Short Sales Benefits

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Here are headlines, quotes, and statistics from large publications about the benefits of short sale instead of foreclosing on a property. Listed below are some general themes about the positive impact of short sales.• Short sales are more efficient than foreclosures,• Banks paying incentives for owners to short sale their property• Damage to credit ratings not as bad compared to foreclosure• Short sales better for the community• Short sales better for banks• Short sales homes sell for more than foreclosed homes

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• Banks are actively encouraging delinquent homeowners to sell their homes for less than they owe, letting them walk away from the debt. • What's more, in some cases banks are offering delinquent homeowners cash -- typically $15,000 to $35,000 -- to do a short sale.

• Bloomberg quotes Bill Fricke, a senior credit officer for Moody's Investors Service in New York: "Banks are nudging potential sellers [to short sale their property] by preapproving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives."

• Losses for lenders are about 15% lower on the sales than on foreclosures, which can take years to complete while taxes and legal, maintenance and other costs accumulate, according to Moody's.

Banks paying homeowners to sell 1 1

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The (short sale) deals accounted for 33% of financially distressed transactions in November, up from 24% a year earlier, said CoreLogic Inc., a Santa Ana, Calif.-based real-estate information company.• Bank of America ran a pilot program in Florida last autumn, according to CNNMoney. It paid $10,000 to $20,000 to certain homeowners to sell their homes. It may be revived and expanded.• JPMorgan Chase "generally" pays incentives of $10,000 to $35,000 at settlement for short sales.• Wells Fargo offers homeowners $10,000 to $20,000 for short sales or deeds in lieu (where the bank takes the home's title.) But the incentives are only in some states.• Citigroup offers qualified borrowers about $3,000, a spokesman told CNNMoney. "Investor programs have different guidelines for relocation incentives, which we honor," the representative said by email.

Banks paying homeowners to sell 1 1

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Banks pay delinquent borrowers $35,000 to sell their homes 2 2

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• From the bank's point of view, the offers make sense, according to Tom Kelly, a spokesman for Chase Mortgage, who would not comment on Pierce or other individual cases. "The first choice is a modification but if that's impossible than a short sale is a faster, more efficient solution,“ he said.• Short sales also command higher prices than foreclosed homes. • In December, foreclosed properties sold for an average of 22% less than conventional sales, while the discount for short sales was only 14%, according to the National Association of Realtors.

Banks pay delinquent borrowers $35,000 to sell their homes 2 2

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Short Sale can mean Bonuses for some Homeowners 3 3

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• Real estate experts said that banks can net bigger proceeds in short sales by sidestepping the costs, lengthy timeline and uncertain sales prospects of foreclosures. • With delinquencies continuing to mount, quick disposition of some homes makes sense for the banks and for the overall housing market.• "Banks are taking a renewed eye in the past six months toward short sales, where they had had more of a jaundiced eye previously," said Stan Humphries, chief economist at real estate website Zillow.com.

Short Sale can mean Bonuses for some Homeowners 3 3

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Banks paying Homeowners to Avoid Foreclosures: Mortgages 4 4

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• “When a modification is not possible, a short sale produces a better and faster result for the homeowner, the investor and the community than a foreclosure,” Short sales represented 9 percent of all U.S. residential transactions in November, the most recent month for which data is available, up from 2 percent in January 2008, according to Corelogic.• Banks also pay a few thousand dollars to the owners of second liens, whose loans can be wiped out by a short sale, to encourage them not to block the deals.• For banks, approving a sale for less than is owned on the home can cut a year or more off the time it takes to unload a property. • From listing to sale, the transactions took about 123 days on average at the end of last year, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.

Banks paying Homeowners to Avoid Foreclosures: Mortgages 4 4

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A Solution to the Holding Crisis Could Be at Hand 5 5

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• Unclogging the legal and financial system is key to the recovery. The latest improvement is an upsurge in lenders’ enthusiasm for short sales as an alternative to foreclosures.• Short sales are much faster than foreclosures and tend to preserve more of a home’s value. (People who leave voluntarily are less likely to punch holes in the walls and steal the copper wiring.)• “The notion of a short sale runs counter to intuition for a lot of bankers,” says Bostic. “In a short sale you actually are losing money. What was not fully appreciated is that a short sale today can actually minimize your long-term losses.”• Aside from cash incentives, lenders are also nudging along potential short sales by pre-approving deals, streamlining the closing process, and forgoing their right to pursue the unpaid balance of the loan, says Bill Fricke, senior credit officer at Moody’s Investors Service (MCO) in New York. Short sales accounted for 33 percent of financially distressed transactions in November, up from 24 percent a year earlier, according to CoreLogic.

A Solution to the Holding Crisis Could Be at Hand 5 5

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Banks Paying Homeowners to Avoid Foreclosures 6 6

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• Banks, accelerating efforts to move troubled mortgages off their books, are offering as much as $35,000 or more in cash to delinquent homeowners to sell their properties for less than they owe.• Lenders have routinely delayed or blocked such transactions, known as short sales, in which they accept less from a buyer than the seller’s outstanding loan. Now banks have decided the deals are faster and less costly than foreclosures, which have slowed in response to regulatory probes of abusive practices. • Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives, “My guess is they want to get rid of bad loans,” Chapman said. “If they short sale these types of loans, they have less of a headache and have some goodwill with the homeowner.”

Banks Paying Homeowners to Avoid Foreclosures 6 6

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Number of Short sales on the Rise 7 7

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• Short sales are increasing as a percentage of home sales in many states, helping some neighborhoods and homeowners avoid the more devastating impacts of foreclosures.• Short sales - when lenders allow financially strapped borrowers to sell homes for less than their unpaid mortgage - accounted for 12% of home sales nationwide in the second quarter. That's up from 10% in the same period last year, says researcher RealtyTrac.• The increases were sharper in some states, including California, Nevada, Michigan, Georgia and Colorado, the data show.• Short-sale homes, which often remain occupied until sold, tend to retain values better than those that go through foreclosure. That helps values of neighboring homes. In the second quarter, short-sale homes sold at a 21% discount to non-foreclosure homes, while bank-owned homes went at a 40% discount, RealtyTrac says. Short sales may also reduce losses for loan owners because they avoid full foreclosure costs. Borrowers may qualify for new mortgages sooner after a short sale than after a foreclosure.

Number of Short sales on the Rise 7 7

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An increase in short sales, along with a shorter average time to sell such homes and bigger discounts relative to normal deals, indicate the market is clearing distressed properties more efficiently, Chief Executive Officer James Saccacio said in the report.

More Short Sales Seen as Lenders Accepting Less 8 8

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Home Short Sales Increase as Banks ‘More Realistic’ on Market 9 9

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• “It’s a win for borrowers who avoid foreclosure, buyers who get a house in better condition and banks that lose less money, which is also a win for taxpayers.”• Pre-foreclosure homes took an average of 245 days to sell after receiving the initial foreclosure notice, down from 256 days in the first quarter.• The average sale price was $192,129, a discount of 21 percent relative to non-distressed homes. Discounts averaged 17 percent in the first quarter and 14 percent a year earlier, according to RealtyTrac.

Home Short Sales Increase as Banks ‘More Realistic’ on Market 9 9

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