JPMorgan Chase: Mortgage modifications just as effective without principal reduction

Contributed by Craig Saxon (, who wrote:  “I’m sure those that work non-performing notes are aware that principal reduction is not as important as payment reduction, but apparently Fannie and Freddie are not!”

Reducing the amount a homeowner, facing default, owes on their mortgage sounds like it would be a great idea to include in a mortgage modification.

But it’s likely just a feel-good factor, according to newly released research from JPMorgan Chase Institute, a think tank arm of the bank.

JPMorgan just released the results of its mortgage modification programs, in a report found here.

The survey looked at data from more than 1 million Chase mortgage customers who received a modification, and created a data asset of 450,000 de-identified modification recipients.

Some of the findings are logical. For example, a 10% mortgage payment reduction reduced default rates by 22%.

Others, like the subject of this article’s headline, are not as obvious.

“There was no material difference between the post-modification default rates of borrowers who received principal plus payment reduction and borrowers who received only payment reduction,” the study finds. “This finding suggests that ‘strategic default’ was not the primary driver of default decisions for these underwater borrowers, meaning that they were not defaulting simply because they owed more on their mortgage than their house was worth.”


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