Distressed homeowners with Washington Mutual mortgages could be getting some relief soon. JP Morgan Chase, the bank that purchased Washington Mutual, said it would halt foreclosures for the next 90 days. During that time the company will work on new programs to help families change the terms of their mortgages and make them manageable.
"We will work with families who want to save their homes but are struggling to make their payments," said Charlie Scharf, CEO of Retail Financial Services at Chase in a written statement. The company said it's new programs will help 400,000 families avoid foreclosure, amounting to $70 billion in loans. The programs will apply to people who live in their homes and have sub-prime mortgages, pay-option mortgages or negative amortization loans. The company said these loans could be changed to 30-year loans, fixed rate loans or even interest only loans, depending on each individual situation.
JP Morgan Chase will also offer a substantial discount on or donate 500 homes to community groups or through non-profit or government programs designed to stabilize communities.
Loan counselors who have been struggling to help homeowners avoid foreclosure were relieved by the news. "This gives people more time to go to their lenders and lenders more time to figure out what's the best loan for the homeowner" said Faith Bautista of the Mabuhay Alliance, a non-profit loan counselor certified by the U.S. Department of Housing and Urban Development.
Organizations that help people avoid foreclosures said the task has been very difficult but in the past few weeks they've seen a change in tone at the banks. Vino Pajanor, Executive Director at the Housing Opportunities Collaborative which hosts free mortgage clinics across the county, said he heard of one counselor modifying three loans in one day for homeowners facing foreclosure. The feat had seemed improbable. But he said 400,000 thousand loans is only a fraction of the variety of loans at risk of foreclosure and time is running out before more foreclosures hit the market. "We can't wait. The more we wait the more complicated it's going to get especially because of the financial crisis that's happening. We need to act now."
JP Morgan Chase's move is the first large-scale pro-active move by a bank to modify mortgages. Customers at Countrywide Home Loans have been given a similar option. But that decision was made as a settlement in a lawsuit filed by State Attorney General Jerry Brown. Some customers of IndyMac Bank have also been given the chance to modify their loans after the FDIC took over its mortgages.
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