When Chase started sending incentive solicitation letters to their borrowers in hardship early this year, many in the real estate industry were excited about the potential positive impact it could have. Sending letters to home owners offering $5,000 to as much as $35,000 BACK as a short sale incentive was a revolutionary way to get the borrower to take action and participate in a short sale. While this has certainly made a difference with some borrowers who can really use the money, unfortunately it rewards those who have made poor decisions and punishes those who are still responsible in many cases.
Here is just one of those cases. We just got a Chase short sale approval letter today from a local file in our Jacksonville, FL brokerage company. The purchase price was only for $60,000. The property and situation qualified for the HAFA program, and the borrower was excited about the possibility of getting $3,000 back to participate in a short sale. Short sale package was received and HUD was sent over showing a net to the lender of just over $47,000. After a short time of waiting and processing, we finally got an approval letter today. But something was different.
After reading the first page of the approval letter, it said that Chase was to receive only $37,000 back at closing. Instinctively, our initial reaction was that this must be some mistake, Until we read further. As it turns out, without the seller or their broker even asking for additional money back, Chase gave the borrower an additional $10,000 back. Including the HAFA money, this seller will be getting $13,000 cash back short sale incentive at the close of their property. Here we have a borrower, who in one way or the other defaulted on his financial responsibilities, and was rewarded with more money than many will see at any one time in their lifetime.
I guess they are just giving defaulted borrowers a little taste of the wall street style executive bonuses that we have become accustomed to hearing about within the banking industry. Where is the justice in this? How is this fair to those who work hard to continue paying a mortgage that is more than the value of their property?
For Original Article See:
Chase Bank Overdoes it With Cash Back Short Sale Incentive
**********************************
like buttons
Replies
Meanwhile, the rest of us should continue picking up the shattered pieces of an economy that's taking it on glass jaw. :) I can't see where rewarding past poor decisionmaking makes any sense. The truth of the matter is, the rest of us will pay in goods and services somehow.
Richard, why do you assume that because someone needs to short sale their home that is was because of past poor decision making? I had a seller recently that easily could afford their home, they actually bought well within their means but due to a serious bout with cancer, their wage earner could no longer work and they had to short sale. Have on right now, a young Air Force Airman, broke his neck in an accident off base and now can not maintain his home. Not all short sales are strategic defaults and not all are the result of borrowing more than they knew they could afford.
As far as Chase, this is a great idea for Chase because they realize that by giving $20,000, they most likely won't have to spend $50,000 or more for the foreclosure or for repairs after they get the foreclosure back.
I have one from Chase right now and I am not a CDPE, they still called me, maybe they are looking at this site or maybe they were looking for the person who escalated the most in my area? Who knows?
Thanks, Jeff.
Good morning Jeff,
I'm not assuming that that at all. My statement was in reference to Chase Bank decisions in seemingly rewarding just about anyone with cash. I'm sure your clients fall well within the true hardship guidelines and rightfully so. I've said all along on this site that there are true hardships to many individuals out there. However, you and I both know that the system gets exploited often by people who really do not meet the true hardship requirements.
When some (not all) of the big banks are taking taxpayer's bailout money and then issuing big bonuses to their execs; then throwing good money after bad doesn't make sense. I'm all for accountability, each and every individual, whether it is Chase or property owners. Let's level the playing field for everyone.
Back to the subject. If you were Chase and you knew that a foreclosure would cost at least $50,000, I believe the number is closer to $75,000 after all expenses and repairs needed, would you rather pay the seller $10,000 to be co-operative or would you rather take the chance that you will have to pay 50-75K later due to legal fees, repairs, marketing etc? Smart money is on the co-op program where the seller is agreeable and does not destroy the house. Not everyone with a Chase loan is getting this money, not sure how they select it though. I really don't think the system is getting exploited at all, it is a program that Chase has agreed to and they have selected particular borrowers to participate in the program.
Not sure what you mean by level the playing field?
Jeff,
First, I would ask why a foreclosure cost $75,000? Why is this number so high. It's actaully a small mortgage for some. If they have documentation and paperwork, then why so high? Something is drastically wrong here. It doesn't make sense.
I don't have factual data in front of me however, I don't believe that foreclosure really cost them that amount. I truly believe the numbers have been inflated over time. Where is the hidden costs? Also, I think that this has been one of the real problems with the industry all along. These companies really know how to work these numbers in their books.
I'll guarantee you that if you don't make payments on your $60,000 BMW, it won't cost the bank $40,000 to pick it up from your front yard. I realize we're talking about 2 different properties, however the principle is the same.
The reason that it does not cost to take the BMW back is that they can do just that when you do not pay, take it back.
The legal fees represent a large portion of the cost of a foreclosure plus the cost of the banks employees handling the foreclosure. There is property preservation, repairs, and holding costs.
I too think $75,000 may be high but believe that it costs at least 1/2 of that amount and it certainly costs alot more than $10,000 that Chase is offering. I list REO properties and more than once I paid more than $10,000 just for repairs to the property out of pocket to be reimubursed.
Documentation and paperwork are good for them to have but they still have to follow the legal proceedings and you and I both know the foreclosure attorneys are soaking the banks for all that they can.
Jeff,
This is my point. Overheads and profits in recovery are out of control. You have companies that make big profits in doing just that alone. I'm not going to even mention the word outsourcing. It may as well be a 4 letter word in some circles. Anyway, these numbers have gone up astronomically because the industry has allowed it to so. From a glance, it seems that there is no self governance and when that happens we all know that goods and services tied to any specific industry will taken advantage of within the system.
Sure enough there are employees salaries and benefits, legal fees/proceedings and costs of repairs however, you can't just give away the farm. As I say, accountability is the key.
You know, people really get upset when they hear about a governmental agency paying $200 for hammer..............well what makes this so different?
Many of the borrowers who are in default are in that position because the banks forced, defined, or manipulated them into it. Thousands of people are paying dearly for the bad financial decisions made by the banking industry. The victims' credit gets ruined and their self-esteem sustains enormous (possibly irreparable) damage. Communities get torn apart or bulldozed. The banksters get bailouts and bonuses.
Justice and fairness are not the business basis of the financial (dis)services industry in this country. You don't get what you deserve. You get what you can negotiate or what you can get away with.
Working hard to continue paying an underwater mortgage may be a very good business decision. Housing values can go up or down. Over the long run, they go up. Since 1620, after every dip in housing prices, those prices escalaate to higher than the previous high when the recession is over. Selling is costly. Moving is costly. Dispruption of one's life is costly. You don't sell a good stock when it takes a beating. A home is like an invesment in that regard. You hold on and wait for the recovery.
My advice to those who can afford the payments is to continue paying them. My advice to those who can not is to make the best of the situation and roll with the punches.
CDPE is well worth the investment. Also sign up for CDPE Advanced and listen to the conference calls and use the materials.
Chase reached out to me to handle a short sale. They are offering the seller $30,000. Without that incentive, he would have just let the property go to foreclosure. Chase would have lost more. I think it is a good business strategy on the part of Chase.
-
1
-
2
of 2 Next