Tuesday, October 13, 2009

JPMorgan Proposes More 'Extend and Pretend' for Mortgage Modifications

by Bill McBride on 10/13/2009 03:15:00 PM

From an article by Jody Shenn and Dawn Kopecki on Bloomberg: JPMorgan Pitches Interest-Only Mortgages to Boost Obama Plan

Banks will push the Obama administration to expand its mortgage-modification program to allow interest-only periods on reworked loans ... while recognizing concern that it may only postpone defaults, according to JPMorgan Chase & Co.

“We’re working with our peers to develop a proposal to present,” Douglas Potolsky, a senior vice president at JPMorgan’s Chase home-loan unit, said yesterday at a Mortgage Bankers Association conference in San Diego.
This is simply more extend and pretend, and only postpones defaults.

The article also has some comments from Laurie Anne Maggiano, director of the Treasury’s policy office for homeownership preservation. Maggiano acknowleges that only "a couple thousand" modification are now permanent, and she notes that the trial period has been extended an extra two months (I guess a disappointing number of trial modifications are becoming permanent).

The key numbers to track going forward will be the number of permanent modificatons, and the redefault rate for permanent modifications. So far it is "a couple thousand" and too early to say.

The article also quotes Maggiano on the short sale initiative that should be announced next week. Housing Wire has more: Treasury to Announce New Program to Avoid Foreclosure
The Chief of the Homeowner Preservation Office at the Treasury, Laurie Maggiano, released information on the Home Affordable Foreclosure Alternatives (HAFA) while speaking at the MBA’s 96th Annual Convention going on in San Diego. The official launch is expected in the next week or so.
...
Maggiano adds that HAFA will offer financial incentives to both servicers and borrowers, and associated secondary investors, in order to facilitate a short sale or deed in lieu of the property.