table, and that no announcement is imminent.

The plan would be the most aggressive effort yet to limit damage from the U.S. housing recession.

The uptick in loan modification efforts was kicked off in August by the Federal Deposit Insurance Corp., which took over failed lender IndyMac Bancorp in July.

More than 4 million American homeowners with a mortgage were at least one payment behind on their loans at the end of June, and 500,000 had started the foreclosure process, according to the most recent data from the Mortgage Bankers Association.

Nationwide, almost one out of every five homeowners with a mortgage owes more to their lender than their properties are worth, according to a report released Friday by First American CoreLogic.

Credit counselor Natalie Lohrenz advises struggling homeowners to contact their lenders even before they miss a payment, reports CBS News correspondent Ben Tracy.

"You may have time to work with the lender to come up with a better payment plan that works better with your budget," said Lohrenz.

JPMorgan's enhanced program will include the opening of 24 regional counseling centers, the hiring of 300 additional loan counselors, new financing alternatives, reaching out to borrowers with pre-qualified modification terms and a new process to independently review each loan before it is moved into foreclosure.

Face-to-face meetings with customers and adding staff to help customers in their neighborhoods was a key part of the program, Scharf said, adding that JPMorgan worked with community groups and local organizations to draw up the plan.

One of the biggest stumbling blocks JPMorgan has found in trying to modify loans is actually getting in touch with customers, he added.

When JPMorgan acquired Washington Mutual and EMC, it also acquired portfolios of mortgages that included option adjustable-rate mortgages. Also known as pay-option, or pick-a-payment mortgages, those loans allow customers to choose from multiple payment options, including paying less than the interest due, which in turn increases the balance of the loans.

JPMorgan, which did not originate option ARMs, said modifications for those loans would eliminate the option to pay less than the outstanding interest.

[tejasdemo]

Awwwwwwww...that sure is sweet of them, aint it ?

[amazedd]

Thanx!

[kiwi_chick]

It appears that most of the house foreclosures came when the 2/28''s came due. Now, a thinking person (bean counter who holds the note) would surmise that it would probably be best to adjust the mortgage rate to one that the homeowner could afford, BEFORE bankruptcy or foreclosure became the reality. How many bean counters do you think took that avenue? Anybody care to hazard a guess?

[kiwi_chick]

You talking heads need to get a grip and understand what led to the downfall of these companies. It was NOT solely the sub-prime lending mess. Do some research. The sub-prime loan fiasco involved not just the lower middle class trying to obtain mortgages that were out of their reach, it also involved the upper middle class doing the same thing. The motif in the sub prime loans were the people who obtained loans for homeowners, knowing full well that they would NEVER qualify for a traditional mortgage. Now, the sub-prime lenders have collected their rather hefty fees and disappeared. I rather think that these greedy people are of the republican persuasion because they would have received HUGE tax savings on the fees they collected. HUGE. At the peak of the sub-prime mess, 2006, there was approximately 13.5% of delinquencies of 60 days or more late, compared with 5% in 2001.. Sub-primes have been around for a long long time. Ask yourself what the hell happened in between? It''s pretty obvious and I''m not going to get into the whole shebang here, but look at the Bush policies. Look at the no-bid contracts in Iraq. Look at the bills for no service in Iraq. Look at the golden handshakes paid out over and over again. It is hardly just a case of the lower middle class pursuing what they have always been told is theirs to pursue. A big part of it is the Republican tenet "I got mine, now I''m gonna get yours."

[credibility2]

Any bailout for mortgage holders will only include those who allowed themselves to be either duped into a subprime ARM mortgage, or who weren''t entitled to a mortgage in the first place. The bailout will not help any mortgage holders who have been paying on time, did the right thing, and then had financial failings, like losing a job. The banks don''t really care about the majority of people who didn''t get the subprime high ARM mortgages and who might only now find themselves in a difficult situation. The aim of the bailout is just to help the numeric minority of mortgages, not the numeric majority of mortgages.

[xnorton]

I''ve read so many articles on this subject, and all of them have posts from other readers griping about irresponsible borrowers, how they deserve it, why should we help, blah, blah, blah. I''m a financially responsible person who purchased an affordable house with a mortgage payment inside my income range four years ago. Since then my job of sixteen years was lost when this lousy economy put the company I worked for out of business. Yeah, we''re struggling and getting behind. We could use some help so my family isn''t dumped out onto the street. Since our govornment is partly responsible for the state of the economy and the lack of jobs I do believe that they should do something. If you''re doing ok, good for you. But the next time you read about the hardships of others please try to simply feel lucky and thankful and not post whiny comments because maybe next time YOU''LL be the one who needs help.

