J.P. Morgan’s Loan Modification Plan

J.P. Morgan Chase & Co. on October 31st, 2008 announced a plan to modify $70 billion in mortgages which translates to helping as many as 400,000 homeowners nationwide. J.P. Morgan is following right behind another big bank, Bank of America which disclosed earlier in the month of their loan modification plan. Their plan consisted of working with as many as 397,000 homeowners nationwide.

The loan modification is becoming top priority for banks to implement. The implementation is coming to fruition as there is top down pressure from the government, and institutional investors to save homeowners. Conditions are starting to favor the distressed homeowner. In particular, with J.P. Morgan, homeowners with options ARMs. With an option ARM homeowners are given the option to choose amongst four payments. Typically the options were the minimum payment, interest only payment, 30 year payment and the 15 year payment. Often homeowners with the option ARM made the minimum payment with the anticipation of refinancing or selling their home in the future. Today most of these houses are overleveraged.

Under the plan, the option ARM will be replaced with fixed-rate loans that are more stable for borrowers and seen as far less likely to default. In addition to the loan modifications J.P. Morgan will delay foreclosure for the borrowers that are qualified under their plan.

J.P. Morgan’s plan is a move in the right direction. At LoanModificationstudio.com we believe that after the election, there will be more lenders to follow Bank of America and J.P. Morgan’s lead. The loan modification will soon reach an inflection point where it will be the favored ubiquitous choice for banks.

As written in the Wall Street Journal, 'John Taylor, CEO of the National Community Reinvestment Coalition, called it "a gutsy move on their part," adding: "They are bending over backward to try to reach out to these people."' And as quoted by my associate, “When the banks start bending there will be mending.” – Johnathan Stanely, Executive Director at LoanModificationStudio.com.

By Kevin Levonas