Banks Stick to Short Sales
Earlier this year, in February 2012, a $25 billion national settlement was reached between 49 states attorneys and the five big banks: JP Morgan Chase, Bank of America, Ally/GMAC, Wells Fargo and Citibank. From this settlement nearly $10.6 billion in mortgage relief has made its way to homeowners.
When the settlement was made the banks agreed to stop improper foreclosure practices and to provide the $25 billion in relief to homeowners in the form of principal reductions, refinances and short sales. A short sale is when a lender agrees to accept a purchase offer for less than what is owed on the mortgage, thereby often releasing the homeowner from the balance of the loan.
What the Settlement Could Mean to Homeowners
The settlement terms include a requirement that the banks spend at least 60 percent of the funds they were awarded to reduce the principle of the mortgages. This sounds great in theory, but the reality is that so far the bulk of that money (more than 85% in fact) has gone to pre-foreclosure short sales, which the banks were already doing before the settlement.
Short sales were already on the rise before the settlement took effect in March. In the first quarter of 2012, short sales were up 25% year-over-year. It seems the banks have realized that short sales are a good alternative for all those involved.
Of the five banks, JP Morgan Chase has spent the most money on first-mortgage principal reduction ($367 million), followed by Wells Fargo ($216.9 million); Ally is next with $111.3 spent and Citibank with $54.3 million. And Bank of America has made nearly $2 billion in trial offers for first-mortgage modifications.
How to Get Homeowners Back in the Black
In just a few short months, the banks spent nearly $10.6 billion mostly on relief efforts like short sales. By concentrating their efforts on short sales, the banks skip the laborious foreclosure process, and they don’t have to manage, maintain and market a home. Instead, the banks get paid first and they make their money right away. When a loan modification or principal reduction still fails after best efforts, short sales are really one of the best solutions, depending on your particular circumstances, of course.
Since the settlement, many families have been able to get a new start by following through with a short sale. However, taking advantage of this option requires overt action. Homeowners need to be active, by working with the bank and seeking out legal professionals who can explain the nuts and bolts of the process.
If you feel like you need someone who will be on your side and assist you in finding the best possible solution for your mortgage problems, whether you or in default or not, please contact one of our Moorestown short sale lawyers.