by millionairemind » Sat Nov 01, 2008 10:17 am
November 1, 2008, 7.45 am (Singapore time)
JPMorgan halts foreclosures, modifies mortgages
NEW YORK - JPMorgan Chase & Co, the nation's largest bank and one of its biggest mortgage lenders, temporarily halted foreclosures on Friday and offered to renegotiate a swathe of mortgages.
The global credit crisis, which began with sub-prime mortgages, increasingly appears to be affecting a wider range of consumer loans and, according to a report published by First American CoreLogic on Friday, nearly one in five US mortgage borrowers now owes more on the loan than their home is worth.
JPMorgan has avoided the large writedowns and credit losses posted by rival banks because it has limited exposure to the riskier classes of mortgages, such as sub-prime loans.
But when the bank acquired failed savings and loan Washington Mutual in September, it inherited that bank's more toxic mortgages.
The expansion of the mortgage modification plan will target many of these mortgages, as well as prime mortgages held by JPMorgan that are also starting to show signs of deterioration.
'Prime mortgages, especially where there are pay-option ARMs involved, (are) becoming a broader issue,' said Charles Scharf, head of retail financial services at JPMorgan.
JPMorgan has about US$250 billion of prime mortgages and home equity loans, US$27 billion in sub-prime mortgages and about US$51 billion of 'option' adjustable-rate mortgages.
Other lenders have also had loan modification programs in place, including Washington Mutual and the former Countrywide Financial Corp, which was acquired in July by Bank of America Corp.
Earlier this month, Bank of America agreed with 11 state attorneys general to offer relief to nearly 400,000 Countrywide customers with troubled mortgages, resulting in an expected US$8.4 billion of interest rate and principal reductions.
Wells Fargo & Co and Citigroup, two other major mortgage lenders, did not immediately return requests for comment on whether they plan expanded loan modification programs.
As part of JPMorgan's effort, expected to last about 90 days, the bank will hire loan counsellors and introduce alternatives to existing mortgage agreements. During this period, the bank will not put any additional loans into foreclosure.
JPMorgan expects to renegotiate US$70 billion of mortgages over two years, in addition to US$40 billion held by 250,000 borrowers since early last year.
The program covers borrowers who live in their homes and who 'show a willingness to pay', the bank said.
Mr Scharf said JPMorgan will also work with homeowners who are current on payments, given that modification programs started once customers have missed payments are 'very often too late to help'.
Most of the troubled mortgages are in regions where house prices have fallen and unemployment is rising, he said, but the program will be open to all customers.
'We are doing this because we think it's the right thing to do,' Mr Scharf added. -- REUTERS
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch
Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.