In an “all options on the table approach,” lenders across the United States are giving cash incentives to borrowers who complete short sales on their properties. A short sale is an alternative to the foreclosure process. It essentially allows a borrower to sell his or her home for an amount less than what is owed on the mortgage.
Even without the incentives, short sales have been increasing every month as of late. And these numbers are likely to increase exponentially with big lenders such as JP Morgan Chase, Bank of America, and Wells Fargo, to name a few, offering anywhere from $5,000 to $35,000 at closing to sellers. Bank of America alone completed 107,000 short sales in 2011, which was up from 92,000 in 2010.
With short sales, lenders are trying to prevent themselves from incurring the financial expense and protracted human work hours involved with foreclosure litigation. In most instances, a short sale coupled with incentive payments to borrowers, can save lenders money compared with the expenses. There are even federal programs that borrowers could qualify for that may provide them with financial relief if the short sale is approved.
According to a 2008 survey by the Joint Economic Committee of Congress, lenders paid an average of about $50,000 when a foreclosure takes place. With the cost of legal services on the rise, it’s no wonder why lenders such as Coldwell Banker are opting to pay up to $20,000 in incentives versus going through a long foreclosure process.
For now, incentive payments are far and few between; however, lenders will have to keep this option open because loan modifications are not always available to borrowers . And banks are well aware of the fact that many of these mortgage payments are long over due. In Florida alone, half of its loans in the foreclosure process are two years past due.
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If you have fallen behind on your mortgage payments and are facing foreclosure, it is imperative that you assess your legal rights and talk to one of our real estate attorneys today. Do not walk away and allow the bank to foreclose on your home. One of our attorneys can defend a foreclosure lawsuit, which might give the home owner additional time to secure a short sale or loan modification. Contact us today.