CHESSNOID

Who gets the automatic modifications and who doesn’t? That’s a good question and the answer depends on the bank and the bank decides which accounts qualify. The banks have finally decided to use common sense and start reducing principal instead of allowing accounts to become delinquent and plunge into foreclosure.

The banks don’t have to do this but it is in their best interest. There are literally millions of homes sitting empty right now because banks foreclosed on them or refused to do modifications for customers even though the house became worth less than the loan balance (underwater).

Don’t forget that many of these banks were bailed out with taxpayer money. This is what should have been done across the board in the beginning when they were bailed out. Instead they sat on that money at 0% and bought government securities that paid interest and abused the program.

This was just another favor called in by big banks to their favorite politicians for a hand out. That is why we should have never bailed them out. The too big too fail policy doesn’t work when the the American taxpayers have to bail the banksters out. The banks should have been forced to give modifications across the board with the billions of dollars we gave them.

NY Times:

Two of the nation’s biggest lenders, JPMorgan Chase and Bank of America, are quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk.

Rula Giosmas is one of the beneficiaries. Last year she received a letter from Chase saying it was cutting in half the amount she owed on her condominium.
…
Banks are proactively overhauling loans for borrowers like Ms. Giosmas who have so-called pay option adjustable rate mortgages …

Ms. Giosmas bought her two-bedroom, two-bath apartment north of downtown Miami for $359,000 in early 2006, according to real estate records. She made a large down payment, but because each month she paid less than was necessary to pay off the loan, her debt swelled to about $300,000.

Meanwhile, the value of the apartment nosedived. By the time Ms. Giosmas got the letter from Chase, the condominium was worth less than half what she paid. “I would not have defaulted,” she said. “But they don’t know that.”

The letter, which Ms. Giosmas remembers as brief and “totally vague,” said Chase was cutting her principal by $150,000 while raising her interest rate to about 5 percent.