At first, the San Leandro woman, who had fallen behind on her condo payments, thought the letter was a scam. “You could sell your home, owe nothing more on your mortgage and get $20,000,” it proclaimed in large type.
“I almost ripped it up,” she said.
But the letter was sent by JPMorgan Chase, the bank behind her mortgage. And after she sold her condo two weeks ago for $98,000 – a third of what she owed on it – Chase indeed gave her $20,000 as an incentive payment, according to the woman and her real estate agent, Jasmin Rhodes of Prudential California Realty.
“I’m not sure why I was so blessed to be given that opportunity,” said the woman, who asked that her name be withheld for personal reasons.
There is no limitation on how homeowners use the bonus payouts. They can use them for moving expenses, as a security deposit on a new place, as a nest egg or simply to pay off other debts.
Some speculate that the offers occur when banks misplace essential paperwork and can’t defend a legal challenge to a foreclosure. Banks say that isn’t so, that when a loan modification isn’t possible, a short sale is often a faster and better solution for everyone concerned than a foreclosure. However, throughout the foreclosure crisis, banks have dragged out short sales over many months and failed to approve reasonable offers, until recently.
So if banks are now turning into Santa Claus, should struggling underwater homeowners stop paying their mortgage in hopes of winning the short sale lottery? We do not really know how banks determine who gets what amount. Since it is random and the outcome is uncertain, homeowners should look at their own case and follow the guidelines out there for their situation. Work with your housing counselor, lender(s), attorney, CPA, and real estate professional.