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Help for cash-strapped homeowners

Posted by Cheryl Costa  November 1, 2008 01:59 PM

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Nationwide, 7.3 million American homeowners are expected to default on their mortgages between 2008 and 2010. Knowing this, JPMorgan Chase and Bank of America have announced broad sweeping plans to help homeowners who are on the verge of foreclosure.

JPMorgan Chase plans to change the terms of $70 billion in mortgages for homeowners who are behind in their payments. The program is expected to impact approximately 400,000 homeowners or just under 5 percent of all the mortgages held by the bank.

Bank of America, under a settlement offer with 11 states, has agreed to permanently write down the amounts owed on approximately 400,000 mortgages.

So why are the banks doing this? Several believe that they can best improve the value of their loans by modifying the terms of existing loans instead of using foreclosures. That's probably not too surprising as both parties tend to lose when a house is foreclosed. The homeowner obviously loses their home, and, generally, the bank doesn't receive as much as it otherwise could for the home. Plus, the bank incurs a lot of legal fees when it follows the foreclosure route.

To learn more about the programs offered by these banks and some others, check out this New York Times article.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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D. Abraham Ringer is a CERTIFIED FINANCIAL PLANNER practitioner and a Financial Adviser with Morgan Stanley Global Wealth Management in Boston. He is registered in MA, NH, NY and several other states to which his articles are directed. For more information please visit
Financial Planning Association™ of Massachusetts has 900 members who specialize in the financial planning process. Many of its members engage in philanthropic pro bono work in their communities, recommend legislation, elevate public awareness, promote financial literacy, and advocate for sound economic and tax policies.
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