Chase Moves to Freeze Foreclosures
JPMorgan Chase & Co. (Chase) — the same company that up until earlier this year encouraged it’s own loan officers to fudge facts and figures on loan applications — announced today a voluntary loan modification program it says will help up to 400,000 homeowners over the next two years. Today’s announcement applies only to owner-occupied properties with mortgages owned by Chase, Washington Mutual (which Chase acquired a few weeks ago), or EMC (the loan-servicing company acquired in the takeover of Bear Stearns earlier this year).
Within the next 90 days, Chase, which just a few weeks ago accepted more than $20 Billion as a cash infusion from the U.S. government, will open regional counseling centers, hire additional loan counselors, introduce financing alternatives, reach out to borrowers to offer pre-qualified modifications, and commence a new process to independently review each of its loans.
Since early 2007, Chase claims to have helped about 250,000 families — with $40 billion in loans — avoid foreclosure, primarily by modifying their loans or payments.
Specifically, for Chase, WaMu and EMC customers, today’s announcement means Chase will:
- Systematically review its entire mortgage portfolio to determine which homeowners are most likely to require help — and try to provide it before they are unable to make payments.
- Proactively reach out to homeowners to offer pre-qualified modifications such as interest-rate reductions and/or principal forbearance. The pre-qualified offers will streamline the modification process and help homeowners understand that Chase is offering a specific option to make their monthly payment more affordable.
- Establish nearly 25 regional counseling centers to provide face-to-face help in areas with high delinquency rates, building on the success of one- and two-day Hope Now reach-out days.
- Add 300 more loan counselors — bringing the company’s combined total to more than 2,500 — so delinquent homeowners can work with the same counselor throughout the process, improving follow-through and success rates.
- Create a separate and independent review process within the company to examine each mortgage before it is sent into the foreclosure process (in order to validate that each homeowner was offered appropriate modifications). In order to pull this off, Chase will hire 150 dedicated staffers.
- Not add any more Chase-owned loans into its foreclosure process while enhancements are being implemented.
- Disclose and explain in plain and simple terms the refinancing or modification alternatives for each kind of loan. Chase also will use in-language communications, including local publications, to more effectively reach homeowners.
- Expand the range of financing alternatives offered to modify pay-option adjustable rate mortgages, including 30-year, fixed-rate loans with affordable payments, principal deferral and interest-only payments for 10 years. All the alternatives eliminate negative amortization.
- Offer a substantial discount on — or donate 500 homes — to community groups or through non-profit or government programs designed to stabilize communities.
- Use more flexible eligibility criteria on origination dates, loan-to-value ratios, rate floors and step-up features.
More than 765,000 homeowners received foreclosure notices during the 3rd quarter of 2008, the most since records began in January 2005, according RealtyTrac.
When you include Countrywide’s mandatory loss mitigation efforts, today’s announcement spells possible relief for some 800,000 Americans facing imminent foreclosure.