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CHASE Away Foreclosure?

Troubled homeowners behind on mortgages owned by JP Morgan Chase may qualify for some valuable benefits if they agree to a short sale rather than let the home go to foreclosure. Under this Short Sale Outreach Program, some folks have reportedly received up to $30,000 and been forgiven any deficiency in order to accept a quick sale of their home, a scenario in which the property sells for less than the amount owed. Homeowners are also entitled to $3,000 of government money if they complete short sales through the Home Affordable Foreclosure Alternative (HAFA) program.

A short sale agreement, forgiven debt, plus cash? Sounds too good to be true, right?

Well, according to the St. Petersburg Times, the program is in fact real.

Chase has extended cash offers to distressed homeowners in exchange for an agreement to short sell their home and avoid foreclosure. Lest anyone mistake the bank for Mother Teresa, you can be assured the institution is not acting out of altruism. The math – not to mention the inevitable details of the program – makes it more advantageous for Chase to remove these bad loans off the financial books in this fashion. (As the Sun Sentinel recently reports, Wells Fargo has also offered delinquent homeowners a similar deal.)

Florida was one of the states hardest hit by the housing market collapse with over 300,000 foreclosures in the Sunshine State, alone, the last several years. And with the foreclosure process in this state taking, on average, nearly two years to unfold, Chase has devised a way to incentivize an alternative and, in the mean time, save itself money.

A mortgagee like Chase loses a lot of money if its properties go into foreclosure. If the proceeding in Florida takes almost two years from beginning to end, that’s two years worth of interest lost, association dues owed, and real estate taxes and legal fees that have to be paid, not to mention the deterioration of the property and the overall loss in value. It’s cheaper to pay a delinquent homeowner cash to get out and agree to a short sale than go through the entire foreclosure process.

What’s the catch in all of this? There are several. The program only applies to mortgages owned by Chase, and not merely serviced by it. If the home is sold, the settlement is reported to credit bureaus. And sellers must also pay taxes on the forgiven debt since it’s considered income. Some experts surmise that Chase has only offered in areas where home prices are still less than $300,000 .  And it’s too early to tell whether some homeowners agreed to a deal with Chase and were never paid, or if the amount promised upfront was eventually reduced after the home was sold.

Chase has not publically disclosed the qualification process. The bank’s analytical team supposedly specifies which loans qualify, and then Chase initiates the process with homeowners by way of a letter. In other words, it’s not an open application process, and, though the details are scant, it appears as if Chase has offered the program to homeowners with only certain particular kinds of loans.

If you’ve received correspondence from Chase or Wells Fargo about any short sale outreach program, please contact me at 813.251.2701 or charlie@flapropertylaw.com.

Please be advised that this article does not constitute legal advice nor does it provide any basis to form an attorney-client relationship. Nothing in this article should be copied without the express permission of the author.

Mr. Hounchell has a law degree from The University of Florida College of Law and he is a partner in The Law Offices of Charles A. Hounchell, P.A.  Attorneys & Counselors at Law, in Tampa, Florida. Mr. Hounchell obtained his undergraduate degree from The George Washington University in Washington D.C. and he obtained his MBA in International Management from the American Graduate School of International Management (“Thunderbird”) in Glendale, Arizona..

Mr. Hounchell is a licensed real estate agent with Smith and Associates, Inc. www.smithandassociates.com; www.livecasanova.com. He has lived in many different countries, including Spain, Brazil, Argentina, Mexico and Germany and he speaks Spanish and Portuguese. A significant portion of Mr. Hounchell’s law practice is concentrated on Real Estate Law. He can be reached at 813-230-3376 or charlie@floridapropertylaw.com