JPMorgan Tackles Troubled Mortgages
Bank to renegotiate thousands of loans.
The mortgage bailout parade marches on.
Just days after rival Bank of America (BAC) announced plans to modify hundreds of thousands of mortgages, JPMorgan (JPM) released details of a homeowner rescue plan of its own on Friday afternoon.
Following its takeover of both Bear Stearns and Washington Mutual, JPMorgan's inventory of distressed mortgages has risen dramatically in the last 8 months. The bank's modification efforts, which mirror Bank of America's plan, are focused largely on subprime loans and option ARMs. The acquisition of WaMu saddled CEO Jamie Dimon's firms with billions of these loans - $16 and $54 billion, respectively, according to the Wall Street Journal.
JPMorgan plans to identify borrowers with both the willingness and ability to pay, lower interest rates and, in some cases, forgive loan principal. For Option ARMs, borrowers may have the opportunity to replace their negatively amortizing mortgage with a safer, fixed rate 30-year loan.
Look out for more of these plans coming from the remaining big American banks, particularly Wells Fargo (WFC): Its recent acquisition of Wachovia (WB) included the Charlotte-based bank's massive option ARM portfolio.
The plan is certainly a step in the right direction. It's nice to see that some of the recent $25 billion injection from the government will be funneled toward the taxpayers that ponied up the money in the first place.
Both JPMorgan and Bank of America's new programs, are, however, evidence of the government's -- and banks' -- inclination to deal with problems that already exist, rather than ones that are on the horizon.
Click here to read more on the coming mortgage crises.
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