Wells Fargo and JP Morgan have begun to bite the bullet and move more of their bloated home inventories through short sales, rather than deal with the expense of a foreclosure proceeding.
JP Morgan claims that they have processed 120,000 short sales since their program began in June 2009 and currently averages 5,000 short sales per month.
However, only 10, 438 short sales have been moved through the government’s HAFA program. Still it’s better for sellers than a foreclosure in most states. California is an exception.
You see, in California they have what is called a “one recourse” law which states that if you lose your home, your lender cannot make you liable for the difference between what was originally owed (your mortgage exposure) and how much money was generated from the sale of your home at auction or through short sale.
In California, Wells Fargo and JP Morgan negotiate (sternly I might add) that you must sign a promissory note for any losses incurred on your property.
So in essence, this seemingly do good action by the two banks may be in their best interest anyway.
In this scenario, the sale of the home results in an immediate cash infusion and your promissory note functions as a final revenue stream. Pretty clever, right?
Now, even if 50% of the people who sign such notes or are held accountable in those states without one recourse laws default, the losses of these banks are still mitigated.
What is not mitigated is the debt thrown onto the shoulders of the borrower, who is also the taxpayer shouldered with the debt of the $1 Trillion dollar bailout afforded the same bank who is mitigating its front side (retail) losses.
Yeah, it’s very real and it provides evidence that Joseph Schrumpeter was indeed correct in his assertion that capitalism run amok leads to corporatism.
And that is who is really represented in Washington, with apologies to the Tea Party. Joe The Plumber gets “piped” again…
Appraisal Source is a New York based residential real estate appraisal firm. They can be of service to you if you need a home appraisal in Long Island or in New York City.
Here’s the original article…Short Sales Rise to Aid Real Estate