Lenders Sweetening the Short Sale?

It wasn’t all that long ago that lenders wouldn’t say yes to a short sale without hours and days of sweet-talking and arm-twisting. Now some lenders are giving out “perks” to encourage homeowners to do a short sale.

While I personally haven’t seen too much sign of this yet in my own agency’s short sale work, this article insists that it’s going on, among lenders such as Wells Fargo, JPMorgan Chase, and Citi. What’s next? Toasters?

Apparently Wells Fargo is offering up to $20,000 worth of “enhanced financial relocation assistance offers” to some of its borrowers if they do a short sale or simply transfer the title back to the bank through a deed-in-lieu. By the way, doesn’t an “enhanced financial relocation assistance offer” sound a lot like what a teenage girl’s father would offer her undesirable boyfriend? (“Here’s a hundred bucks, kid, if you don’t come around anymore.”)

Anyway, Wells Fargo is doing this in Florida and some other states where the foreclosure process has gotten longer. It applies to first-lien loans that Wells Fargo itself owns, which is a pretty small share of the total loans it services.

JPMorgan Chase appears to be doing something similar for borrowers who agree to a pre-foreclosure sale, with a report of a $20,000 Chase offer to a Florida borrower, although the company won’t get specific about its offers.

But we loved what Chase said about its approach: “…a short sale is a better result for the borrower, the servicer, the investor, and the neighborhood than foreclosure.” I can guarantee you we’ll be quoting JPMorgan Chase on that.

Add Citi to the list too, as that lender says it is offering an average incentive of about $12,000 for short sales in which Citi itself owns the loan. The homeowner gets that once the sale closes.

We’ve always told homeowners that they may not walk away with any cash after a short sale, but at least they will be out from under the loan. It looks like some of them may now end up with some cash after all. That could be a big help in paying for a move or a deposit on a rental home.

Bank of America, by the way, doesn’t appear to offer incentives, but says it has improved its procedures to reduce its short sale red tape. That’s definitely a good thing. Also, they’re allowing agents to make a backup offer if the original potential buyer walks away from the deal. That keeps us agents from having to start the whole transaction all over again.

What this all really demonstrates, though, is what we’ve been saying for the past several years: The short sale really is a great alternative to foreclosure (we’d call it a “win-win” if that wasn’t such a cliché). It’s heartening to see these major lenders recognizing that fact.

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