Bank of America, JPMorgan Chase, and Wells Fargo have all started offering cash incentives to their delinquent customers in Florida who agree to a short sale. It’s not unusual for a lender to give a small cash bonus to foreclosed customers who leave their properties in good condition, which has become known as Cash For Keys. What is different about these new programs at the nation’s top three mortgage lenders is that the amounts are significantly higher, up to 20,000 dollars.
The banks cite the length of time that foreclosure takes as their reason for encouraging customers to make short sales. In Florida, it is an average of 619 days, 30 percent longer than it took just one year ago. Short sales, while still not a particularly short process, are much more efficient and overall more beneficial for everyone involved.
In short sales, homeowners are protected from potential deficiency judgments and severe credit hits, while the banks themselves are able to recoup something, instead of nothing, from defaulted loans. They also save money that would otherwise be spent on the eviction process. It is the smarter business move. Real estate agents win, too. They gain a listing, a sale and a commission.
Encouraging short sales is also a public relations boon for banks reeling from a recent lack of confidence from consumers. By helping people to avoid foreclosure, they present a more beneficent image. That improves their overall bottom line by bringing in new customers.
It may be smart business to offer a cash incentive for a short sale, but it really does help people, too. Those facing foreclosure frequently don’t know where they are going to live once their home has been taken away. They are often so strapped for money that they cannot afford a typical first-and-last-month’s upfront payment on a rental property. The cash makes a big difference in helping people to land on their feet. Some may even be able to use it as a downpayment on a more affordable home.
A short sale, relative to a foreclosure, is easier emotionally and psychologically, too. There’s the comfort of knowing that the debt is gone, and with no risk of legal action. A person can truly start fresh. There’s less embarrassment, and the impact on credit is less than it would be for a foreclosure.
More banks are looking into offering significant cash incentives to their delinquent customers who choose short sales. It makes good business sense for them, since they do not lose as much money as they would in a foreclosure. It also is a way for them to give something back to the community and earn goodwill.
The government also has a program, the Home Affordable Foreclosure Alternatives (HAFA), that provides cash, up to 3000 dollars, for short sales. To get the government credit, homeowners must meet certain minimum criteria, including that the loan be owned by the Freddie Mac or Fannie Mae. Through the end of 2012, there is also a federal tax break for short sales.
