The JP Morgan Chase Short Sale Incentive Program: List, Assist + $20,000 Incentive to avoid foreclosure.

Short sales are now becoming even more important options to homeowners who are about to experience a foreclosure.  Why?  Because some lenders such as Chase are offering cash incentives to list their homes and accept a quick sale payoff and they're offering forgiveness. 

JP Morgan Chase's deal for example offers qualifying homeowners behind on their payments, the option of accepting a quick sale of their home.   The bank will then give them $10,000 to $20,000 and forgive the borrower what it loses on the mortgage.  The key here is qualifying loans.  Sources indicate that approximately 25% of Chase loans were originated by Washington Mutual and later acquired by Chase in its merger.  Many of those loans qualify for this list, assist  incentive program. 

The qualifying homeowners would get the cash after the home is purchased in a short sale, meaning the buyer pays less than what the bank is owed.

So, what's in it for Chase? By avoiding the foreclosure, a process that can take nearly two years, the bank saves attorney fees, court costs and property taxes.  More importantly, the bank speeds the process of getting more bad loans off its books.

Other qualifying loans are negative amortization loans, which allowed homeowners to ‘pick a payment' each month within a certain range.  For example, a homeowner may have a $1,800 monthly mortgage payment, however they're allowed to pay anywhere between say, $800 and $1,800 per month, with anything less than $1,800 being added to the principal.  You can see how the principle amount can get out of hand and why banks like Chase are realizing those loses and offering such a large incentive such as $20,000 to homeowners if it means they can get those loans off their books sooner.

The bank began offering these incentives in late 2010.   Here in Minnesota, several of our clients have already received these letters, thinking it's nothing but a scam when in fact it is real.  Chase still does suffer losses with this cash incentive, however they appear to be significantly different than going through the entire foreclosure and re-selling the REO (Real Estate Owned) asset at significantly reduced amounts.   Therefore, the net result is better for both homeowners and investors.  The potential after math associated with this incentive might also affect the amount of anticipated ‘shadow inventory'.

Chase is also offering the cash payment to other homeowners whose mortgages it services. However, whether unpaid balances on these loans will be forgiven depends on the investors who own the mortgages.

Another positive factor associated with this list, assist incentive is for homeowners and real estate agents: Chase has been providing answers in approximately 35 to 40 days after an offer is made on a home. Most short sales typically take six to nine months to finalize.

I think it's a step in the right direction, Chase is currently offering more money than anybody else.  Hopefully this won't prompt certain homeowners to consider ‘strategic defaults' since there are so many other solutions for anyone owning more than their home is currently worth.

One thing we always recommend to our clients is to open their mail and communicate their on-going questions to us during this challenging and quite often embarrassing process.

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