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Chase offers mortgage holders a way out

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 Puente can be reached at mpuente@sptimes.com or (727) 893-8459. Follow him at Twitter at twitter.com/markapuente.

Chase offers mortgage holders a way out 04/29/11 [Last modified: Friday, April 29, 2011 11:21pm]
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