Chase Offers Pay to Play Modification

I have been off the air for a long time as maintaining the blog whilst holding down three jobs and negotiating with Chase for a loan modification became and remains all-consuming.

But I would feel remiss if I did not post the modification offer Chase has “approved”. At first blush it seems almost too good to be true – an affordable payment coupled with the prospect of an unanticipated reduction in principal.

Upon closer inspection, the actual terms of the modification are missing – it’s a carrot dangled before a starved and desperate individual in the hopes they will bite.

I am not biting for anything that is not put in writing. I would urge anyone who may have received a similar offer to tread carefully. The offer and my response is posted below; I belive it speaks for itself.

ChasePaytoPlayModificationOffer

JPMorgan Ousts Mortgage Chief Lowman

As reported today on Bloomberg.com:

JPMorgan Chase & Co. (JPM), the second-largest U.S. bank, ousted mortgage chief David Lowman after it overcharged active-duty military personnel on loans and improperly foreclosed on other borrowers.

“Dave Lowman and I have decided he will leave the firm,”Frank Bisignano, the head of home-lending, said today in an internal employee memo obtained by Bloomberg News.

JPMorgan has been taking steps this year to repair its mortgage unit, which posted at least $3.3 billion in losses during the first quarter. Lowman, 54, who ran home-lending since leaving Citigroup Inc. (C) in 2006, was directed in February to start reporting to Chief Administrative Officer Bisignano, 51. The New York-based bank then hired Cindy Armine, Citigroup’s chief compliance officer, last month to increase oversight as chief control officer of home-lending.

“We thank Dave for his five years of service to our firm,” Bisignano said in the memo. “He worked here during extraordinary times and has said he will take some much needed time off.”  A message left at Lowman’s office wasn’t immediately returned.

High Losses

Chief Executive Officer Jamie Dimon, 55, said JPMorgan’s record $5.6 billion in profit during the first quarter was tempered by “extraordinarily high losses we still are bearing on mortgage-related issues.”

“Unfortunately, these losses will continue for a while,”Dimon said in a statement on April 13 when the bank reported results. JPMorgan’s performance has been hampered by poor performing mortgage portfolios acquired when it bought Washington Mutual Inc. and Bear Stearns Cos. in 2008.

In April, JPMorgan agreed to pay $56 million and to reduce mortgage rates for all deployed soldiers to settle claims that it overcharged military personnel on their mortgages and seized homes of 27 active-duty military personnel who were protected by the Servicemembers Civil Relief Act.

Dimon said the military foreclosures were the worst mistake the bank has ever made.

“We deeply apologize to the military, the veterans, anyone who’s ever served this country and we’re trying to go way beyond” what is needed to correct the errors, he said at the company’s May 17 annual shareholder meeting. “We’re sorry.”

________________________________________________________________

That should probably read: “We’re sorry we got caught and we had to sacrifice someone – so long Mr. David Lowman.”

JPMorgan Names New Head for Mortgage Business

Read the latest propaganda from Chase…Lowman demoted; Jamie Dimon’s righthand man is Frank Bisignano, now heading up Chase Home Lending…

Hoping to troubleshoot some of the problems plaguing its mortgage operations, Jamie Dimon dispatched one of his top lieutenants to oversee the Chase Home Lending business.

Frank Bisignano, JPMorgan Chase’s chief administrative officer, will now add supervision of the Chase mortgage origination and loan payment collection businesses to his other duties, which include managing technology and real estate for the bank. David Lowman, the current head of Chase Home Lending, will retain his title but report to Mr. Bisignano.

The management change comes as Chase’s mortgage business has faced considerable challenges as a result of the recession. Chase, like most of its peers, has faced enormous losses on its large portfolio of home equity and mortgage loans after loosening its lending standards during the housing boom. But it has also struggled to digest the mortgage operations that it acquired with its takeovers of Washington Mutual and Bear Stearns during the financial crisis.

