Two of the nation’s largest lenders are quietly offering some delinquent homeowners a deal.
JPMorgan Chase & Co. and Wells Fargo & Co. say they give select borrowers behind on their mortgage payments $10,000 to $20,000 for agreeing to short sales, which means the homes are sold for less than what’s owed on the mortgages.
Most banks figure they’re doing homeowners a favor simply by signing off on short sales and forgiving the amount owed. But in some cases, Chase and Wells Fargo borrowers receive that and cash at the closing.
Lenders routinely hand homeowners a few thousand dollars if they leave the properties in good shape after foreclosure. That’s known as “cash for keys.” Also, homeowners are entitled to $3,000 of government money if they complete short sales through the Home Affordable Foreclosure Alternative program.
But real estate agents and other industry observers say they aren’t aware of other major lenders offering such sizable incentives for successful short sales.
“It looked, to me, like it was a come-on,” said Allison Adler, an agent for the Keyes Co. in Weston.
But Adler checked and discovered it was legitimate. Her client, Sara Horowitz, received $10,000 last week from Chase when she completed a short sale of her Davie townhouse.
“I have to say, this extra bonus from Chase was a lifesaver for me,” Horowitz, 39, said Monday. “I used it to help me get into a rental unit. It was perfect.”
Wells Fargo and Chase don’t specifically address why they offer the money for short sales. Rather, they explain they’re cutting their losses in choosing to forgo the potentially lengthy process of foreclosure.
“Our goal is to help as many people avoid foreclosure as possible,” Chase spokeswoman Nancy Norris said, pointing out that the bank has completed more than 110,000 short sales nationwide since early 2009.
Wells Fargo offers the cash to homeowners in Florida and other states “where the foreclosure process is lengthening,” spokesman Tom Goyda said.
The average foreclosure in Florida took 619 days for cases completed in the first three months of 2011, according to RealtyTrac Inc., a foreclosure listing firm. That's more than 30 percent longer than cases completed a year ago.
The lenders decide whether to make payments after considering individual circumstances, and they don’t disclose what those are. The banks won’t say how many people have been offered the cash.
Wells Fargo and Chase are the nation’s second- and third-largest lenders, respectively, behind Bank of America. A spokeswoman for Bank of America said she couldn’t provide any information on incentives for short sales.
Chase and Wells Fargo don’t say how many home loans they own in Florida.
Wells Fargo has 700 offices and $66.1 billion in deposits statewide, according to Federal Deposit Insurance Corp. data as of June 2010, the most recent period for which statistics are available. Chase has 247 offices and $10.4 billion in deposits in Florida.
In 2008, Chase acquired Washington Mutual, and Wells Fargo took over Wachovia Corp.
The money for short sales is an effort by the lenders to be viewed as good corporate citizens as they expand aggressively in Florida after the banking takeovers, Miami-based banking analyst Ken Thomas said.
Ward Kellogg, chairman of Paradise Bank in Boca Raton, said his community bank occasionally has offered money to homeowners who cooperate in short sales. He figures Chase and Wells Fargo are agreeing to the incentives so that they can write off the bad loans as soon as possible.
“Without cooperation, it’s going to take a year and half,” Kellogg said. “With cooperation, it could be 30 to 60 days.”
By Paul Owers June 27, 2011 07:00 AM
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