Saturday’s St. Pete Times had an interesting article about how Bank of America is offering cash to homeowners who are delinquent on their mortgage payments. Instead of pushing for foreclosure, BOA is offering cash in exchange for the homeowners consenting to the home being sold to a third party for less than the amount owed, i.e. a short sale.
In an industry littered with horror stories and negativity, this is good news. If you’re skeptical, don’t be – this is a natural consequence of foreclosure defense attorneys like Stopa Law Firm making it difficult for banks to foreclose through the court process. In other words, take a second look at my website, written in early 2008, including this sentence:
If your bank cannot win its foreclosure lawsuit against you quickly (because you are fighting for yourself and defending your rights), it may be willing to negotiate with you in ways that it otherwise wouldn’t…
I foresaw resolutions like this years ago. It only makes sense. If foreclosure defense attorneys are continuing to make it difficult for banks to win in court, and the court systems are so clogged that cases are moving slowly, it makes perfect sense for banks to try to find a way to avoid the court process and resolve these disputes in other ways. Giving homeowners facing foreclosure cash payments in exchange for them consenting to a short sale is an obvious solution for the banks. It’s a “win” for both sides – the bank gets the property sold and the homeowner gets money to move elsewhere.
As the article suggests, I’m sure this solution won’t work for all homeowners. For instance, the article notes that BOA isn’t intending to waive a deficiency judgment in all cases. That’s ridiculous – it doesn’t help to put a few grand in your pocket if the bank can get a judgment against you far in excess of that amount. This why we all need to keep fighting. The more difficult we make it for the banks to foreclose, the more inclined they’ll be to give homeowners a fair resolution. And make no mistake, that’s what’s happening here – the banks don’t care about being fair to homeowners; they care only about avoiding the time and expense associated with foreclosure lawsuits.
Here’s the article. …
Bank of America is offering up to $20,000 to select Florida homeowners willing to agree to a short sale instead of entering foreclosure.
To sweeten the deal further, the nation’s largest lender will consider waiving the deficiency on the loan, which allows homeowners to sell the house for less then they owe without having to make up the difference to the bank. It can save homeowners thousands of dollars.
Not every Bank of America customer in Florida will be eligible for the program, which pays a minimum cash incentive of $5,000. It’s targeted toward homeowners who cannot afford their mortgages.
To quality, the short sales must be submitted for bank approval by Nov. 30 and must close by Aug. 31. Sales already under contract are not eligible; neither are properties outside of Florida.
This is a “test-and-learn” program being rolled out only in Florida because of the higher foreclosure rates than other parts of the country, said Christina Beyer Toth, a Tampa-based spokeswoman.
Florida is seen as a viable market to gauge short-sale response when presenting homeowners with relocation assistance, she said. If successful, the plan could expand to other states.
The bank notified select Florida real estate agents this week about the offer.
“It will get a lot of people off the fence about wanting to sell their home,” said Steve Capen of Keller Williams Realty in St. Petersburg. “This makes sense.”
What’s in it for Bank of America? It saves attorney fees, court costs and property taxes by avoiding foreclosure. It also speeds the process of getting bad loans off its books and gets the properties back on the market faster.
Capen, who specializes in short sales, plans to heavily market the offer to clients. But he cautioned that homeowners shouldn’t get overly excited because many of these plans have restrictions.
“It will only help a fraction of the people,” he said.
Homeowners get the cash after the short-sale deal closes. A caveat: Homeowners might have to pay income taxes related to the deficiency waiver and the cash payout.
The cash payouts give homeowners a reason not to trash their homes or strip them bare before moving out. When houses enter foreclosure, homeowners can essentially live for free until banks take possession at the end of the court process, which takes an average of nearly two years in Florida.
Attorney Chris Boss of Yesner & Boss said the deficiency waiver will enable homeowners to buy a house without filing bankruptcy or waiting three years from when foreclosures become final.
“It’s a chance to get away from the house with some money in your pocket,” Boss said. “This is good for the economy.”
Other national lenders started similar programs.
Late last year, JPMorgan Chase began giving homeowners $10,000 to $20,000 and waived losses on the mortgage. The bank still suffers a loss in the process, but generally speaking, sale prices on short-sale homes are higher than foreclosed homes.
Real estate experts and economists have said the housing market cannot fully recover until the millions of distressed mortgages are removed from the system.