Mortgage modification nation: Gentlemen, start your engines

The mortgage modification movement is poised for a big jump off the starting blocks with the Friday announcement by JP Morgan Chase & Co. of plans to modify terms on $70 billion in home loans for as many as 400,000 borrowers, according to today's Associated Press article in the Los Angeles Times and a longer article in the Wall St. Journal.

Borrowers behind on their payments or about it be -- particularly those with option adjustable interest rate mortgages, a.k.a. options ARMs, that result in negative amortization -- could be moved into loans with lower rates or smaller principal amounts owed.

JP Morgan joins other lenders taking a similar course, including Bank of America and Wachovia.

Reports the Journal:

"The move ... suggests that banks are realizing they can improve the value of their loan portfolios through mass modifications rather than foreclosures, which tend to produce larger losses. Until now, mortgage holders have been reluctant to renegotiate loans or have been doing so one-by-one, a time-consuming process. The bundling of loans into securities that are then sold to investors further complicates matters."

Foreclosures will be put on hold for 90 days while the modification process is put into effect. That's a long road ahead.

--Lauren Beale

Thoughts? Comments?

Photo: JP Morgan Chase headquarters in New York. Credit: Mark Lennihan / Associated Press

Comments

[esp4p3]

I think many of these people that get the loan modifications will end up walking away from their house eventually. Why? They will realize that the acceleration of home price declines around them makes continuing to make their own payments pointless. Why pay a mortgage on a place that is worth 50-100k less than your loan? Then they will stop making payments even though they can still afford it.

[E]

Equity Sharing Provision = Long term suckers bet.

[ProtectMeFromAmerica'sServicingCompany]

I am so sick of people pointing the finger as we all sink in an economy where no one seems to have the right answers to make it work, but we all seem to know the cause – subprime mortgages. I say to all of you to remember some basic life lessons.

Remember this quote…”And then they came for me.” Also, remember when HIV/AIDS was probably controllable but all we heard in the early days was, “Deserve them (gay men) right for their lifestyle.” Now, HIV affects us all around the world.
What if we had attacked the issue of HIV at ground zero? What if we helped our brothers and fellow humans during Hitler’s reign instead of turning out backs? Problems need to be addressed head on.

We should stop listening to the lies of the mortgage industry and creating hopeless organizations that do nothing. People have been asking for help for the last two years and the mortgage industry simply chose not to listen. There was money to be made in foreclosures at the cost of misplaced families.

Another lesson we got early is that, “No man is an Island.” Investor’s of subprime mortgages should realize they can continue to makes profits by modifying loans which will stabilize the world economy and keep families intact. I pray for the children who are impacted.
For those still on a high horse, do what is right now, or suffer the consequences later. So what if you did all the right things help those who may not have? The consequences will be unemployed people, higher food prices, higher transportation costs, and higher prices in all that we do. You will pay! So, I say, swallow your pride.

The economic reality is what it is and it needs fixing. Do we spend the next few months discussing fixing the dyke or do we plug it now. I am a simple man with simple solutions for larger problems. “Ain’t nothin’ goin’ to bake until you turn up the heat.

It seems that is the only message that investors and servicing companies are going to get. I say ground them and take away their cell phones until they get the lesson. Oh, and a spanking may not be bad as we teach that greed is a sin.

[Ali Rizvi]

I don’t think it’s fair that some lenders are helping their clients & some are bluntly just saying no. The Govt. needs to set guidelines & regulate modifications for EVERYONE & all lenders must comply.

[matthew]

So people who took out NINJA (No Income, No Job or Assets) loans get rewarded with long-term rate reductions to 2% while those of us who were careful with our finances continue to pay market interest rates. We're basically rewarding people who either made risky bets on housing prices continuing to soar into the stratosphere, people who didn't bother to read their mortgage contracts, and banks who failed to exercise any modicum of underwriting standards, while leaving the rest of the folks out to dry who played the game fairly.

[kenb]

I hope the taxpayer is being protected in all this. Why use taxpayer money to bailout homeowners that find themselves "underwater" on their mortgage? Many of these homeowners may have refinanced their homes and taken out tens of thousands of dollars in cash to take vacations and buy toys to support their "me first" lifestyle.

Now the government wants taxpayers to absorb the loss in value of homeowners who engaged in such irresponsible behavior. Doesn't make much sense.

[Miguel A. Gonzalez]

Viewing our economic crisis and the banks urge to sell off their distress asset and with housing values decreasing. This loan mods are temporally aid for the banks not the people. This will help banks keep their credit rating above water while they try to sell their asset and jeopardized some else's(like government+taxpayers) portfolio or investment who will be handling all this distress notes. on top of that their just giving the client a low interest rate for 2 years than after it will adjust back up again and placing clients in same situation we are seen, by then banks will have their distress asset sold to new investor(government + taxpayers money). and the same home owner who is in default because of hardship problems will be forced to sell in the future or have house foreclose on because client cant afford new payments and becoming governments issue know because they are holding this notes. The government should of paid down peoples mortgage not aid the banks its our tax payer money anyways this would of help achieve more cash flow into families and increase consumer spending , but no in other hand we are injecting more of tax payers money in banks , and people are still in debt. and banks are not lending. consumer spending is decreasing U.S citizens losing their jobs creating more unemployment and having families living off their last reserves. Tell me im wrong. Whos more important Families or Banks who does the government want to help. US or Them.

