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BANKS PAYING HOMEOWNERS TO AVOID FORECLOSURES

With the increase in foreclosures, some banks are offering as much as $35,000 or more in cash to delinquent homeowners in an effort to move troubled mortgages off their books.  In the past, banks were not as open to short sales because they felt they were losing a lot of money by accepting less money from a buyer than a seller’s outstanding loan.  However, because of the increased regulatory environment across the nation, banks are working with potential sellers by pre-approving deals, streamlining the closing process, foregoing their right to sue for unpaid debt and in some cases providing large cash incentives to sellers to free up the properties.  Banks were finding that homeowners were staying in their home and essentially living “rent-free” while they were trying to negotiate a modification that would decrease their principal and monthly payments. Moreover, for banks, approving a sale for less than is owed can cut valuable time in terms of re-selling the property.
On average, lenders spend about 348 days to foreclose on a home and an additional 175 days to sell the property. In the end, a modification may not work out and banks were losing lots of money by waiting on modification and then going through the foreclosure process.  After looking at the landscape of the housing market, many of the big banks are doing a cost benefit analysis of whether it is smarter for them to offer incentives to homeowners to move troubled mortgages off their books or continue to try and modify a loan that may or may not work out in the end.  It seems clear that banks think moving the properties, even if they lose money on the front end, is in their best interest.

The take away from all of this is simple: if clients are in negotiations with their bank for a loan modification, the bank may offer a cash incentive for them to short sale their property in lieu of modification.  If they qualify, some homeowners are walking away with up to $35,000 dollars.  The banks that are offering cash incentives include JP Morgan Chase, Wells Fargo, and Citigroup.  However, other banks and investors are offering incentives as well.

Reminder:  Real Estate Agents who would like to learn more about our attorney negotiated Short Sales can attend our next Short Sale Open House on Tuesday, April 3 (5:30 – 6:30 pm) OR if you are interested in bringing your Short Sale clients to a free 30 minute consultation with Attorney Lee Drizin, please contact Sherise Kyles at sherise@leedrizin.com or 702-798-4955.

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