Many parts of the business ran on separate technology systems, making a three-way integration especially tricky. At the same time, Chase has come under fire from Washington for failing to cope with a giant wave of foreclosures as well as overcharging several thousand military veterans.

“The mortgage business for everybody has changed tremendously,” Mr. Bisignano said in a brief interview on Friday. “Adding help to it can never be a bad idea.”

Charles W. Scharf, the head of Chase Retail Financial Services, and Mr. Lowman have had their hands full contending with all of these issues over the last few years. They have significantly tightened the bank’s lending standards, halted the sale of new mortgages through independent brokers and overhauled the bank’s servicing operations. They have also hired thousands of employees and improved technology to try to keep up with the foreclosure mess.

In 2010, Chase also began cordoning off its existing portfolio of real estate loans from those that conformed to its tougher new standards, a so-called good bank/bad bank strategy that has been used frequently by financial institutions to restructure their operations.

But with Mr. Bisignano, Mr. Dimon is installing one of his strongest managers with a long history of overseeing the operations of several banks. He also comes from a family of veterans, which will be crucial to smoothing relations with lawmakers, regulators and military leaders.

Mr. Bisignano, a trusted lieutenant of Mr. Dimon, followed him to JPMorgan Chase in 2005 as his chief administrative officer. Mr. Bisignano was charged with consolidating the bank’s real estate and identifying other cost-saving measures.

At Citigroup, Mr. Bisignano ran its global transaction services business and helped oversee technology and operations for its investment bank. Mr. Bisignano, 51, will report to both Mr. Dimon and Mr. Scharf.

Here is the email from Mr. Dimon and Mr. Scharf:

As you know, our Home Lending business has gone through a period of enormous challenge and change. Our team has worked day and night for almost three years to deal with the unprecedented credit environment and the added complexity from the WaMu and legacy Bear Stearns EMC merger integrations.

We recognize how much we’ve accomplished, but know we still have a great deal of work ahead of us. Given the importance of this business to our company and our customers, we’ve asked Frank Bisignano, our Chief Administrative Officer, to take on additional responsibilities and get more directly involved in managing this business. Effective immediately, Dave Lowman, CEO of Home Lending, and his team will report to Frank.

Frank will continue to report to Jamie as CAO and will report to Charlie on Home Lending, which will remain part of Retail Financial Services. He continues on the firm’s Operating Committee and Executive Committee, and joins the RFS Management team.

Frank is a great partner to all of us and an extraordinary operating executive. He is an integral part of all six of our lines of business, and we are thrilled to be able to leverage his leadership and experience more directly in Home Lending.

We have a leading Home Lending business. Chase is the third-largest mortgage lender and the #3 mortgage servicer in the country. We have 8 million customers who are living in a home with a Chase mortgage. When customers have difficulties, we do everything we can to help them find a way to avoid foreclosure. We have offered more than 1 million modifications and prevented foreclosure for more than 480,000 customers. We recently announced that we are opening another 25 Chase Homeownership Centers, bringing our total to 76 in 23 states and the District of Columbia.

We look forward to working with Frank to make our Home Lending business even stronger.

________________________________________________________________________________ 

I think they mean to say they look forward  to continuing the bankster shell game of preying upon legions of beleaguered homeowners who just want to work out a payment plan with their lender in order to remain in their homes; the shell game being the charade of pretending to help with no intention of actually providing any help at all.

The Wall Street Journal on Loan Modification Aid – Worse Off?

May 18, 2010: The Wall Street Journal published the article.

The title: “Loan Aid Leaves Some Worse Off”

The subtitle: One in Four in Government’s Mortgage Program Is Dropped; Tales of Exhausted Savings

The article was lengthy and primarily about a woman in Phoenix, yet my picture loomed large on page three of the print edition. I kept reading the article to see when my situation would be addressed, only to find myself relegated to the last three paragraphs. The picture was larger than the area allocated to text. I turned the page in hopes of seeing more and was met with an almost full-page advertisement from Chase touting the ways Chase was helping struggling homeowners. Had the editors of the Wall Street Journal caved in the face of the almighty dollar? I hoped not, but how could one really know?

