Getting a mortgage refinance during this time of historic low interest rates has been a major challenge for millions of homeowners across the country. One reason potential borrowers encountered difficulty when attempting to refinance their home loans had to do with the drop in home prices. After the real estate market collapsed more than five years ago, the average value of a home declined 34%, according to the Case-Shiller Home Price Index.
Before the market crashed, many lenders offered 100% financing. Consequently, even in cases where home values did not fall as much, many borrowers still did not have sufficient equity in their homes to qualify for refinancing. In addition, mortgage lenders tightened credit underwriting requirements for refinancing loans requiring borrowers to have a minimum of 5-10% equity in the property.
JP Morgan Offers Mortgage Relief
As part of the $25 billion mortgage settlement reached between five major lenders —Wells Fargo, Citibank, Bank of America, Ally Financial and JP Morgan Chase—and a state/federal government negotiating team, the banks agreed to provide mortgage relief to struggling homeowners. The settlement agreement was approved by the court in April.
JP Morgan Chase has committed $4.2 billion to mortgage relief.Borrowers may receive mortgage refinancing to a lower interest rate, principal reduction, or both categories of mortgage relief.
Chase officials moved quickly, after the settlement was reached in February, to assemble staff, examine documents, and find customers who qualify for mortgage modifications under certain rules.
The guidelines for mortgage relief include the following items:
The bank benefits by giving homeowners some financial relief, which makes foreclosure less likely to occur.
Chase Cuts Interest Rates
A Washington state couple, Bob and Michelle Irvin, was among thousands of homeowners who were caught by surprise this summer when they received letters from JP Morgan Chase’s mortgage servicing division notifying them of the lender’s decision to cut their mortgage interest rate from 6.5% to 2.8% for the next five years.
At the end of the five-year period, the mortgage morphs into a fixed-rate home loan for the 18 years remaining on the term. Refinancing the mortgage reduces the couple’s monthly payment by $229 to a more affordable $601.
At one point, the family had become 20 months delinquent with their mortgage payment and came close to losing their residence. Bob, like millions of fellow Americans, lost his job. Fortunately, he eventually found work as a commercial fisherman. However, attempts to work out a mortgage modification with JP Morgan Chase proved unsuccessful.
Bank Shortens Mortgage Relief Process
From March 1 to June 30, JP Morgan Chase has modified 3,086 home loans. Surprisingly, of the many customers mailed letters offering them the chance to modify their home loans, only 50% contacted the bank to discuss the matter revealed Amy Bonitatibus a Chase spokesperson. According to Chase, 11,500 loan modification offers have not yet to be processed.
The bank recently moved to simplify procedures. It now presents the offer and terms, which include a new interest rate, and/or principal reduction amount, and new monthly payment, in a letter. The customer only has to sign the document and return it to the lender.
Since JP Morgan Chase owns the mortgages, the loan modification process does not require verification of the borrower’s job, income, and assets. Homeowners with mortgages sold off to investors or held by Fannie Mae or Freddie Mac do not qualify for Chase mortgage relief.
Borrowers who have private loans with other lenders, andwould like to find out if they are eligible for refinancing or mortgage modifications, should call theirbank to discuss the matter.