I saw an article the other day about a couple who had gotten a letter from JPMorgan Chase informing them their mortgage interest rate was going to be cut from the current 6.5% to just 2.8% for the next 5 years. After that, their interest rate would be adjusted to a fixed rate of 3.9% for the remaining term of their loan. They were delighted to find this would cut their payments by more than $220 a month.
It couldn’t have come at a better time
It turned out this couple was just one of many who had received similar letters from Chase. This couple said it came at a great time as they were 20 months behind on their payments. They reported they had asked Chase to reduce their payments, but since they didn’t have much income, they were unable to get their mortgage modified.
Like winning the lottery
For this couple, the news from Chase was like winning the lottery. This came as a result of the settlement for $25 billion that had been negotiated between the federal government and attorneys general and the nation’s five largest banks. Chase itself had promised $4.2 billion in mortgage relief to help tens of thousands of homeowners by reducing either their interest rate or their principal or both.
Under the settlement
The five banks are trying to move quickly because they get more credit for modifications to mortgages that are finalized in the first year. In fact, Chase already had put together a group of people to go through mortgages and find candidates whose mortgages could be modified by the time the deal was approved. One of the stipulations of the settlement was that Chase had to hold the borrowers’ loans directly and they could not be divided up among investors or involve either Freddie Mac or Freddie Mae. Most of the homeowners have to be underwater (owing far more than the homes were worth) or delinquent in their loans.
Only half responded
Chase said that it had mailed letters to borrowers who fit the bill asking them to call to talk about a modification of their loan. However, having customers reply turned out to be tougher than the bank thought as only about 50% of the customers responded.
The process has been streamlined
Chase wants to get more of its mortgages modified quicker. So it has simplified the process and now modifies the terms of the loans and then sends a letter to customers describing their revised payment plans. The borrowers see their new interest rates or the amount their balances have been reduced and their new payments. They just need to sign the letter to approve the new terms and mail it back to Chase.
A win-win proposition
This is a win–win proposition for both Chase and its customers. It’s good for the bank because it’s changing its own mortgages, so it doesn’t have to confirm the borrower’s income, employment history and assets. Since it’s making payments easier to afford, it’s lowering the chances its borrowers will default. And, of course, it’s a win for Chase customers because they end up with a better interest rate and a reduced balance.
3,086 mortgages modified
Between March 1 and the end of June, Chase modified 3,086 mortgages. It has also proposed modifications to 11,500 more borrowers, but those modifications have not yet been completed.
Have you received a letter?
If Chase holds your mortgage, you too may have “won the lottery” like the couple described earlier in this article. If you did receive a modification letter, be sure to sign it and mail it back to Chase. If you haven’t received a letter, you should contact Chase to see if you might be eligible.
Numerous options will be available
JPMorgan Chase seems to be covering all home borrowers’ bases with its recent changes. According to the financial institution’s website, several different programs will fall under its latest loan modification efforts.
Chase Modification Program (CHAMP)
Through Chase’s baseline loan modification program, homebuyers with mortgages not owned or backed by a government-based program can qualify for reduced interest rates under a number of circumstances. Homes in good repair, investment properties and small-scale multiple family dwellings are among the ones potentially eligible for interest rate cuts. Borrowers experiencing financial hardships are also receiving fair consideration for payment relief.
Federal Housing Administration (FHA)
While homes insured by the Federal Housing Administration aren’t included in Chase’s original loan modification program, they haven’t been left out of the mix altogether. As is the case with the financial service provider’s CHAMP agenda, homes in livable condition and homeowners struggling due to recent hardships are being considered for eligibility under the company’s FHA adjustments.
Though non-owner-occupied properties may qualify via the CHAMP program, this isn’t the case with those under Federal Housing Administration loans. FHA mortgage loans being considered for modifications must also date back a year or more from the program’s launch.
United States Department of Agriculture (USDA) / Rural Housing Services (RHS)
Borrowers under the provisions of USDA and RHS loans currently experiencing financial hardships can potentially qualify for modifications as well. Homeowners occupying these residences on a full-time basis with no intentions of selling in the foreseeable future may be eligible for reduced interest rates providing the properties in question have been adequately maintained.
