JPMorgan Chase Settlement: Good Steps Forward, But More Should Be Done

November 19, 2013—Responding to reports of a final settlement between the US government and JPMorgan Chase, Kevin Stein, Associate Director of the California Reinvestment Coalition, released this statement:

“While details are still emerging, some of the provisions in the settlement will go a long way towards helping homeowners who are struggling to keep their homes. We applaud the focus on principal reduction modifications for first mortgages (modifications that are statistically the most likely to help keep people in their homes) and support the appointment of a strong monitor to oversee the settlement. The bank committing to provide additional quality loans to low and moderate income home buyers is welcome, and could be an antidote to all-cash investors and Wall Street firms that are buying up properties and pushing out first-time home buyers.

CRC also has some concerns about the settlement:

1)The independent monitor should require Chase to submit demographic information on their customers who are facing foreclosure, and whether or not the bank offers modifications to these customers and their neighborhoods to ensure that hardest hit communities receive help, and that fair housing and lending laws are followed.

2)Chase should stop any foreclosure proceedings for borrowers who might be eligible to receive relief under this settlement so that they are not foreclosed on while waiting for a modification.

3)It appears the bank could receive credit for granting forbearances, wherein a homeowner’s monthly payments are temporarily reduced, but their loan balance is not. In most cases, offering a forbearance to a homeowner is a band-aid solution that merely postpones dealing with the underlying problem in the loan. Instead, the bank should focus on offering permanent, sustainable modifications

4)The settlement reportedly includes $2 billion in fines to federal prosecutors. Some of that fine should be used to fund housing counselors and nonprofit attorneys who will work with homeowners to ensure they receive help under the settlement. Part of the fine should also be used to fund the development of more affordable,multifamily housing, a need that has only increased, especially in California, since the mortgage meltdown.

5)Lastly, if Congress doesn’t extend the Mortgage Debt Forgiveness Act, or if it’s not addressed in the final settlement, the principal reduction modifications in this settlement could create unintended tax consequences for homeowners who are already struggling financially.”

In October, CRC, along with 17 other California nonprofits that directly serve homeowners facing foreclosure,released a statement, suggesting that all future mortgage settlements incorporate seven provisions, based on“lessons learned” from previous settlements.The seven provisions are listed below, for more detail on the provisions, visit this link.

All Future Mortgage Settlements Should Include:

1. Relief commensurate with harm caused.
2. Priority on keeping people in their homes through first lien principal reductions.
3. Support for housing counselors and legal service lawyers.
4. Stronger loan servicing standards
5. Support for affordable housing.
6. Transparency and data reporting to ensure relief is distributed fairly.
7. Strong enforcement and monitoring