Executives from Bank of America, Wells Fargo, and J.P. Morgan Chase argued before the House Financial Services Committee that reducing mortgage principal only makes sense for a few borrowers with high-risk loans. Otherwise, reducing principal will only lead to many other borrowers demanding the same treatment.
More than 11 million households are underwater, estimates First American CoreLogic. Writing down all their loans would cost $700 billion to $900 billion, J.P. Morgan Chase projected in testimony.
Spending this kind of money to write down principal would raise costs for borrowers and would result in mortgage investors demanding more interest and greater down payments, Chase testified.
In materials released before Congressional testimony, the Bank of America says it will report that about 1.44 million of its own mortgage customers are 60 days or more delinquent. That’s nearly 14 percent of the 10.4 million first mortgages the company services.
About 50 percent of its struggling customers haven’t made a mortgage payment in more than a year and 50 percent owe more than the value of their homes. Yet, nearly 500,000 haven’t supplied information or taken other initial steps to qualify for mortgage help.
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Source: The Wall Street Journal, James R. Hagerty, and Charlotte Observer, Stella M. Hopkins (04/13/2010)
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