JP Morgan Chase is Making Mortgage Modifications Easier

If you have a mortgage through JPMorgan Chase, you may be receiving a letter with new mortgage terms in the near future.

The new $25 billion settlement that the banks have to live by is making things much easier for troubled homeowners who have had problems paying their mortgages. But it appears that JPMorgan Chase is ahead of the curve when it comes to making loan modifications easier than ever.

In fact, Chase is basically doing all of the work for you. According to the Money section on CNN’s website, Chase is making the modifications and then sending letters to borrowers letting them know what their new monthly payment is going to be. The only thing the mortgage borrower has to do is sign the form enclosed with the letter and send it back. It doesn’t get much easier than that!

Chase has pledged to more than $4 billion in mortgage relief for thousands of borrowers who have a loan through them. This relief comes from either reducing the interest rate on their mortgage loans or reducing the principal that is owed. In some cases, Chase is doing both.

One of the reasons Chase is so motivated to get these modifications pushed through is because banks are getting more credit for the mortgage modifications that they complete within the first year of the settlement, which was reached earlier this year in February. The actual deal was finalized in April, but Chase had already assembled a team to start going through the tens of thousands of mortgages that are held by the company. In order to qualify for a loan modification, the mortgage had to meet certain qualifications. For one, the mortgage had to be held by Chase directly. It couldn’t be backed by the federal government and it couldn’t be divided among other investors. Also, the borrowers had to be behind on their mortgage payments or they had to be significantly underwater in order to qualify for a modification from Chase.

At first, Chase found thousands of homeowners who fit these qualifications. The bank then sent letters to these homeowners asking them to contact the bank to discuss a mortgage modification. When only half of the customers responded, Chase decided on a new plan, according to Amy Bonitatbus, one of the bank’s spokespersons. That’s when Chase decided to be more proactive by sending out the letters with the new mortgage terms.

According to a preliminary report conducted by CNN on Chase’s progress and the progress of the court settlement overall, Chase modified more than 3,000 mortgages between March 1 and June 30 for a total of $369 million in credits. There are currently about 11,500 other modifications that have been offered by Chase but have yet to be completed.

Is it a good idea for Chase to be more proactive in trying to modify troubled mortgages?

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Have Home Prices Hit Bottom?

Home prices are on the rise, but will these trends last for long?

There has been a lot of talk about housing prices and if they are going to get much lower than they are right now. Fortunately for some homeowners, due to some recent evidence, it looks like they’ve hit rock bottom and they are on their way back up. This is good news for some homeowners who owe more on their home than its current market value because if they are looking for an opportunity to sell their home, they might be able to get out from underneath it without being responsible for too much debt owed on it.

According to Nick Timiraos of the Wall Street Journal, home prices increased for the spring and summer months for the last several years because that’s when home sales are at their best. Home buying activity has seemed to drop off for those years during the fall and winter months. But things seem different this year. The prices of homes in July actually increased by almost 4 percent compared to the same time last year. This is the biggest increase in at least six years. In addition to that, home prices have gone up by more than 9 percent just since February of this year.

But don’t get too excited just yet. There is some bad news, says Timiraos. While home prices currently look good when compared to the same monthly time periods of the year before, the economy is still looking relatively uncertain. Wages certainly aren’t keeping up with the increase in housing prices so home buyers are going to be few and far between. In addition to that, those who are looking to buy a home run into another roadblock – the difficulty of qualifying for a mortgage. Underwriting standards make it almost impossible to get a mortgage loan if you have a bad credit score. Also, many families have too much mortgage debt. They are underwater in their loans and simply cannot get out of their agreement to shop for a new house. And many of those who aren’t underwater don’t have enough equity in their current home to have a down payment ready to purchase another home, even if they are downsizing.

While the rock bottom low prices may be behind us, experts like Mark Fleming, chief economist at CoreLogic, warn consumers against getting too enthusiastic about a full recovery. The increase in prices isn’t likely to continue in the same pattern that it has in the last six months. They will probably stay close to the prices they are at now…at least for awhile.

What this means for the average homeowner is that recovery is on its way. If you have been discouraged because you want to sell your home but you owe too much on it compared to what it’s worth, there may be a light at the end of the tunnel. If you can ride out the market for a little while longer, home prices may get a little closer to what they were when you purchased the home to help relieve some of the financial burden when you put your home on the market.

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Tax Breaks On Mortgage Aid May Expire: What Does It Mean For You?

Are you responsible for paying taxes on forgiven mortgage debt?

It has been said that the only two things that are certain in life are death and taxes. And even then, taxes are the worse of the two because, according to Will Rogers, “death doesn’t get worse every time Congress meets.” But a few years ago, Congress actually passed legislation (the Mortgage Forgiveness Debt Relief Act) that would relieve taxes on forgiven mortgage debt, such as in a short sale. Unfortunately, that legislation is scheduled to expire at the end of 2012. Unless extended by Congress, what would expiration of the Mortgage Forgiveness Debt Relief Act mean for you?

 Here are some questions that homeowners are asking about paying taxes on forgiven mortgage debt.

How does the Mortgage Forgiveness Debt Relief Act work?
The idea behind this legislation is rather simple and applies most clearly where the bank agrees to extinguish a mortgage loan in order to recover less than the full value of a primary home (ordinarily through a short sale). If you have a home on which you owe $200,000 and you were to sell it as a short sale for $175,000 with the bank agreeing to extinguish the remaining debt, you would ordinarily be responsible for paying taxes on the $25,000 difference because the IRS considers the debt forgiven as income.  The Mortgage Forgiveness Debt Relief Act, however, makes that $25,000 in non-taxable.  If you are planning on selling your home before foreclosure as a short sale, there is a big incentive to do it before the end of 2012 when the legislation expires.

Do the provisions apply to any forgiven debts related to my mortgage?
No. According to the IRS’s website, the Mortgage Forgiveness Debt Relief Act “applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes.”The debt must also be secured by your home.

Will Congress extend the provision past December 31, 2012?
There are signs that the provision will be extended past December 31, 2012. In fact, the Senate Finance Committee recently passed a one-year extension for the legislation. However, as of right now, Congress has not passed the extension. It is expected to, however, as part of a larger tax measure that is being discussed by lawmakers in the months to come before year’s end.

Are there instances in which the homeowner is still responsible for the taxes?
The Mortgage Forgiveness Debt Relief Act does not apply to all homes that are sold for less than what the homeowner owes on them. If you have a short sale on a home that is not your primary residence (a second home or investment property) or if you have debt forgiven on a home equity line of credit, you are still required to report those monies to the IRS.

Will I be taxed on the difference between my outstanding mortgage balance and the value of my home if my home goes through foreclosure?
There is no short answer to this question. For homeowners who have a recourse mortgage (i.e., a mortgage where the lender can pursue the borrower for any money owed as a result of the difference between the selling price and the amount owed) , any debt that is forgiven is considered as income. 

On the other hand, with non-recourse mortgages, the forgiven debt is not considered income to the borrower according the Mortgage Forgiveness Debt Relief Act. With these mortgages, the lender is not allowed to pursue you for the price difference following a foreclosure. The laws regarding recourse and non-recourse mortgages generally depend on the state in which you live.

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