The nation’s largest mortgage lenders have reluctantly agreed to alter the home loans of about 100,000 financially troubled consumers in recent months as a result of pressure from both the federal government and a coalition of the 50 state attorneys general, according to a report from the Wall Street Journal. These lenders – Bank of America, Citi, JPMorgan Chase, Wells Fargo and Ally Financial, the company that controls GMAC – have been criticized for being too slow or unwilling to let some underwater borrowers make their monthly payments more affordable by cutting thousands of dollars off the loan principal.
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But the state attorneys general will likely incentivize this type of loan alteration during negotiations over the settlement of a national investigation into the way these lenders dealt with home loans and foreclosures, the report said. Further, the investigators are “very likely” to make such loan agreement changes mandatory for some borrowers as part of the settlement.
Many consumers who could benefit from a home loan alteration are those who have so-called underwater properties – those that are worth less than the remaining balance on a loan. However, lenders are not willing to do so because it typically would result in their losing a considerable amount of money.