JPMorgan Chase & Co is putting on a kinder, gentler face as it overhauls a unit that negotiates with borrowers whose homes are headed into foreclosure.

In a sign of the bank's sensitivity to the issue of callousness to borrowers, it is re-christening its Loss Mitigation department as Borrower Assistance, according to Frank Bisignano, JPMorgan's chief administrative officer who was assigned by Chief Executive Jamie Dimon in February to fix the bank's mortgage problems.

Bisignano sent a memo to bank employees on Monday announcing a reorganization of the bank's residential mortgage business under new executives. JPMorgan's mortgage problems, including allegations of abusive foreclosure practices, are the main reason the bank fell as much as $7 billion short of its profit potential last year, Chief Executive Jamie Dimon told shareholders earlier this year.

Bisignano said in an interview with Reuters that JPMorgan is shifting its foreclosure unit more aggressively toward offering affordable terms to delinquent borrowers to help both consumers and the bank.

Modifying a loan is much more economical for the firm than foreclosing, he also noted in the memo to employees that was obtained by Reuters.

On another front, Bisignano is deploying risk-management experts from JPMorgan's investment bank to work through problem portfolios of mortgage loans and bank-owned real estate. The effort will be led by Craig Delany, who handled critical short-term funding of JPMorgan during the financial crisis.

Delany will report to Bisignano and to Matt Zames, co-head of global fixed income at the investment bank, according to the memo.

Dimon earlier this year said legal and other issues related to residential mortgages, including billions of dollars of warranty claims from investors in mortgage-backed securities, were the main reason it failed to last year to meet its profit potential of $22 billion to $24 billion.

The reorganization of the mortgage foreclosure area follows a plan that JPMorgan submitted last week, under an agreement with federal regulators, to revamp how it handles troubled mortgages. JPMorgan and other large banks have been the subject of investigations since last year of shoddy documentation and other practices in foreclosure procedures.

The new Borrower Assistance department will be headed by Pat Sheehy, who was praised in the memo for work on rebuilding businesses at the bank over the past five years. Sheehy, the bank said, has 27 years of mortgage banking experience, including a sales management post at Countrywide Financial.

(Reporting by David Henry; Edited by Jed Horowitz and Richard Chang)

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