How would you feel if you found out your mortgage servicer was suddenly slashing your interest rate? Or maybe reducing your principal balance? That would feel pretty darn good, right? What seems like a pipe dream may actually become a reality for tens of thousands of homeowners across the country, as a number of banks are offering loan modifications to eligible borrowers.
Chase, for one, has pledged $4.2 billion in mortgage relief to thousands of borrowers by either reducing their interest rate, cutting their principal balance, or both. This agreement was reached as part of the $25 billion settlement between the nation’s five biggest banks and the state attorneys general and federal government. Under the settlement, the banks receive a bigger credit for modifications completed in the first year, which means Chase and other banks will be acting quickly to get these opportunities out there.
Since the settlement was reached in April, Chase has organized a team of workers to go through their paperwork and find potential candidates that meet the modification guidelines. The guidelines included the following provisions:
- The borrowers’ loans had to be directly held by Chase (not divided between investors or backed by Fannie Mae/Freddie Mac)
- Eligible borrowers either had to be delinquent on their loans or owe far more on their homes than they were worth.
After finding thousands of borrowers who met both requirements, Chase sent out letters, informing the borrowers of their eligibility for loan modifications and asking them to call the bank to discuss. Unfortunately, only about half of the borrowers actually responded. In an effort to streamline the process, Chase now sends a letter with the new payment plan laid out so the borrower can see the new rate, new principal balance, what their payments will be like, etc. If the borrower is interested, all they have to do is sign the letter, mail it back, and the new terms will be implemented as soon as possible.
Other banks are offering similar opportunities. If you’re curious about your ability to qualify for a mortgage modification, contact your lender or servicer. If you’re loan is being held by Fannie Mae or Freddie Mac, you can find out about HARP refinancing on ForTheBestRate.com as another possible solution for payment relief.