Banks Helping Homeowners Avoid Foreclosure?
Homeowners with Option ARM mortgages (sometimes called ‘Pick-A-Payment’ or ‘Neg Am’ (short for negative amortization) Loans) are getting unexpected help from 2 large banks to help them avoid foreclosure – JPMortgage Chase and Bank of America.
JPMortgage Chase and Bank of America?
Stung by the federal government for not doing enough to help homeowners who are struggling with their mortgages, both JPMortgage Chase and Bank of America are quietly helping homeowners who are underwater on their Option ARM mortgages avoid foreclosure by modifying their loans – even if they are not in default or haven’t otherwise asked for it.
These big banks are providing help to those they feel are “at risk” of defaulting on their Option ARM mortgages by easing the terms of the mortgage. While the banks are not reducing the balances owed on the mortgages, they are using all other available means to help homeowners who are underwater avoid foreclosure – either by waiving prepayment penalties, by refinancing current mortgages into more stable fixed-rate mortgages, by lowering the interest rates, by postponing some of the balance owed, or by extending the term of the loan.
The banks are not reducing the balances owed on the mortgages as that would be unfair to those who are making their mortgage payments on time. It would also be impractical because so many mortgages are securitized into pools owned by investors.
The questions remain, however: Why are these particular homeowners - the ones with the Options ARM mortgages - getting mortgage relief – even if they haven’t asked for it – while so many others who have asked for help are not? And how many of those who did not get help wind up losing their homes to foreclosure?
If I was the lucky homeowner who received unsolicited help from the bank, I’d be elated. However, if I was the unlucky homeowner who had to constantly deal with different representatives from these banks every time I called, was told repeatedly that my documents were either ‘lost’ or never submitted, or worse yet - lost my home to foreclosure because the bank wouldn’t modify my mortgage loan, I’d be angry.
It seems to me that if the banks have time to deal with homeowners who have never asked for a mortgage modification, then they have time to deal with all of the others who have already requested it and submitted their document.
East Bridgewater, MA 02333
Lew Corcoran, ASP®, IAHSP, IAHSP-CB