Banks Now Prefer Short Sales to Foreclosures

A lender’s interest is in profit, and a foreclosure used to be more lucrative for a bank than a short sale. Now, however, the average foreclosure takes more than 300 days to process and the time and work that goes into the process now costs banks more profit than a short sale – wherein a bank approves the sale by the homeowner for less than the loan amount, losing the difference between the sale price and the loan. In New York and New Jersey the process can take more than 600 days; time where no profit is being made on the house, and it remains as a negative entry on the bank’s books. This shortcut is becoming an increasingly more popular option for the nation’s three largest mortgage carriers, Bank of America, JPMorgan Chase and Wells Fargo.  For more on this continue reading the following article from The Street .

Banks dealing with lengthy, complicated and frequently messy foreclosures are starting to see "short sales" as a quicker and cheaper way of getting bad loans off their books.

The nation's biggest mortgage servicers- Bank of America - are beginning to step up their efforts to ease the short sale process for borrowers who are unsuccessful in getting loan modifications and face the threat of foreclosure.

Servicers are attempting to reach out to borrowers and are paying out more incentives to those suffering financial hardship to help proceed with a short sale. They are also cutting down the time taken to approve short sales, although realtors still complain that the process takes too long.

JPMorgan has processed 120,000 short sales through its proprietary program since June 2009 and now averages 5,000 short sales a month. The bank says its average response time to approve a short sales transaction is 30 days.

"We think the short sale is a good solution for many struggling homeowners and we let them know that it's an option," said Christine Holevas, spokesperson for JPMorgan in an email. "Our outreach efforts have increased in the past year or so. Foreclosure can be an expensive and lengthy process for all parties. It's a good deal for the homeowner and a good deal for us (a cheaper way to get a bad loan off the books.

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