[Jody Gass]

What about the people who pay their bills and pay them on time? Is the bank/banks going to reward us? Sure would be nice to be allowed to get to skip a payment or two over the course of a loan!

[Pete]

Great plan - I have friends who defaulted on their first subprime, got mom and dad to bail them out by putting their house up as collatoral on the new mortage, and are now [intentionally] defaulting on the new mortgage to get better terms. They're bragging about it AND encourgaging others to default on their loans. This is a wildly STUPID plan.

[Nelcisco]

Thank you Lauren for reporting that.

[anonymouse]

Are the people who are paying there mortgages as they should being rewarded equally? Let me get this straight..I can be coerced into making a bad decision on mortgage selection and be forgiven with payments I can afford at the end of the day, at the cost of taxes to the masses...nice !!!

[Suzi]

This change will not keep the home prices from falling. And as the prices fall further more and more home owners will end up foreclosing on their homes.

Sources: http://www.homepricetrend.com

[Leric Goodman]

This is a Press Release rather than substantial relief.

This ballyhoo only applies to the loans Morgan-Chase-Wamu held intact inhouse rather than securitizing them, which is a very small percentage of the problem loans they made.

[mike thompson]

great, im glad i went to mexico last month instead of paying my mortgage. now that im behind i can get a reduced principle and a better intrest rate. It just doesn't pay to be responsible.

[Mark Schindler]

Sounds a bit like the Obama plan.
A loosening of credit will also allow those in danger of foreclosure to pay other bills.

[Jimmy]

Looks like it's time to stop paying my mortgage!

[Mark]

Modifying mortgages for those who bought more than they could afford is the same as penalizing those who live within their means. What a joke.

[markedmiston]

My wife and I are in a house with an upsidedown value. we have been paying the bills. But what would help us would be able to get a better refinanced mortgage rate in the 4 point range. 15 year terms We could take it from there. It seems that people not paying the mortgage are the ones getting looked at for the help.Help people before they fail sounds like better preventive medicine.

[angry_homeowner]

I think this is a great idea, but how about some help for the responsible people that had their home value fall more than a 100K. The banks are rewarding all the idiots who bought more house than they could afford while punishing us responsible people still paying for our mortgages. I bought my home for 309K and there is one in foreclosure right downt he road that is like mine for 189K. All of the lenders should modify the principle balance on existing loans to the current market value for setting up this ridiculous false economy that was called the "housing bubble" . They allowed this to happen by lending to less-than-creditworthy borrowers, they should use their profits to correct it.

My 2 cents from an angry homeowner in Tampa, FL.

[Ohio]

So we bail the banks out so they can bail stupid people out. So if i make may payment I do not get help if I do not make my payment I get help? Does anyone else see anything wrong with this picture? -Ohio

[Jim Campbell]

The economy is bad and may get worse. The stock markets are bad, the home mortgage and other credit systems are broken, the jobs situation could possibly continue to deteriorate. Who knows what else looms? www.LikeSoup.com

[Charles]

Have paid loans faithfully through thick and thin of last few years. My Bank of America says stop paying to receive any help from them. What a bunch of shysters! If this continues expect a lot of honest people to go bad. We also want or share as we are paying for everyone else.

[Dan]

WelKome, Komrades, to the United States of Amerika.

If you work hard and pay a lot of taxes, at least you take comfort in knowing that you're helping to pay for Alberto Ramirez's home.

Who is Alberto Ramirez? He's a $14K/yr strawberry picker who bought a $720K home.

http://drhousingbubble.blogspot.com/2007/05/yearly-income-14000-purchase-of-house.html

If you're not calling & writing every senator & representative, expressing your outrage, you have no right to complain about Alberto, his large home, his Ford Explorer, and his 52" color LCD HDTV.

[Darryl]

Again the government and banks have no clue as to what's caused a big part of this economic downturn. Middle class jobs and salaries have been cut and suppressed. Nobody is addressing the problem of those that had good loans (competitave interest rates) but they lost their jobs and can no longer afford their homes. It would be fine if there were other middle class jobs available, buy when a middle class job is lost, in many cases, the only replacement job is a lower paying job. The government and banks need to help these people.

[Al Gullo]

I think I'll stop paying my mortgage, wait for the foreclosure notice and ask the government to renegotiate the terms and amount of my debt. It sounds like a solid financial plan. I'm past 65, on a fixed income and do not have hundreds of thousands of dollars in the bank. I just look at my income and pay my bills before I go and purchase a new toy. For all these years I have been a responsible lborrower, never defaulting on a credit obligation. Never making a late payment. And this is my reward. My tax dollars bailing out the deadbeats so the corporations can continue to make a profit. What ever happened to rewarding good behavior?