United States Department of Veterans Affairs (VA)
Members of the nation’s military likewise stand to see relief through Chase’s latest loan revamps. Those currently facing financial difficulties may qualify so long as their properties are in acceptable condition. In order to qualify for interest rate relief in this category, borrowers must have made at least 12 full payments on their homes since their loans were initially acquired.
Mortgage Modification for Second Mortgages
Though JPMorgan Chase’s other loan modification programs apply to first liens only, this one is geared toward second liens. Those taking out second mortgages within nine months of the program’s initiation and struggling to make monthly payments may qualify for lower interest rates if their homes are currently in livable condition.
Other Investor Modifications
In addition to these loan modification programs, Chase is extending a list of additional options to the nation’s homeowners. Prerequisites for these alternatives vary greatly, but they’re designed to provide relief for many not covered by the company’s other plans.
Additional Debt Relief Options for Homeowners
JPMorgan Chase’s mortgage modification programs have been put into place for borrowers who want and need to stay in their home but are struggling financially due to hardships, like job loss, unexpected illness or loss of a loved one. Some, though, simply don’t have the means to remain in their homes. For those, Chase is also making a wide range of options available.
A short sale entails selling a home for less than the amount owed on it. Buyers sometimes find they can no longer make their mortgage payments, but the property’s value has dropped below the amount still owed. In such case, a borrower would ask the lender for permission to sell the property at its current market value.
Before carrying out a short sale, a borrower must file an application for loss mitigation detailing current monthly household income and expenses. Proofs of income and monthly bills as well as bank statements and an affidavit of hardship will have to be submitted along with the application.
Though lenders get back less than the original loan amount with a short sale, some agree to consider the balance paid in full once the sale has been completed. Others pass a deficiency judgment on borrowers afterward, meaning the borrower is responsible for making up at least part of the balance. In many cases, former homeowners are able to salvage their credit scores to a degree by taking advantage of the short sale option.
Deed in Lieu
In the case of a deed in lieu of foreclosure, borrowers may transfer the title of a property from themselves to their mortgage holder. In turn, the homeowners are absolved from responsibility for monthly mortgage payments. Some lenders require borrowers to attempt to sell their properties before offering the deed-in-lieu opportunity.
As is the case with a short sale, borrowers must prove their eligibility for a deed-in-lieu. This involves providing proof of income and expenses, copies of latest tax returns, recent bank statements and a hardship affidavit. If deemed eligible for a deed in lieu, borrowers are asked to sign a deed reverting ownership back to the lender and a separate affidavit stating they’re doing so of their own volition.
Lenders ultimately resell a property following a deed-in-lieu agreement. Should the home in question sell for less than the original loan amount, the lender has the right to pass a deficiency judgment on the borrower. Most choose not to, but those who do will expect the former deed holder to pay the difference.
Most mortgage lenders allow borrowers a grace period before foreclosing on a property or taking other types of further action. Those who fall behind on payments but find themselves financially capable of catching up before the end of this extension may be allowed a reinstatement. This allows them to retain ownership of the home and essentially pick up where they left off before experiencing hardship.
In order to be granted reinstatement, borrowers must be able to cover all past-due mortgage payments and late fees as well as any other applicable charges in a single lump sum. Extra charges outside standard payments, interest and late fees vary by lender but can include attorney fees, additional property inspections and court costs for any proceedings involved.
After bringing payments current and paying additional fees, payments generally remain the same as they were before the agreement. Loan terms and interest rates likewise go unchanged.
For many homeowners, hardships are only temporary hurdles. Once adversity passes, their financial situations return to normal, and they’re able to carry on with their lives. In cases like these, lenders may offer the option of a repayment plan.
Repayment plans allow homeowners to catch up on their overdue mortgage payments over a specific period of time. Though these timeframes usually hover around six months or so, specific stints depend on how far behind on payments the borrower is, how much extra he or she can afford to pay each month and certain other factors.