The article read as follows:

The government’s mortgage-modification program has left some struggling homeowners worse off than they were before.

The Treasury reported Monday that nearly one in four homeowners who were offered lower payments under the Obama administration’s 15-month-old effort have been weeded out of the program. Many people were removed from the trials because they failed to make payments, didn’t provide all the financial documents needed to qualify or were found to be ineligible.

Homeowners are first offered trial modifications under the program, which provides incentive payments to loan servicers, investors and the homeowners. If borrowers make the payments and satisfy other criteria, those trials are made permanent, ensuring a cut in payments for five years.

While awaiting answers, some borrowers keep making payments, exhausting their savings in what may be a futile effort to save their homes. They also incur fees from the banks and delay taking action that might give them a fresh start in a more affordable home.

Some borrowers had unrealistic expectations about loan-relief programs, which were never designed to prevent all foreclosures. Another big problem is that banks often take six to 12 months to determine whether applicants are eligible.

“I had to learn the hard way and deplete my savings doing it,” said Mia Parry, a manager at a mortgage brokerage in Scottsdale, Ariz., who has spent nearly two years seeking a loan modification. She now wishes she had put her home on the market.

Most struggling borrowers do benefit from seeking help, said Aaron Horvath, a senior vice president at Springboard Inc., a nonprofit counseling service based in Riverside, Calif.

Some win modifications, cutting monthly payments by hundreds of dollars. Others who ultimately can’t get modifications at least are allowed to stay in their homes for months, making either no payments or reduced payments.

But “if you’re draining your savings” in a vain effort to hang onto a home, he said, you may end up worse off.

Eager for quick results, the Obama administration last year prodded banks to start people on trials without first obtaining documents proving they were eligible. That has led to many crushed hopes. The Treasury earlier this year changed its rules and told banks to start trials only after getting documents that proved borrowers qualified.

The Treasury said in a monthly report on the government’s $50 billion Home Affordable Modification Program, or HAMP, that about 1.2 million trial modifications had been started under the plan, and about 281,000 borrowers had washed out by the end of April.

Only about 30% of borrowers who seek help from the main foreclosure-prevention counseling program at Neighborhood Housing Services of South Florida end up with modifications, said LeeAnn Robinson, chief operating officer of the Miami-based nonprofit. Many borrowers don’t have enough income to support even reduced loan payments; others give up before completing the paperwork.

On average, it takes seven months to resolve a borrower’s situation, up from four months a year ago, Ms. Robinson said. Banks and other loan servicers can’t keep up with the demand for help, she said.

Ms. Parry bought a home in Phoenix in 2005 for $535,000, but she believes it now would sell for around $250,000. She has been seeking a modification from a unit of Citigroup Inc., the servicer of her two mortgage loans, since June 2008.

Ms. Parry’s application was turned down in late 2008, but President Obama’s announcement of HAMP in February 2009 rekindled her hopes. Ms. Parry decided to keep making payments on her loans because she expected to qualify for this new program.

Citigroup started her on a HAMP trial in June 2009, and she made three payments. Then Citigroup told her there had been a mistake and she would need to go through another three-month trial.

At the end of that second trial, Ms. Parry said, Citigroup told her the investor that owned her first mortgage wasn’t participating in HAMP, so she couldn’t get a modification under that plan. During her trial period, Citigroup charged her more than $1,300 of “late charges” and “delinquency expenses,” she said.

Ms. Parry said Citigroup should have been able to determine that the investor wasn’t participating before she went through the trial. Citigroup recently offered her another type of modification that she said fell short of the HAMP formula and wouldn’t lower her costs enough to make keeping the home worthwhile. Unless Citigroup improves the offer, she will try to sell the home.

A Citigroup spokesman said: “We have worked diligently with the borrower and the investor in an effort to find a solution that meets both the borrower’s needs and the investor’s requirements.”

The Treasury said in a monthly report on the government’s $50 billion Home Affordable Modification Program, or HAMP, that about 1.2 million trial modifications had been started under the plan, and about 281,000 borrowers had washed out by the end of April.

