by Justin L. Seekamp
A recent article from Bloomberg News details the recent decision by many major banks involved in the mire of foreclosure to, instead of chosing to foreclose on delinquent homeowners, offer homeowners money in return for the homeowners then essentially handing over the keys to their respective homes. The article from Bloomberg News can be read in its entirety here.
The article found that deals such as these ones have increased exponentially and are accounted for 33% of financially distressed transactions in November 2011, up from 24% a year earlier. These deals are typically either short sales or deeds in lieu of foreclosure. A short sale is essentially when the lender allows the homeowner, whether delinquent or not, to sell the home for far less than what the home is worth and then allow the homeowner, sometimes, to no be responsible for the remaining debt owed to the bank. A deed in lieu of foreclosure is when the homeowner and the bank agree that a short sale or typical sale is not going to occur and the homeowner and bank then agree to have the homeowner turn the deed to the home over to the bank and then allow the homeowner, sometimes, to not be responsible for the debt owed to the bank. The article detailed the particular situation for a delinquent homeowner named Karen Farley. The article stated that Ms. Farley had failed to make a mortgage payment for a year until she then spontaneously received what she initially believed to be a form letter in which her mortgage lender, JPMorgan Chase, offered to pay Ms. Farley $30,000.00 to move out of her home and also owe nothing on the mortgage that she had with JPMorgan. Ms. Farley had received an approved short sale from JPMorgan in which she sold her home for $200,000.00 less than what she owed on it and still received $30,000.00 in moving costs.
Are these large banks realizing that being nice is the way to go? Likely not, as the article details that it is more likely to be a cost saving device for these large banks that hold millions of mortgages in which homeowners are delinquent in their payments and the foreclosure process may take a long time. The Bloomberg News article states that the reasons behind these offers is that, “Losses for lenders are about 15 percent lower on the sales than on foreclosures, which can take years to complete while taxes and legal, maintenance and other costs accumulate.” Additionally, the large lenders may have chosen to take the easiest option out and forgo the fact and the increased scrutiny facing many of these large banks from their faulty foreclosure activity.
The fact that many of these banks are now offering homeowners substantial sums of money to move out of their homes sounds like a deal to good to be true. To be sure that this is not the case, seek representation from a qualified and experienced Florida foreclosure attorney to make sure that the deal is really all its cracked up to be.
