Using recent data collected from a variety of sources, this report shows how Chase is harmingfamilies and communities in New York by refusing to modify the mortgages of strugglinghomeowners at an alarming rate. The report examines and analyzes Chase’s performance in thisarea using the following data:-- results compiled for Chase-serviced loans where modifications have been requested byborrowers (through a group of New York City loan counseling organizations).-- results as reported by the federal Home Affordable Modification Program (HAMP).Affordable, permanent, transparent and timely mortgage modifications are important forfamilies, the community and the economy. In a speech in January, FDIC chair Sheila Bair urgedbanks to quickly provide mortgage modifications as a means to aid the economy.“Bair also said lenders need to pursue more loan modifications instead of foreclosures,arguing it will help the economy as well as the borrower”.
“The fact is, every time servicers have delayed needed changes to minimize their short-term costs, they have seen a deepening of the crisis that has cost them–and the rest of us–even more,” she said. “It is time for government and industry to reach an agreement thatwill finally bring closure to the crisis.”
Principal reduction must be a keystone of the modification process. Currently less than 5% of mortgage modifications include principal reduction, despite the many experts who believe this isnecessary.
A recent industry analysis concludes that principal reduction is “the least costly and onlypermanent solution for defaulted loans”.
Principal reduction reduces the likelihood of re-default, as shown by a 2009 study of loanmodifications.
The State Foreclosure Prevention Working Group, made up of state Attorneys Generaland state banking regulators, said in an August 2010 report that: “The State WorkingGroup believes that servicers should strategically increase their use of principal reductionmodification to maximize prospects for success. … in fact, the vast majority of loanmodifications actually increase the loan amount by adding servicing charges and latepayments to the loan balance.”
Laurie Goodman, Roger Ashworth, Brian Landy, Lidan Yand,
The Housing Crisis – Seizing the Problem,Proposing Solution,
pp. 13-14 (October 1, 2010).
Roberto G Quercia & Lei Ding,
Loan Modifications and Redefault Risk: An Examination of Short-Term Impacts,
Cityscape: A Journal of Policy Development and Research (HUD), Vol. 11, Number 3, 171, 1712-73 (2009).
“Redefault Rates Improve for Recent Loan Modifications,” State Foreclosure Prevention Working GroupMemorandum on Loan Modification Performance (August, 2010),