Only about 30% of borrowers who seek help from the main foreclosure-prevention counseling program at Neighborhood Housing Services of South Florida end up with modifications, said LeeAnn Robinson, chief operating officer of the Miami-based nonprofit. Many borrowers don’t have enough income to support even reduced loan payments; others give up before completing the paperwork.

On average, it takes seven months to resolve a borrower’s situation, up from four months a year ago, Ms. Robinson said. Banks and other loan servicers can’t keep up with the demand for help, she said.

Ms. Parry bought a home in Phoenix in 2005 for $535,000, but she believes it now would sell for around $250,000. She has been seeking a modification from a unit of Citigroup Inc., the servicer of her two mortgage loans, since June 2008.

Ms. Parry’s application was turned down in late 2008, but President Obama’s announcement of HAMP in February 2009 rekindled her hopes. Ms. Parry decided to keep making payments on her loans because she expected to qualify for this new program.

Citigroup started her on a HAMP trial in June 2009, and she made three payments. Then Citigroup told her there had been a mistake and she would need to go through another three-month trial.

At the end of that second trial, Ms. Parry said, Citigroup told her the investor that owned her first mortgage wasn’t participating in HAMP, so she couldn’t get a modification under that plan. During her trial period, Citigroup charged her more than $1,300 of “late charges” and “delinquency expenses,” she said.

Ms. Parry said Citigroup should have been able to determine that the investor wasn’t participating before she went through the trial. Citigroup recently offered her another type of modification that she said fell short of the HAMP formula and wouldn’t lower her costs enough to make keeping the home worthwhile. Unless Citigroup improves the offer, she will try to sell the home.

A Citigroup spokesman said: “We have worked diligently with the borrower and the investor in an effort to find a solution that meets both the borrower’s needs and the investor’s requirements.”

Martha Wright stands on her back deck Thursday, May 13, 2010 in Avalon, New Jersey.(Stephen Chernin for The Wall Street Journal)

Martha Wright stands on her back deck Thursday, May 13, 2010 in Avalon, New Jersey.(Stephen Chernin for The Wall Street Journal)

Martha Wright, a marketing executive whose income has dropped in recent years, has been trying since February 2009 to work out a deal with J.P. Morgan Chase & Co., the bank that services the $1.1 million mortgage on her Avalon, N.J. home.

The bank denied her request last summer, but Ms. Wright said she kept trying because the responses from the bank were unclear and inconsistent, and she believed she still might qualify. Meanwhile, she said, by continuing to make payments, she cut her nonretirement savings to about $500 from $63,000 in early 2009.

A spokesman for J.P. Morgan said the bank told Ms. Wright on three occasions that she didn’t qualify for a modification. “Modifying the loan would produce less value to the loan’s owner than foreclosing,” he said.

The Wall Street Journal seeks clarification on Chase Loan Modification Answers

May 14, 2020: Two days elapsed before Chase came back to the Wall Street Journal reporter with a revised comment on my situation. In the face of the evidence I provided, Chase had little choice but to modify their intentionally misleading answer.

Per the reporter:

“Below is Chase’s latest statement re your loan. Please let me know your thoughts. Thanks. 

Chase: We modified the homeowners’ mortgage in 2008, reducing the interest rate to 6% and locking in until 2013.  The homeowner applied for another modification in 2009.  

In the summer of 2009, in March of 2010, and in May of 2010, we notified the homeowner that she did not qualify for a second modification.  We determined that modifying the loan would produce less value to the loan’s owner than foreclosing, using analysis based on the Treasury’s model.  There also a question about whether it was her primary residence.”

