Chase-ing Mortgage Modifications

JP Morgan Chase (JPM: 43.48 -0.89%) announced today that it has approved 138,000 trial mortgage modifications since April 6 for homeowners on the precipice of foreclosure.

Processing began through President Obama’s Making Homes Affordable program, which was unveiled in April. Chase has approved 87,100 trial modifications through MHA, and 44,100 have made their first payment. But for loans that do not meet MHA’s qualifications, Chase offers another tier of modification. Chase has approved through its own program 50,900 loans, and 9,500 have made their first payment.

Of the 138,000 approved and modified loans, 53,600 have made a first payment.

“We’ve made really good progress,” said Thomas Kelly, a spokesman for Chase. “The volume has just been enormous since the program was announced, and there’s more coming in the pipeline every week.”

Through the MHA program, qualified borrowers can have their endangered mortgages reduced for principal, interest, property taxes and hazard insurance to 31% of their gross income. These modifications usually come from a reduced interest rate or an extended length of the loan.

But for those borrowers who cannot qualify for the MHA program, for reasons such as a jumbo mortgages, rental properties or unoccupied properties on the market, Chase modifies these loans under its own program.

In Chase’s modification process, the payments may be adjusted from 31% of the borrowers gross income to a range that keeps the Net Property Value at a positive, where the investor can still make a profit.  The range can reach anywhere from 36-38%.

“It has taken time,” Kelly said.  “Because of the volume, it has taken a large infrastructure and a lot of people to staff it.”

Both programs provide better options for both the borrower and the investor than foreclosure, Kelly said.

Chase has an additional 155,000 applications currently churning in the review process.

Write to Jon Prior.