July 16, 2024

San Diego home short sale payoff Bailout Program


San Diego home short sale
San Diego home short sale

What would you say if I told you there was a big bank program helping San Diego homeowners who are facing foreclosure?  I’m sure the answer would be:  “What is it, another new program?”  What if I told you this short sale incentive program to help troubled homeowners is being carried out nationwide, but the qualifications as well as the amount of help are being kept secret!

This is exactly what is occurring not only here in San Diego, but probably nationally, as well.  It’s understood that banks such as Chaste, Bank of America and Wells Fargo are participating by helping homeowners with lump-sum cash offers when their homes close escrow through a short sale.

Now don’t get excited if you are a homeowner in trouble, because there’s nowhere to apply for this incentive. This is a program where the banks contact you by mail to see if you are interested in taking part in the program. I understand wording in these bank letters goes like: ‘you have options that may help you avoid foreclosure and make a fresh start. You may be able to own nothing more on your mortgage and get $35,000 after you sell your home.’ The letters go on to say that the homeowner qualifies for a new program and if they complete a short sale through this program they may be eligible for cash to use for moving and other expenses. It also says that the troubled homeowners will not be on the hook for future mortgage payments on their homes. Lastly, the letters invite the troubled homeowner to call the bank for further information.

When the homeowners do call the lender, they are asked to provide a listing agreement with the real estate broker and another letter authorizing the broker to talk to the banks negotiator. Plus, once an offer comes in on the property the bank seems to process the short sale much quicker than standard short sales.

It’s understood that the banks cash incentives to the homeowners who do join the program, range from a few thousand dollars to as high as $35,000! However, the banks are refusing to release information about how the amount of these incentives are calculated.

My take on this:  This is a secret government bailout program that most likely, due to the huge amount of taxpayer money involved, is being cloaked in secrecy.

Before you think I’m too far out in my opinion, let me give you a couple of reasons that I believe show this to be a correct assumption. First of all, it seems just the major banks are participating. It also seems that this is a nationwide program. Combine this fact with the huge payoff incentives of up to $35,000 per home owner, and one can only believe that if not originally designed by the government, the government is paying the banks for their expenses incurred through this program.

Let’s think about it. Why else would a number of competitive banks be engaging in a similar hush-hush short sale incentive program, that depending on its scope could cost them millions of dollars?

Parts of this program are reminiscent of the government’s ‘Cash for Clunkers’ program. Just like that program, I believe this one will fail, as well. Why are such huge cash incentives necessary? For that matter, why are any cash incentives necessary? Why not just send letters to troubled homeowners saying that the bank will expedite a short sale for them and they will not be on the hook for any losses? If you think about it, that’s incentive enough for many homeowners who are underwater, to move forward with a short sale.

Banks are not in the business of losing money. To offer these kinds of huge short sale incentives in a coordinated program, I have to believe that the banks are being compensated either directly with cash, or some type of cash equivalent credit, through the Fed!

In conclusion, I will say that the hallmark of every past failed government housing bailout program was marked by huge amounts of money being thrown at the problem. So as far as the San Diego home short sale bailout program goes … Once again we see the same throw money actions being taken.  Only now, perhaps to abate the inevitable criticism of such a program, the program details are being kept under wraps.

So much for open government and hope and change!