My hair was on fire over this misleading representation of how I’d been strung along and flat-out lied to for over thirteen months. I wanted to run screaming to the reporter but I composed myself. The Wall Street Journal was a conservative publication and the reporter had an obligation to be objective and hear all sides. I was absolutely livid but I composed a measured response:

Thank you for giving me the opportunity to respond. Regarding the statement: We modified the homeowners’ mortgage in 2008, reducing the interest rate to 6% and locking in until 2013. The Loan originated as a sub-prime pick & pay with Washington Mutual on 2/26/06. Over the next eighteen months I received countless marketing solicitations offering to “modify” my loan to a fixed rate; they all seemed to focus on me paying WaMu some lump sum in order to “fix” my interest rate.

By mid to late 2007 I actually understood my loan and the concept of “negative amortization”. I started paying the full mortgage amount each month (the principal and interest) and even made some headway on reducing the negative amortization. Once I focused on the mortgage it was evident that when the loan adjusted, the interest rate was going to jump and the full amount would increase exponentially.

The Washington Mutual solicitations continued and with each “offer” the lump sum amount to “fix” the interest rate kept dropping. By January 2008 I could see that interest rates were going up and I feared the interest rate reset. In February 2008 I folded and paid Washington Mutual $995.00 for the privilege of locking into a 5/1 LIBOR Interest Only ARM at 6.62%.

To call this streamline refinance which I paid for the privilege of getting a “modification” is disingenuous at best; my “mortgage modification” consisted of nothing more than a five-year fixed rate interest only loan with a new higher (not lower) payment. The interest rate was not reduced, indeed, it increased.

Regarding the statement: The homeowner applied for another modification in 2009. This is correct; I initiated a modification request on 2/24/09 and was denied on 8/25/09 because: “Your property equity exceeds our program guidelines.”

Regarding the statement: In the summer of 2009, in March of 2010, and in May of 2010, we notified the homeowner that she did not qualify for a second modification. We determined that modifying the loan would produce less value to the loan’s owner than foreclosing, using analysis based on the Treasury’s model. I stand by my original comments: That is not correct. I have two written letters from Chase, which I have shared with you.

To reiterate: The first denial, dated August 25, 2009, states in one sentence: “Your property equity exceeds our program guidelines.” There is no reference to the Treasury’s model as a reason for denial; nor is there reference to a residency issue. The way Chase has worded this new response is disingenuous at best.  

The second written communication dated March 5, 2010 states “We are unable to offer you a Home Affordable Modification because we are unable to verify that you do live in the property as your primary residence”. There is no reference to the Treasury’s model as a reason for denial; regarding the residency issue, Chase has three years of Federal Income tax returns at the address (I can provide five years worth) & five years of voting records. Chase confirmed my residency was not an issue and reopened the case (which is why they kept working on it and allegedly generated another denial in May 2010).

Regarding: the May 2010 denial Chase references. As previously noted, I have received no written communication of this and know only from a call I placed yesterday (5/13/10) that, per Rafael in Loss Mitigation at Chase, the modification was denied on 5/4/10. It is again disingenuous at best to state Chase notified the homeowner, as, without your intercession, I would STILL have no knowledge of this denial; I waited again for the mailman today before responding and there is nothing from Chase.

Regarding the statement: We determined that modifying the loan would produce less value to the loan’s owner than foreclosing, using analysis based on the Treasury’s model. This has not been communicated to the homeowner in writing at any time. I am aware of this ONLY through your email asking for a comment on Chase’s initial response and subsequently through the above referenced Springboard conference call of 5/13/10. Also, I am not certain but I believe the Treasury’s model applies to HAMP modifications, and was we know, I have never qualified for a HAMP modification.  

Finally, I stand by my statement submitted 5/14/10: The opaque banking procedures practiced by Chase do not help the homeowner, they help only the investors. 

If I knew back in February 2009, or even August 2009, what I know today — that the investors behind my loan find it more profitable to foreclose (negative net present value) than to work with me on a modification — I could have made an informed decision. I would have taken the hit and drained my IRA to bring the loan down to a smaller amount and refinanced while my credit record was excellent. At this point, my savings are depleted and my credit record is distressed; even if I reduce the loan amount, no lender will refinance.

