US banks have finally figured out that it costs them less to simply take a loss on an underwater home mortgage rather than try to foreclose. Banks are even paying for the privilege. Major US banks JP Morgan Chase & Co. (NYSE: JPM), Bank of America Corp. (NYSE: BAC), Wells Fargo & Co. (NYSE: WFC), and Citigroup Inc. (NYSE: C) all have short sales programs in place.
There about 14 million US homes in foreclosure, behind on mortgage payments, or underwater according to a Bloomberg News story citing RealtyTrac:
Bank-owned foreclosures and short sales sold at a discount of 34 percent to non-distressed properties in the third quarter.
In addition to getting out from under the mortgage, a homeowner can receive up to $35,000 in cash to pay for moving expenses and a new place to live. Banks are also reported to be paying a few thousand dollars to holders of second liens to clear the lien and make sure that the short sale goes through.
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