Article from Barrons.com,
8/6/11My Kingdom for a House: Coming Up Short?
Robin Goldwyn Blumenthal
A few delinquent homeowners fighting foreclosure have gotten letters in the past few weeks from JPMorgan Chase offering to forgive $100,000 in debt on a “short sale,” with a kicker for the homeowner: $10,000 to $35,000 to stay on the property and facilitate its sale. Attorneys are applauding the sweetener.
This way, the bank recovers more than in a foreclosure, and avoids attorneys’ fees and maintaining the property, says Sarasota, Fla., real-estate attorney Anne Weintraub. Instead, the cash encourages the homeowner to maintain the property, and sell it. Result? The bank’s loss is smaller than in a foreclosure.
A short-sale client recently received $10,000 in cash at closing and Weintraub suspects the bank’s generosity stems from having trouble locating the original paperwork associated with the mortgage. “In Florida, the bank that sues the homeowner must prove it owns the note to win its foreclosure case,” says Weintraub. Usually, she says, the bank can’t locate the note. The phenomenon was first reported in the Sarasota Herald-Tribune.
JPMorgan Chase spokeswoman Christine Holevas wouldn’t comment on the bank’s ability to find specific paperwork, but did acknowledge that Chase’s cash incentive is a relatively new development for short sales, where a house sells for less than the mortgage.
“We understand the value of keeping the homeowner there until the property is sold; it helps secure the asset,” says Holevas. Weintraub agrees. “By next year, most banks will follow Chase’s lead and offer homeowners cash and other incentives to cooperate in foreclosure alternatives,” she says.
Maybe she’s right. Last week, Bank of America was reported to be discussing homeowner foreclosures and loan forgiveness with state and federal officials.