David Brancaccio: You know how vast numbers of Americans owe more than their house is worth. You know that many lenders are allowing people to do short sales -- that is, selling a house for less than what's left on the mortgage. But who knew some banks are reportedly paying cash to homeowners to sweeten the pain of moving? Bloomberg News reports a case of a J.P. Morgan Chase letter to a homeowner that said "you could sell your home, owe nothing more on the mortgage, and get $30,000."
Prashant Gopal is the Bloomberg News reporter on the story. Prashant, thanks for joining us.
Prashant Gopal: Great to be here.
Brancaccio: Help me understand this: you have seen an example where a lender offers cash over and above the short sale to ease the transition out of a house for a deliquent home owner?
Gopal: Absolutely. You know, actually, I've heard about numerous cases like this. Chase is the most aggressive. You know, they're offering up to $35,000 to homeowners who are deliquent to have them sell the home for less than they owe. It's called a short sale.
And the idea here is it's cheaper for them than to go through the foreclosure process, which can take up to four years in New York. As you imagine, there's a lot of maintenence csots, taxes, etc. that can accrue during that foreclosure process. So getting a sale done can actually save the bank some money.
Brancaccio: So number one, you get the lender to agree to a short sale. But number two, there's also some cash to help you with your moving expenses, or to rent the new place.
Gopal: Right. I don't know about you, but I think I could move for less than $35,000. So clearly it's a pretty big incentive. I think part of the issue is a lot of homeowners are so overwhelmed, getting bombarded with offers from different people to help them; they don't open the mail. They're just trying to, in one way, figure out a way to get people to listen to them. Money talks.
Brancaccio: How much of this has to do with clearing the backlog of these foreclosures that are sitting on these banks balance sheets?
Gopal: I think it's all about that. There's something called a shadow inventory, which includes folks who are underwater on their loan but also people who are seriously deliquent, that could be up to 14 million. So it's a gigantic number and I think lenders are trying to figure out every way possible to clear the pipeline.
Brancaccio: Prashant Gopal of Bloomberg News. Thank you very much.
Gopal: Thank you.