JP Morgan Chase 2010 Annual Report Download - page 135

JPMorgan Chase & Co./2010 Annual Report 135
successful trial payment period of at least three months. Approxi-
mately 87% of on–balance sheet modifications completed since
July 1, 2009, were completed in 2010, with approximately 10%
completed as recently as the fourth quarter of 2010. Performance
metrics to date for modifications seasoned more than six months
show weighted average redefault rates of 25% and 28% for HAMP
and the Firm’s other modification programs, respectively. While
these rates compare favorably to equivalent metrics for modifica-
tions completed under prior programs, ultimate redefault rates will
remain uncertain until modified loans have seasoned.
The following table presents information as of December 31, 2010 and 2009, relating to restructured on–balance sheet residential real estate
loans for which concessions have been granted to borrowers experiencing financial difficulty. Modifications of PCI loans continue to be ac-
counted for and reported as PCI loans, and the impact of the modification is incorporated into the Firm’s quarterly assessment of estimated
future cash flows. Modifications of consumer loans other than PCI loans are generally accounted for and reported as troubled debt restructur-
ings (“TDRs”).
Restructured residential real estate loans
2010 2009
December 31,
(in millions)
On–balanc
e
sheet loans
Nonaccrual
on–
balance
sheet loans(d)
On–
balance
sheet loans
Nonaccrual
on–
balance
sheet loans(d)
Restructured residential real estate loans – excluding PCI loans
(a)(b)
Home equity – senior lien
$
226
$
38
$ 168 $ 30
Home equity – junior lien
283
63
222 43
Prime mortgage, including option ARMs
2,084
534
642 249
Subprime mortgage
2,751
632
1,998 598
Total restructured residential real estate loans
–
excluding PCI
l
oan
s
$
5,344
$ 1,267
$ 3,030 $ 920
Restructured PCI loans(c)
Home equity
$
492
NA
$ 453 NA
Prime mortgage
3,018
NA
1,526 NA
Subprime mortgage
3,329
NA
1,954 NA
Option ARMs
9,396
NA
2,972 NA
Total restructured
PCI loans
$
16,235
NA
$ 6,905 NA
(a) Amounts represent the carrying value of restructured residential real estate loans.
(b) At December 31, 2010 and 2009, $3.0 billion and $296 million, respectively, of loans modified subsequent to repurchase from Ginnie Mae were excluded from loans
accounted for as TDRs. When such loans perform subsequent to modification they are generally sold back into Ginnie Mae loan pools. Modified loans that do not re-
perform become subject to foreclosure. Substantially all amounts due under the terms of these loans continue to be insured and, where applicable, reimbursement of
insured amounts is proceeding normally.
(c) Amounts represent the unpaid principal balance of restructured PCI loans.
(d) Nonaccrual loans modified in a TDR may be returned to accrual status when repayment is reasonably assured and the borrower has made a minimum of six payments
under the new terms. As of December 31, 2010 and 2009, nonaccrual loans of $580 million and $256 million, respectively, are TDRs for which the borrowers have not
yet made six payments under their modified terms.
Foreclosure prevention: Foreclosure is a last resort and the Firm
makes significant efforts to help borrowers stay in their homes.
Since the first quarter of 2009, the Firm has prevented two foreclo-
sures (through loan modification, short sales, and other foreclosure
prevention means) for every foreclosure completed.
The Firm has a well-defined foreclosure prevention process when a
borrower fails to pay on his or her loan. Customer contacts are
attempted multiple times in various ways to pursue options other
than foreclosure (including through loan modification, short sales,
and other foreclosure prevention means). In addition, if the Firm is
unable to contact a customer, various reviews are completed of
borrower’s facts and circumstances before a foreclosure sale is
completed. By the time of a foreclosure sale, borrowers have not
made a payment on average for approximately 14 months.
Foreclosure process issues
The foreclosure process is governed by laws and regulations estab-
lished on a state-by-state basis. In some states, the foreclosure proc-
ess involves a judicial process requiring filing documents with a court.
In other states, the process is mostly non-judicial, involving various
processes, some of which require filing documents with governmental
agencies. During the third quarter of 2010, the Firm became aware
that certain documents executed by Firm personnel in connection
with the foreclosure process may not have complied with all applica-
ble procedural requirements. For example, in certain instances, the
underlying loan file review and verification of information for inclusion
in an affidavit was performed by Firm personnel other than the affi-
ant, or the affidavit may not have been properly notarized. The Firm
instructed its outside foreclosure counsel to temporarily suspend
foreclosures, foreclosure sales and evictions in 43 states so that it
could review its processes. These matters are the subject of investiga-
tion by federal and state officials. For further discussion, see “Mort-
gage Foreclosure Investigations and Litigation” in Note 32 on pages
282–289 of this Annual Report.