Be on the Lookout for: Mortgage Loan Modifications

July 12, 2011— -- Being rewarded for doing the right thing is nothing unusual but hard to believe when big banks are the ones doing the rewarding.

Chase and Bank of America are starting to reduce what their at-risk customers owe on their mortgages but the banks' definition of "at risk" includes people who can make their mortgage payments and aren't even in default.

Chase and Bank of America, among others, were penalized last month for not doing enough to help homeowners who are falling behind on payments.

Banks are choosing whose mortgages to modify from a pool of homeowners with option adjustable rate mortgages, or loans with low initial payments and low interest rates for set a period of time. After that time, the rate would jump unless the homeowner could pay off the rest of the mortgage. But such loans didn't turn out to be as bad as expected because interest rates never jumped that high.

"By proactively contacting pay option ARM customers and discussing other products with better options for long-term, affordable payments, we hope to prevent customers from reaching a point where they struggle to make their payments," a Bank of America spokesman told the New York Times.

Chase declined a request for comment.

There's no telling why the banks deemed option ARM loans to be riskier than others or why they are cutting mortgages for those who are making on-time payments over those who really need the breaks.

But if you do qualify, be on the lookout, you might be one of the lucky few.