Confused By Chase Bank 1st
and 2nd Loan Modification

by Kevin
(Phoenix, AZ)

I have a first and second mortgage with Chase. About 2 yrs ago I tried working with them to modify since I was running out of places to borrow money to keep my mortgage current. Just over a year ago, I gave up and quit paying the mortgage. My current home value is about $350k and I owe $505k. I live in the Phoenix area that has been hit hard. I believe in paying my bills and am trying to make a workable situation.

Have been working with Chase since then to modify both 1st and 2nd mortgage. After much up and down I have now made 8 modified payments on 2nd mortgage and 5 payments on my first. Not a huge reduction in either mortgage, but with careful spending, I'm staying above water.
Here are the questions.

1. My 1st mortgage is in underwriting waiting for something to happen with the Treasury Department. No other details given to me. Do you know what Chase is waiting for and any idea when it will happen?

2. My 2nd mortgage is pressuring me to modify even though the first has not closed yet. Initial offer was about a $20 a month reduction on a $110,000 loan from my original loan and $120 more a month than my modified payment. Interest only at about 6.78% interest. The 1st mortgage said the 2nd shouldn't close or be modified until after the first. A $20 reduction doesn't help me. If I was only $20 short on making the payment, I would have begged on my days off at the exit ramp of the expressway to make the payment. I told them that I needed to see what the final numbers were on the first before I would commit. If it is a very small reduction, I have no choice but to file bankruptcy. Is this right that they want to close first on the 2nd mortgage, or are they trying to pull something?

Mortgage Loan Modification Answer:

by Loan Modification Expert - Dan North

You are right this is confusing. It sounds like you have two different Loss Mitigation Officers from Chase working with you on the loan modifications. It should be one person so that the two are coordinated but apparently that did not happen.

I have a couple questions to help clarify what is happening:

• Are your mortgages being modified by Chase under the HAMP program and are you on a 3 month Trial Modification?



• Is your modified mortgage payment on your 1st mortgage 31% of your gross monthly income?



• Is your modified interest rate on your 1st below 4%?



• What is the modified interest rate on the 1st? (that will set the cap on the interest rate after year 5 on your 2nd)

If these are HAMP modifications you are already past the 3 monthly payment trial and if the modified amounts are still not affordable you can propose that they make further modifications to make the loan affordable. If you have mortgage insurance they can do a partial claim with your mortgage insurer to pay any delinquent amounts on your mortgage which will reduce your payments by not adding that amount to the end of the mortgage, the partial claim amount will be a no interest loan from the mortgage insurance company. Chase can also do a principal forbearance which will lower your payments. You can also extend the length of the mortgage which will also bring down the payments. Each of those options are solutions that lenders generally are willing to do.

I will address your 2nd as that one is cut and dry. A modified interest rate of 6.78% is too high, under the Making Home Affordable 2nd Lien Program your 2nd mortgage is automatically reduced to 2% on interest only loans for 5 years, then will step up to the interest rate set on your modified 1st mortgage and the 2nd mortgage is to forbear principal to the same proportion as principal forbearance on the 1st mortgage modification.

If the 1st mortgage modification will include a forbearance of principal then the 2nd should wait for the 1st to complete as that will increase the monthly savings on your payment. That may be what Chase is waiting for from the Treasury Dept as the Government will share the cost of reducing your 1st mortgage.

I do not understand why they would have to wait as they can just arrange the principal forbearance and get reimbursed from the government but they may want the paperwork through so they get paid right away before they make that modification. That is not procedure under the HAMP guidelines but they are not strictly following these guidelines or both your mortgages would now be permanently modified with your 2nd mortgage modified payment a lot lower than it is now.

I can not say on your 1st as I do not know what you are paying or what the terms are on your 1st mortgage modification (if you want specific recommendations complete the on-line Pre-Qualify for FasTrac Hardship Loan Modification Form). It should be generally be below 4% and can go as low as 2% unless a higher percent brings the payment down to 31% of your gross monthly income. Remember that the target payment of 31% of your gross monthly income is to include your escrow payment or your property tax, homeowner insurance and home owners association fees if you pay that separately.

If 31% of your gross income is still not an affordable rate then you will need to work out a different mortgage loan modification with Chase and they should be willing to work out something as they do not want more foreclosures in Phoenix.


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