Short Sale Blog

This Edmonds, WA, homeowner avoided foreclosure through a short sale. He owed over $440,000 on his Suntrust first mortgage, and $259,000 on his Chase second mortgage - a total of $700,000 of debt. But his home was valued at only $429,000.

Chase has just issued their approval letter for the short sale, accepting $20,000 net proceeds on the $259,000 mortgage balance owing - a discount of $239,000. The short sale approval letter waived the Edmonds homeowner of ever having to repay that deficiency.

You can read the Chase short sale approval letter here: 3.7.12_Chase_2nd_Lien_240k_Deficiency_Debt_Settled_Short_Sale_Approval.pdf

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

My, how things have changed in a year or two!

It was not so long ago that struggling homeowners had to beg lenders to approve them for a short sale. But now, some of the major lenders are making the first move - contacting the sellers themselves to propose a short sale, and even offering cash incentives to homeowners!

These short sale incentive programs are not widely publicized, and they are considered to be “by invitation.” As banks realize that they may recover more of their losses by allowing a short sale than by pushing to foreclosure, they are targeting homeowners who are at risk of defaulting - often, before they are even in mortgage trouble.

The lenders proactively contact these homeowners, suggesting that they undertake a short sale, and often offering a hefty cash payment to the homeowner upon completion of the short sale. These cash payments are reported to range from a few thousand dollars to up to $35,000.

Some of the lenders implementing these incentive programs, and the reported incentives, are:

Bank of America Cooperative Sale Program - upon completion of the short sale, the homeowner receives a $2,500 to $3,000 relocation payment, and the real estate agents receives a 6% commission.

Citi Proactive Short Sale Program - according to the HousingWire, the average cash payment to sellers this year was $12,000

Chase - offers cash payments up to $30-$35,000 to sellers

GMAC - there are reports of cash incentive payments to sellers of up to $1,600

Litton - reportedly offers cash incentives to sellers of $3,000 to $5,000

Wachovia/Wells Fargo - offers cash payments of 1% of the sales price (minimum $2,500) for sellers.

Although these programs are considered “invitation only” - meaning that the lenders contact the homeowners, rather than homeowners applying for them - there are some reports of short sales negotiators successfully requesting that the homeowners they represent be considered for incentive programs.

But the big take-away from this story is that lenders no longer merely consider short sale requests - but that they are now proactively initiating short sales. This means that they are far more likely to consider and approve any short sale offer put to them than they were a year or two ago.

As Citi’s senior vice president of loss mitigation told the HousingWire, "We're not going to turn anybody away if the short sale meets the net requirement we're looking for." This means that the lenders are no longer looking for stories of exceptional hardship in order to approve a short sale. As long as the short sale represents the best way for the lender to maximize their recovery on a distressed asset, they will approve it.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

J.P. Morgan Chase has apologized for overcharging 4,500 active-service military members on their mortgages, and for wrongfully foreclosing on 18 of them. But for California Rep. Bob Filner, an apology is not enough. “Everything is impersonal. Nobody is ever responsible and yet these people’s lives were turned upside down.”

This story was reported last month by the Wall Street Journal. The report indicates that a spokesperson for the lender has acknowledged that they did not comply with the law, and that they are embarrassed about the incident.

The Servicemembers Civil Relief Act, or SCRA, is a federal law that protects soldiers, sailors, airmen and Marines from being sued - both when in active service, and for up to a year afterward. The origins of the act date back to the Civil War; the law was redrafted under its current title in the 1940s.

Two of the results of this act, for servicemembers who fall under its protection, are that interest rates are capped, and foreclosures cannot take place.

Chase’s error was discovered partly because a U.S. Marine Corps captain who felt that he had been overcharged on his mortgage filed a lawsuit against the lender. The lawmakers who participated in this hearing expressed their concerns that, although this problem was discovered with this one lender, it may also occur with many other lenders - and that other military personnel may also be being overcharged or threatened with having their homes taken away.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/