the visible hand

it is the theory which decides what can be observed – einstein

JP Morgan on the sanctity of contracts…

Posted by ecoshift on April 12, 2010

JPMorgan Chase Argues Against Mortgage Modifications, Citing Sanctity Of Contracts
From the Huffington Post

With millions of homeowners losing their homes to foreclosure during this recession, megabank JPMorgan Chase plans to argue against the Obama administration’s latest weapon in its fight to stem the problem — principal cuts for struggling borrowers — by citing the sanctity of contracts and the borrower’s “promise to repay.”

In testimony to be delivered Tuesday afternoon, David Lowman, chief executive officer for home lending at the “Too Big To Fail” behemoth, will fight back against the program which calls for lenders and investors to decrease the outstanding debt owed on a home mortgage. While his competitors at Bank of America, Wells Fargo and Citigroup plan to dance around the issue — judging from their prepared remarks — Lowman cut right to it: borrowers don’t deserve it.

“Like all loans, mortgage contracts are based on a promise to repay money borrowed,” Lowman’s prepared remarks read. “Importantly, there is no provision in the mortgage contract, express or implied, that the lender will restore equity or reduce the repayment amount if the value of the collateral — be it a home, a car or a stock market investment — depreciates.

“If we re-write the mortgage contract retroactively to restore equity to any mortgage borrower because the value of his or her home declined, what responsible lender will take the equity risk of financing mortgages in the future? What responsible regulator would want lenders to take such risk?”

read more…

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