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Easing terms on at-risk loans - are the big banks finally listening?

With millions of property owners throughout the U.S. defaulting on their mortgages and facing foreclosure, two leading lenders are helping borrowers who are not even in default by easing the terms of their mortgages or even reducing their debt. Though these borrowers did not ask for help, they are receiving it because they are deemed at special risk.

Take one example of a Florida condominium owner who received a letter from JP Morgan Chase that they were reducing the principle of her loan by 50%. Although this particular owner was paying her mortgage on time and most likely would have continued to do so, Chase reduced her balance from $300,000 to $150,000 and increased her interest rate. The result was that her payments remained approximately the same, but she was no longer upside down on her mortgage. She was able to then sell the property for a small profit.

Bank of America and JP Morgan Chase are quietly modifying loans for tens of thousands of borrowers, overhauling loans for borrowers who have pay option adjustable rate mortgages (ARMs). With these loans, the borrower has the option of paying a lower payment for a fixed period of time by skipping the principle payment and some of the interest payment, with the unpaid balance added to the loan.

Chase inherited $50 billion in option ARM loans when it purchased Washington Mutual in 2008, and Bank of America acquired 550,000 option ARMs as the result of its purchase of Countrywide Financial in 2008. According to Bank of America, more than 200,000 of these troubled loans have been converted to more stable mortgages.

Although Chase and Bank of America appear to be showing concern for homeowners who may be at risk of running into trouble, this appears in stark contrast to their concern for those who are already in default and faced with foreclosure. Both lenders were penalized by regulators last month for poor modification of mortgages in default.

No matter the terms of your mortgage, if you are at risk of or have already fallen behind on your payments, it is important to consider discussing your options with an attorney. At Jacoby & Jacoby, we understand how foreclosure and loan modification work and are prepared to offer guidance that is designed to protect your legal rights and financial interests. We represent homeowners throughout Long Island.

Contact a Long Island foreclosure attorney at Jacoby & Jacoby today.

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