Several distressed homeowners who may be eligible for loan modifications were denied by Chase for a reason that violates the Treasury Department’s rules, according to a recent report from ProPublica, a nonprofit news organization.
ProPublica said that six troubled homeowners had been denied loan modifications by Chase Home Finance, JPMorgan’s mortgage servicing arm, on the grounds that their financial hardships were not deemed to be “permanent.” It was unclear what criteria Chase used to judge a hardship as temporary.
The examples ProPublica found all occurred before the Treasury explicitly banned these types of denials in December. But the homeowners are still in limbo, and some may face foreclosure, ProPublica reported.
In one case, Lesa Herron, of Santa Rosa, Calif., learned in November that she was denied a permanent modification, even though her mortgage payment amounted to more than half her income from her two jobs.
A Chase spokeswoman told ProPublica that the company adapted as quickly as possible to Treasury’s guidelines, but she did not say whether it would review the applications of those who had been denied.
So far, Chase seems to be the only large provider that has turned away homeowners for this reason. The company has roughly 425,000 customers who are eligible for loan modifications but has approved only a little more than 7,000, according to ProPublica.
Chase isn’t the only mortgage servicer slow to modify mortgages. The program has been moving so sluggishly that the Treasury recently said it would simplify the paperwork required to apply for the its loan modification program, in hopes of increasing the number of permanent modifications.
Consumer advocates argue that reducing the principal on loans held by homeowners who owe more than their houses are worth would strengthen the program and give borrowers more incentive to stay in their homes.
We published a related post earlier this week about the different proposals to reduce mortgage principal (we also had a post about how to figure out if you should walk away from your mortgage here).
Have you run into problems trying to get a loan modification? What do you think should be done to improve the program?
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