Nov 04 2008
Efforts to save troubled mortgages
With the aim of preventing homeowners to move towards foreclosures JP Morgan tightened its mortgage modification efforts and has added itself to the list of banks to work out a plan with the above mentioned aim. This program by JP Morgan aims to help innumerable customers by avoiding foreclosure on about $ 70 billion in loans.
This $70 billion estimate is projected to be spread over a period of two years. This mention plan is expected to bring out changes which will lay emphasis on a particular type of loan which would be so structured that the borrower’s outstanding balance would sometimes grow over month on month. JP Morgan inherited $54 billion of such loans after it took over Washington Mutual in the month of September. Rising home foreclosures and the expected role of banks in this process has provided the major impetus in the formulation of this plan by JP Morgan. The banking community as it is is under immense political pressure to suitably address the problem of fore closures. Apart from JP Morgan, Bank of America and the Federal Deposit Insurance Corp too have similar loan plans in their offering with the aim to somehow curtail the menace of increasing fore closures.
It was this mortgage crunch which made the financial crunch presently sweeping across the United States reach this level. Big financial investors had invested huge money on the securities which were backed by risky mortgages which soon became difficult to value. As a result of it banks suffered huge losses and started lending thereby aggravating the already existing credit crunch. The US government has so far been able to tackle the grievances affecting the banking and the credit sector while the issue of ailing house owners is still to be tackled by the government. It is a widely believed view which I too abdicate that the financial markets and the economy in the US cannot be revived completely till the decline in housing prices is being arrested at a point. Fore closures is surely worsening this malady of declining house prices.