My company has been touting the success of the HAFA program quite a bit lately; the homeowner gets out of the upside down toxic asset mortgage, gets a full release of deficiency and even gets cash at closing. What could be better?
Even better news came across my desk today though: apparently several lenders are getting on board the cash incentive train also, according to this article in today's New York Times. This news comes at a great time, because there are still so many people out there who want to sell their home but think that they can't, or think that they don't have any options.
According to the article, the lenders are offering these cash incentives to homeowners in exchange for completing a short sale and moving out of their home, which is similar in nature to the HAFA program. The big difference seems to be the amount of cash at closing. In some cases, it's been as much as $35,000, compared to HAFA's $3,000.
Picture it: I'm upside down on my mortgage. It's not my fault; massive numbers of people across the U.S. are under water also. The negative equity is depressing, but I'm doing what I can by making my mortgage payment if I can, and trying to stick with it. I know that I can't sell because I want to MAKE money on my home, not lose money. Cue the lender cash incentives! Now, I can short sale my home and possibly make $35,000 doing it! That might be the same as, or more than, what I would make off selling my home in a normal economy!
This train of thought is exactly what will be going through the minds of thousands of homeowners who dream of selling their upside down home.
Why would the lender give cash to someone who is quitting on their mortgage, or hasn't even been making mortgage payments? The New York Times article goes on to quote a Chase spokesman, "A short sale generally produces a better and faster result for the homeowner, the investor and the community than a foreclosure." In short, it's a win/win/win situation and the lenders are finally opening their eyes to the fact that this problem isn't going to go away.
In fact, the article confirms that the problem isn't going away anytime soon: "The outlook for home prices remains glum, with a drop of 2.5 percent expected this year followed by meager growth for several years thereafter, according to a recent report from MacroMarkets LLC." These MacroMarkets LLC figures are accounting for the U.S. as a whole, however, and not just the state of Florida. You'll recall that in many ways, Florida has been taking a beating on home values that exceed the national average.
Although it's not fun to hear the truth about the current and upcoming real estate market, it's refreshing to hear that maybe, after all this time, the lenders are opening their eyes to the situation and seeing it for what it is: a situation that can get better with time and smart incentive programs like these.