Monday, July 4, 2011

3-Years Later... BAC and JPM Cutting The Principal On Options ARM Mortgages

It pays not to pay your bills on time it seems. 3 years later we are still at this. The New York Tienms reported Sunday that BAC and JPM have started reducing the principal owed on tens of thousands of mortgages "where the banks deem the loans especially risky, even if the borrowers have not asked".

It cited a case in Florida where a lady's principal balance was cut in half.

The banks are targeting holders of option ARM loans, i.e. pay option adjustable-rate mortgages, loans in which borrowers have the option of skipping some principal and interest payments.

Such "option ARM" loans were seen as especially high risk in the wake of the financial crisis;

Reuters: "One law professor quoted by the Times said the banks were behaving in contradictory ways, modifying some loans that should not be and not modifying some loans that should be".

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