Mortgage Insights Blog

JPMorgan Chase & Co. on Friday announced a loan modification plan that will help as many as 400,000 customers avoid foreclosure. Having already modified about $40 billion in loans, Chase will not put any more loans into foreclosure as it expands its program over the next 90 days.

Following its takeover of both Bear Stearns and Washington Mutual, JPMorgan's inventory of distressed mortgages has risen dramatically in the last 8 months. The bank's modification efforts, which mirror Bank of America’s plan, are focused largely on subprime loans and option ARMs. The acquisition of WaMu saddled Chase with billions of these loans - $16 and $54 billion, respectively.

JPMorgan plans to identify borrowers with both the willingness and ability to pay, lower interest rates and, in some cases, forgive loan principal. For Option ARMs, borrowers may have the opportunity to replace their negatively amortizing mortgage with a safer, fixed rate 30-year loan.

Look out for more of these plans coming from the remaining big American banks, particularly Wells Fargo (WFC): Its recent acquisition of Wachovia (WB) included the Charlotte-based bank’s massive option ARM portfolio.

Both JPMorgan and Bank of America's new programs are, however, evidence of the government's -- and banks’ -- inclination to deal with problems that already exist, rather than ones that are on the horizon. The plan is certainly a step in the right direction. It's nice to see that some of the recent $25 billion injection from the government will be used to help the taxpayers that will eventually be burdened with footing the bill.

If you have a mortgage that has recently gone adjustable or if you would like to see what alternatives may be available, you can visit Chase’s website for further details.