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A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency.


JPMorgan Chase has started a Short Sale Outreach Program which they are offering to mortgagors whose mortgages are owned by Chase. Chase is offering up to $30,000 to people who are behind on their mortgages, to try to convince them to short sale the property, rather than letting the property foreclose. To be offered this deal though, the mortgage must be owned by Chase, not just serviced by them.

Why would they be aggressive with mortgages they own as opposed to ones they service? The answer is money, of course. The holder of the mortgage usually loses a huge amount of money if the property goes into foreclosure because of interest lost, real estate taxes and legal fees that have to be paid and association dues owed. Throw in deterioration to the property and the loss in overall value, and lenders are lucky to get back 50% of the money owed on any foreclosure. The numbers for a short sale are much lower and so they realize that it would be much cheaper to pay the delinquent homeowner to get out, rather than go through the entire foreclosure process.

On the other hand, if they service a loan, the bank doing the servicing actually gets paid a percentage (usually .25%) of the principal balance of the loan, to take in the monthly payments and distribute the money (taxes, insurance, interest, principal). That percentage can actually double when a loan becomes delinquent, meaning the longer a property remains delinquent, the more money they earn. All in all though, if more programs like this were offered, the real estate industry could possibly recover at a much faster rate.

 
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Fannie Mae is hoping to attract qualified buyers to the market by offering buyers assistance. Fannie Mae’s REO (Real Estate Owned) disposition operation, HomePath, will offer 3.5 percent in closing cost assistance to help buyers purchase a home. Fannie Mae acquired 262,078 single family REO properties through foreclosure in 2010. Many of these properties are also eligible for special HomePath Mortgage and HomePlan Renovation Mortgage financing, which  offers homebuyers a chance to purchase with as little as 3 percent down.

If this deal looks like something you could benefit from do not delay. This incentive will only apply to initial offers submitted on or after April 11, 2011 and that close on or before June 30, 2011. Also, buyers are required to reside in the home as their primary residence, essentially excluding investors looking to take advantage. Terry Edwards, EVP of credit portfolio management at Fannie Mae said, “Since interest rates remain low, the incentive will go a long way toward helping even more families buy a new home so this is a great time for Fannie Mae to offer some assistance”. Hopefully this will help reduce the amount of empty homes and get good homebuyers into a house they can afford while also trying to put the real estate market back on the right track.

 
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Credit will get you the lower interest rates on cars, homes and different types of credit in general and in this article I will share with you some techniques for restoring your credit score and rating to get approved for cars, homes and credit cards. Continue Reading

 
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