subject: Banks Offering Thousands Of Dollars To Delinquent Homeowners [print this page] Why are banks offering thousands of dollars to delinquent homeowners? It certainly isn't because they are trying to be nice. The answer boils down to money.
Bank of America is mailing out packets of paperwork to delinquent homeowners encouraging them to try to short sell. Also, the bank has started testing a program in areas of Florida with high percentages of foreclosures that offers borrowers incentives as high as $20,000 to short sell. This program is similar to ones adopted by banks such as Chase, which has a nationwide program that offers borrowers as much as $30,000 to short sell and relocate.
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Short Sales Cost Banks 50% Less Than Foreclosures
These handouts are part of a growing trend among big mortgage servicers aggressively incentivizing homeowners who have stopped paying their mortgages to pursue short sales. Foreclosures result in huge costs for banks. According to Realty Trac, the average loss on a foreclosed home was 40% in August, while the loss on short sales was 20%. Now you know why banks are offering thousands of dollars to delinquent homeowners; it's all about money.
Short Sale Volumes Skyrocketing
Bank of America senior vice president and mortgage servicing executive Bob Hora hosted a webinar recently to talk about the bank's goals for foreclosures. Whereas short sales used to be extremely rare and represented less than 1% of all sales, now they take up 12% of the market, according to Realty Trac.
Bank of America is on track to complete 100,000 short sales in 2011, up from about 42,000 a couple years ago, said Hora. He went on to share that Bank of America wants to increase its' volume by 60% in 2012. Other large banks, such as JP Morgan Chase, have adopted similar plans.
Banks Hiring Thousands To Staff Short Sale Departments
Since the volume of short sales has been rising since the housing crash, banks have been playing catch up with staffing and training. To keep up, the banks have ramped up their short sale staffs and are streamlining the process. "If we can shave three weeks off the timeline, that's better for everyone," said Hora in the webinar.
Bank of America now has 3,000 people on its short sale account, Hora said. In the housing depression's early years it had 200 to 250.
