Cash for Keys; Another Reason to Fight Foreclosure

According to today’s St. Pete Times, Chase is offering cash incentives to some homeowners to consent to foreclosure.  I have yet to see this happen on a widespread basis, but it certainly seems like this is becoming more of a possibility for homeowners who fight their foreclosure cases. 

This is indicative of what I’ve been telling homeowners for many years now – if you defend your case, you never know what type of settlement a bank may be induced to offer.  Who knows; maybe the bank will offer a deal like this to you.  Or, if you defend your foreclosure,  maybe the laws will change in a way that helps you.  The only certainty is this – if you give up, and get foreclosed, you lose any ability to take advantage of these possibilities. 

Also, how cool is it that banks are being forced to pay cash to homeowners in foreclosure?  Banks got their bailouts; it’s nice to see some homeowners getting a little relief, too.  

Here is the article. 

JP Morgan Chase has a deal for some homeowners behind on their payments: If they’ll accept a quick sale of their home, the bank will give them $10,000 to $20,000 and forgive what it loses on the mortgage.  Homeowners get the cash after the home is purchased in a short sale, meaning the buyer pays less than what the bank is owed.

What’s in it for Chase? By avoiding foreclosure, a process that can take nearly two years in Florida, the bank saves attorney fees, court costs and property taxes. And it speeds the process of getting bad loans off its books.  The bank began offering the incentive in late 2010.

“The net result is better for homeowners and investors,” said Mary Kay Bean, a Chase spokeswoman.

Chase still suffers a loss in the process. But generally speaking, sale prices on foreclosure homes are lower than those on short-sale homes. 

Bean declined to discuss the criteria used to select homes in the program. But Realtors said the homes are in more desirable locations and newer.

Chase’s offer of cash to walk away from a home and forgiving the loan balance applies only to mortgages the banks owns.

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.

In either case, borrowers aren’t walking away without consequence.  After a home is sold, the settlement is reported to credit bureaus, Bean said. Sellers must also pay taxes on the money forgiven by Chase since it is considered income.  Obviously, homeowners whose mortgage balance was not waived will be in worse shape creditwise.

Realtor blogs are buzzing with chatter about this program, saying Chase is offering up to $35,000. Bean declined to confirm that amount.

Another factor beneficial for homeowners and real estate agents: Chase provides an answer in about 35 to 40 days after an offer is made on a home. Most short sales typically take six to nine months to finalize.

“We’ve been working to get than down,” Bean said, stressing that Chase has closed more than 100,000 short sales since 2009.

Florida is saddled with more than 300,000 foreclosures. Thousands of other loans are nearing default because the homes are worth less than what is owed.

Bean declined to discuss whether the cash offer would propel more borrowers into a “strategic default.” The term describes homeowners who can pay their mortgages but stop because they owe more than the home is worth.

“It’s a very individual decision on how some people handle their financial decisions,” she said.

The St. Petersburg Times found two real estate agents who represent borrowers in the Chase program. The homeowners declined to talk.

Andrew Duncan, leader of the Duncan Duo & Associates at Keller Williams Realty in Tampa, is listing a Clearwater home for $150,000. He was skeptical of the offer until holding a conference call with a Chase representative.

“It’s a win-win all around,” he said. “The banks need to do something to get these homes on the market.”

Chris Hounchell, a short sale specialist with RE/MAX Metro in St. Petersburg, represents the seller of a high-end condo. Banks have finally realized they need to prevent more foreclosures, he said.   More importantly, Hounchell said, the cash offers will help stabilize the housing market by ridding the rolls of distressed properties.

“It’s a step in the right direction,” he said. “Chase is offering more money than anybody else.”

Bean offered this advice to borrowers:  “You should open your mail. This could be very important for some.”

Mark Stopa

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10 Responses to Cash for Keys; Another Reason to Fight Foreclosure

  1. Pingback: Cash for Keys; Another Reason to Fight Foreclosure | Foreclosure News Online

  2. Mediator Ken says:

    Mark, I haven’t seen it yet on a wide spread basis either, but I have seen maybe half a dozen. It’s typically $1,500 upon agreement and another $1,500 upon vacating. Sometimes it’s as much as $5k total. And, it obviously includes waiver of deficiency. But, like you said, it’s only after a fight. I haven’t seen one yet offered to a pro se homeowner, only those represented by good lawyers.

  3. Hillary says:

    Cash for keys -Not a win win situation if the lender couldn’t foreclose on you in the first place. Which is in my opinion usually the case.

    • Mark Stopa Mark Stopa says:

      This is a fair point, Hillary. My rebuttal …

      As good as I think I am at foreclosure defense, I don’t try to disillusion clients into thinking they’re going to get a free home.
      Judges just aren’t in the business of doing that.
      As a result, we’re left with the premise that any particular client is going to lose his/her home at some point.
      Once you accept that, it will undoubtedly make sense for some people to consent to foreclosure in exchange for cash, especially if we’re talking about $20-$30,000 like the article suggested. It’s certainly not for everyone, but that’s a lot of money for many people.

  4. Diana Cessna says:

    I’ve seen these offers and approvals from colleagues out of state in the $15K-$35K amounts but not that high in Florida. More in line with what Ken says.

    As I’ve learned from Mark, it still is critical for homeowners to avoid settling without their own independent attorney representation. On the service, these settlement offers seem like great deals but they need to be analyzed with legal expertise to protect the homeowners property rights and to avoid future action. A Realtor cannot do that.

  5. Serenity says:

    I’m in Las Vegas and closed on my house with Chase this week. I received the $20,000 offer letter from Chase in December and listed it then. I received an offer in March, Chase countered once, buyer’s countered back at their original offer and Chase accepted. I signed docs and received a check for $20,000 the afternoon it was recorded.

    I was highly skeptical of the offer when I received the letter but for once it turns out to be on the up and up. I’ve been keeping an eye on any info online about the program, specifically to see if anyone actually made it to the finish line. Its just been within the last two weeks that I’ve started seeing success stories.

    One additional thing. I declined HAFA participation because the first negotiator I spoke with after receiving the letter told me I could not do both programs. I could do either HAFA and try for $3000 cash for keys, OR I could do the Chase Fastrack program. As it turns out that information was not true. Since HAFA is federal it has separate rules and processes than this internal program by Chase. So most of the other stories I’ve seen online, the sellers were able to get the HAFA incentive in addition to the Chase incentive.

    Great blog btw. I’ve been a subscriber for several months now!

  6. rc says:

    My bank BAC just called me and said they can put a sale date on my home anyday . again after trying to apply for the modification program she tells me i nees a bank acct , i have applied for the program twice and NEVER had they asked me since i told them my credit cards collectors would take my money , W2 was fine then . Now they wont let me apply again !

  7. Commercial Real Estate Analysis Software Rankings says:

    This post makes me reflect about another reason and its impact in the current economical situation. Great information and reference! Another good post Mark.

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