 

Springboard credit.org Nonprofit Consumer Credit Management

The Wall Street Journal reporter was working on many facets of the “worse off” story, including speaking with a representative of the Springboard credit.org Nonprofit Consumer Credit Management organization for a perspective on the situation. They offered to help me try to work something out with Chase and I jumped at the chance. I was devastated by the “negative net present value” comment Chase provided and while I’d received nothing in writing about it, the state of affairs seemed dire. Why hadn’t Chase communicated they would prefer to foreclose rather than modify my loan from the get-go? Why string me along for over thirteen months? It simply made no sense. How could anyone make an informed decision without timely and clear answers?

I would take help from anyone with something to offer, and while I’d been working with a credit counselor at CCCSDV.org, perhaps the folks at Springboard www.credit.org could help. It was free, they were offering to help; Springboard had professionals who specialized in home loan modifications and I needed all the help I could get – I went for it.

Chase loan modification denial due to negative net present value

May 12, 2010: Even as I was taking Ms. De Laura’s (214) 626-2671 “courtesy” call from the Chase Home Lending Executive Office, an e-mail from the Wall Street Journal was waiting in my in-box, with a comment from Chase. Per the reporter:

“Here’s the response I got from Chase re your situation:

Chase communicated to the customer in the summer of 2009, in March of 2010, and in May of 2010 that the customer would not qualify for a loan modification because the analysis showed a negative net present value.   

 Is that correct?”

Was this another test? I composed my thoughts and replied:

“That is not correct. I have two written letters from Chase. The first denial, dated August 25, 2009, states in one sentence: “Your property equity exceeds our program guidelines.” 

The second written communication dated March 5, 2010 states “We are unable to offer you a Home Affordable Modification because we are unable to verify that you do live in the property as your primary residence”.

The case was reopened once I provided my voting records and residency was proven. 

There is nothing in May of 2010, indeed Shawnte Trowlsdell told me on 5/10/10 a letter was to have gone out on April 30th but it did not; she could not see the letter and did not know what it said or why it was not sent. My mailman has come and left today and there are no letters from Chase. The phrase “negative net present value” has never been used nor do I really know what it means…

Two minutes ago Chase called to tell me they were composing a written response to my letter to Mr. Lowman.” 

I was beside myself. I now had an answer, whatever “negative net present value” meant, because this was the first time I’d ever seen those four words in a sentence, and the sentence came from Chase via The Wall Street Journal. There was nothing in writing from Chase about this, nor had those four words ever been expressed in any of my hundreds of calls to Chase.

I didn’t know what it meant but I did know that the response from Chase was curiously worded in such a way as to imply I’d been told all this before, which was simply not true. There were really two sentences in the quote, strung together with the word “because”, only the “because” had never been shared with me. 

The Wall Street Journal needed to know this so I faxed the reporter copies of my two denial letters. I also sent a shout-out to my banker and broker friends to learn the meaning of “negative net present value” 

I spoke with my broker and another broker and a banker I knew – all were mystified by the term “negative net present value” and thought there must be some kind of mistake since I was not underwater in the loan, indeed; I had some equity, as evidenced by the August 2009 denial. The banker said she would dig deeper and get back to me. This was the same banker who had helped me prepare my monthly expenses spreadsheet; she was familiar with my situation and eager to offer assistance. 

Finally I sent an email to the Wall Street Journal reporter and expressed my frustration over not knowing what those four words meant and anger at having never seen them before. They seemed like more bank-talk designed to confuse and obscure, why couldn’t the guidelines and the formulas be transparent? 

His reply was chilling: 

What they mean, I believe, is this: It isn’t in the best financial interests of the owner of the loan to give you a modification. I believe they mean this: the net present value formula shows they would be better off either collecting payments from you under the current terms or foreclosing.”

 I hoped he was mistaken but I knew at that very moment that Chase had been playing games for with me for over fourteen months; they had only provided a clear answer when backed against the wall by the Wall Street Journal.

Was this the new American way, or just the Chase way? It seemed to me that Chase was continuing the predatory loan practices devised by Washington Mutual, and they were even better at playing the game.  

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