[dbor77]

Yeah Right, hahaha lmao...your joking right? They have already helped them enough wouldn''t you say? They took a house worth 50g''s and jacked the price up to 150g''s. Gave a mortgage to someone they knew couldn''t afford it but got them "locked in" to the deal. Now they want to help the homeowner, how? LOL

[ricklf1]

Why did govermnent tinker with a free market system in the first place? It would be bad at first, if the whole commercial and residential real estate market collapsed, but when the dust settled the country could start over again and we would be stronger.

Bail-outs are like giving pain-killer for an abcessed tooth. It feels better, however the problem is still there and festering!

[variant_530]

rharrin1 - You are the idiot if you think that a person who signed a loan doc should have any leeway what so ever to reduce their loan amount. What about those of us that work for a living AND pay what we owe. Do you think your beloved Obama will help us? Hell no, we are his bread and butter to take care of the deadbeats that bought beyond their means.

[hbevis]

nlada at 12:17 AM : Nov 02, 2008

I am retired and I pray that you find a way to survive this mess that we are in..

[variant_530]

Hey Jamie Dimon - The soloution here is not to reward/bail out people who lack the foresight to understand that they could never meet their financial obligation. I doubt they even read their loan docs.
The real soloution is to lower the interest rate for those that are making their payments and who didnt use their home as an ATM to 2% so they can buy up these deadbeats homes and rent them back to them. Reward the people who are honoring their obligation not the ones who are not!
I''ve read that there is also a plan to forgive these deadbeats credit card debt. Where does this end? When those who do pay their bills are broke and can no longer foot the bill to bail out the deadbeats?
What incentive are you providing here?

[walt1944-2009]

There is no trust in anything anymore! No one trusts the government (federal, state, and local), Corporate America, their employer, and especially banks.

Now banks are saying they are going to "help" out homeowners with their mortgages. I haven''t seen a corporate or financial institution yet that does something and not expect a return on it!

So, I would beware of anyone who says they want to help you; you can bet there will be "fine print" in it somewhere!!!

SIG HEIL, YOU CAN BET YOUR LIFE YOU CAN''T TRUST ANYONE NAMED BUSH!!!, BUSH!!!
sig heil, I''M NOT A BUSH, I JUST THINK LIKE ONE!!!, McBush!!!
sig heil, I''M NOT A BUSH EITHER, BUT I''M LEARNING!!!, Palin!!!

[wlmrtpatriot]

In this housing foreclosure debacle, I can''t bring myself to blame the "poor people". I blame a lot of people but not the poor people. Barney Frank and Herb Moses are top on the list in my opinion.

[u-r-right]

I''m going after my city and county to reduce my assessment for property tax. They last did assessments when real estate was at its peak in value. I don''t a any chance getting $415,900 out of my house these days. I would speculate the value has dropped at least $80k.

[frankistage]

I bought my home in ''93 and I took a hit, on paper at least, when prices dropped. Consequently, if they start reducing the amount due on the mortgages by 10/15%, I should get the same reduction.

[missingamerica]

Hey, bankers: Go after the oil companies and those people who were speculating in oil.

THEY are the ones who pushed so many of America''s former homeowners over the edge...

[fulghum2]

Aim to help struggling homeowners? Why aren''t the homeowners helping themselves?!? WE did, through having four children, and working. They need to do something called "WORK". Or do they have a bone in their arm!

[rhs648]

Banks should re-negotiate those ARM loans and lower interest rates on everyone... not just those in trouble BUT they should NOT reduce the balance due. These people thought the house was worth that so it must be. Being upside down isn''''t a problem... not being able to deal with the payments is.

It would be very unfair to reduce the balance due.. I hope that doesn''''t happen..

Posted by fhmullane

You are correct. It is unfair to expect people who are paying their mortgages to do so when other people get the amounts owed reduced. However, this is exactly what the Democrats may do after the elections. It would be in line with spreading socialism in the United States.

[FHMullane]

Banks should re-negotiate those ARM loans and lower interest rates on everyone... not just those in trouble BUT they should NOT reduce the balance due. These people thought the house was worth that so it must be. Being upside down isn''t a problem... not being able to deal with the payments is.

It would be very unfair to reduce the balance due.. I hope that doesn''t happen..

[credibility2]

Make a mistake. Live beyond your means. Get involved in risky shell game stunts without being intelligent enough to hire an attorney to interpret what''s really going on. Get in way over your head. No worry, don''t pay, someone will come and bail you out and make it all better so you can keep having something you weren''t entitled to have in the first place because you never really deserved it. Enter the befuddled moronic homeowner who is drowning in their own stupidity and greed. And to think the majority of homeowners with mortgages have done everything right and pay their bills on time. No one is bailing them out. Being stupid and doing the wrong thing is being rewarded.