JP Morgan to modify $70bn bad mortgages

3 November 2008 12:28 pm

The New York bank will take the mortgages of up to 400,000 borrowers and lower rates, change terms and raise loan to value ratios.

It is the first bank in the US to make such a move, but more are predicted to follow as 7.3 million Americans are set to default on their home loans between now and 2010, according to Moody’s.

Many of the bad loans on JP Morgan’s book come from the $54bn loan book inherited from Washington Mutual, which crashed in September.

J.P. Morgan executive for mortgages and branch banking Charles Scharf told the Wall Street Journal that "it doesn't make sense for us to wait" to tackle the problem.

He says: "We've heard loud and clear and are listening to what some of the thought leaders around the country are saying. Our goal in doing this was to come up with something that we think will lead the industry in helping as much as possible on this issue."

J.P. Morgan has recently received a $25bn injection from the Fed’s Treasury program. Scharf also told the WSJ: "The stronger you are, the more willing you are to spend money and do a whole series of things.”

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