During the reimbursement period, the past-due amount plus any applicable charges is divided into smaller portions, each of which is added to individual mortgage payments to come. While monthly payments increase until the past-due amount is caught up, the extent of the loan and its interest rates remain the same. Once the total in arrears has been paid, mortgage payments will return to their original amounts.
Those who foresee being unable to keep current on their mortgage payments may be able to benefit from a forbearance plan. In an agreement like this, the lender agrees to temporarily reduce or delay monthly payments. Once the arranged timeframe ends, the borrower begins making payments as originally scheduled while also paying past-due taxes, interest and insurance fees. Additional expenses may come into play as well.
What Are the Benefits of These Mortgage Relief Alternatives?
By far, the most significant benefit of all these alternatives is avoiding foreclosure. By extension, falling back on these options help steer clear of the many potential repercussions of foreclosure, like poor credit scores, inability to purchase a home in the future and even bankruptcy in some cases. Aside from those advantages, plenty can be said for the benefit of reduced stress and extra financial wiggle room to be able to cover basic necessities during times of hardship.
Which One Is Right for Me?
Which option best suits your needs depends on your unique circumstances. Are you capable of making at least partial mortgage payments each month? Do you foresee your hardships being short-term or extended? Is catching up on past-due obligations feasible? These are only a few of the aspects to be taken into consideration before deciding how to proceed.
If you don’t anticipate being able to cover reduced payments or eventually catch up on the amount in arrears, a short sale may be the best option. Though being responsible for any difference between the amount you borrowed and the home’s selling price is a possibility, you can reduce the risks involved by making sure the short-sale agreement states your lender will consider the balance paid in full after the sale.
In the event this situation applies to you, or you’d simply rather wipe the slate clean and start afresh later on, a deed in lieu of foreclosure may also be beneficial. Keep in mind, your lender may insist you try to sell the home before agreeing to a deed in lieu. If so, the chances of a deficiency judgement still exist. Once again, you can turn the odds more in your favor by ensuring the balance will be considered paid in full after the fact.
Those who fall behind on their mortgage payments but receive an income boost or find themselves with a lump sum of money before foreclosure takes place may be best served by reinstatement. Although a significant amount will be required upfront in order to be eligible for this alternative, payments, interest rates and other charges revert to their former amounts once initial dues are paid.
Missed mortgage payments caused by temporary financial struggles can be mitigated courtesy of a repayment plan. Monthly payments will be higher for a number of months until the past-due amount is paid in full, but they’ll fall back into place afterward. Lenders take into account your income and expenses before determining how much extra you’ll pay each month, how long the repayment plan will last and whether or not this option is in the cards for you.
Under the right circumstances, a forbearance plan may also be a helpful alternative. Particularly in situations where a hardship is short-lived and extra money may come into play before foreclosure enters the picture, forbearance may be the best course of action. Monthly payments will be reduced or halted for a time before picking up as originally scheduled.
Once the initial forbearance period ends, extensions may be available. Either way, you’ll be responsible for covering any additional fees and expenses accrued over the course of the plan. Whether these will be due in a lump sum, divided across several months or due at the end of your mortgage term will be decided by your lender.
In a Nutshell
JPMorgan Chase is offering a number of loan modification and mortgage relief alternatives for its borrowers. They’re designed to cater to a wide range of circumstances homeowners may face in today’s fluctuating and uncertain economy. If you have yet to receive a letter from them, continue keeping an eye on the mailbox or call your local branch to learn more.
Though the financial institution’s baseline loan modification program doesn’t apply to all borrowers, its other options have branched out in several directions. Those with FHA, USDA, RHS and VA loans are served by separate modification programs geared specifically toward their potential needs. Borrowers with second mortgages are likewise kept in the loop.
For those who’ve fallen behind on their mortgage payments, numerous alternatives have additionally been made available. From short sales and deed-in-lieu agreements to forbearances, repayment plans and reinstatements, solutions have been extended to help homeowners facing hardships avoid foreclosure and its potential repercussions.
Don’t hesitate to contact your local JPMorgan Chase or one of its representatives with questions and concerns. Whether you’re anticipating moderate struggles or you’ve already fallen behind on mortgage payments, they’re readily available to help you sort through the details and better understand just which options best fit your circumstances.