Bank of America Offers Homeowners $20,000 to do a Short-sale
Following the example of Chase Bank, Bank of America, the nation’s largest mortgage servicer, is offering Florida homeowners up to $20,000 to short sale their homes in an effort to get them off their books.
This offer from bank of America was sent out via email to select Florida Realtors earlier this week outlining basic details of the plan.
There are some strict conditions, however, regarding eligibility and investor participation. The short sales must be submitted for approval to Bank of America before Nov. 30 to qualify. The homes must have no offers on them already and the closing must occur before Aug. 31, 2012.
A short sale is when a bank agrees to sell a house for less than is owed on the mortgage.
Realtors said the Bank of America plan, which has a minimum payout amount of $5,000, is a genuine incentive to struggling homeowners who to encourage the homeowner to act instead of doing nothing.
Given that the current average time to foreclosure in Florida is 676 days — nearly two years — it is in everybody’s best interests to get these homes sold, not just Bank of America. The national average foreclosure timeline is 318 days.
The Palm Beach Post interviewed a number of real estate agents and received different opinions. “I think this is a positive sign that the bank is being creative to try and help homeowners and get things moving,” said Paul Baltrun, who works with real estate and mortgages at the Law Office of Paul A. Krasker in West Palm Beach. “With real estate attorneys handling these cases, you’re talking two, three, four years before there’s going to be a resolution in a foreclosure.”
Guy Cecala, chief executive officer and publisher of Inside Mortgage Finance, called the short sale payout a “bribe.”
“You can call it a relocation fee, but it’s basically a bribe to make sure the borrower leaves the house in good condition and in an orderly fashion,” Cecala said. “It makes good business sense considering you may have to put $20,000 into a foreclosed home to fix it up.”
Homeowners, especially ones who feel cheated by the bank, have been known to steal appliances and other fixtures, or damage the home.
A spokesman for Bank of America said the program is being tested in Florida, and if successful, could be expanded to other states.
Wells Fargo and J.P. Morgan Chase have similar short-sale programs, sometimes called “cash for keys.”
Wells Fargo spokesman Jason Menke said his company offers up to $20,000 on eligible short sales that are left in “broom swept” condition. Although the program is not advertised, deals are mostly made on homes in states with lengthy foreclosure timelines, he said.
And caveats exist. The Wells Fargo short-sale incentive is only good on first-lien loans that it owns, which is about 20 percent of its total portfolio.
Bank of America’s plan excludes Ginnie Mae, Federal Housing Administration and VA loans.
Similar to the federal Home Affordable Foreclosure Alternatives program, or HAFA, which offers $3,000 in relocation assistance, the Bank of America program may also waive a homeowner’s deficiency judgment at closing.
A deficiency judgment in a short sale is basically the difference between what the house sells for and what is still owed on the loan.
HAFA, which began in April 2010, has seen limited success with just 15,531 short sales completed nationwide through August.
But Realtors said cash for keys programs can work.
Joe Kendall, a broker associate at Sandals Realty in Fort Myers, said he recently closed on a short sale where the seller got $25,000 from Chase.
“They realize people are struggling and this is another way to get the homes off the books,” he said.
Exclusions from the Bank of America program:
- Ginnie Mae, FHA, VA and USDA loans are ineligible for participation
- Lot loans are ineligible for participation
- Properties outside the state of Florida are ineligible for participation
- Short sales initiated with an offer are not currently eligible for the enhanced relocation assistance
Frequently Asked Questions:
Q: How can I find out if my client/homeowner qualifies for this relocation assistance?
A: Call a Bank of America short sale specialist at 1.877.459.2852.
Monday – Friday 8 a.m. – 10 p.m.; Saturday 9 a.m. – 5:30 p.m. Eastern
Q: Do I have to do anything differently when initiating or completing the short sale?
A: No. As long as the homeowner’s short sale is initiated between September 26 and November 30, 2011, and the property closes by August 31, 2012, they will be eligible.
Q: Will the relocation assistance funds be reported on the HUD-1?
A: Yes, they will be documented on the HUD-1, and a 1099-MISC will be issued.
Q: Can the relocation assistance funds be used to pay off existing liens?
A: Yes, if the investor approves it.
Q: Is the relocation assistance added to any other incentives, such as the HAFA or Bank of America proprietary program incentives?
A: No. A homeowner will receive the $5,000 to $20,000 in place of the typical incentive paid out by these programs. The relocation assistance is essentially an enhancement to the standard payout offered on these programs.
Q: Is the enhanced relocation assistance available for other programs?
A: Currently, the enhanced relocation assistance is only available to short sale programs initiated without an offer. However, as we gauge the success we may extend this incentive to other programs.
Questions?
Homeowners and agents may call 1.877.459.2852 to speak to a Bank of America short sale specialist about this exciting relocation assistance offering.
* The relocation assistance payment from Bank of America is calculated based on the unpaid principal balance of the homeowner’s loan and the type of short sale that the homeowner completes, but will not be less than $5,000 or more than $20,000.
For help doing a Bank of America short sale
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