Underwater homeowners get move-out bonuses

At first, the California woman, who had fallen behind on her condo payments, thought the letter was a scam. "You could sell your home, owe nothing more on your mortgage and get $20,000," it proclaimed in large type.

"I almost ripped it up," she said.

But the letter was sent by JPMorgan Chase, the bank behind her mortgage. And after she sold her condo in January for $98,000 -- a third of what she owed on it -- Chase indeed gave her $20,000 as an incentive payment, according to the woman and her real estate agent, Jasmin Rhodes of Prudential California Realty.

"I'm not sure why I was so blessed to be given that opportunity," said the woman, who asked that her name be withheld for personal reasons.

In a new development, banks are now selectively offering substantial sums of money -- up to $35,000 -- to some homeowners to encourage short sales, in which homes are sold for less than is owed on the mortgage.

Real estate experts said that banks can net bigger proceeds in short sales by sidestepping the costs, lengthy timeline and uncertain sales prospects of foreclosures. Quick disposition of some homes makes sense for the banks and for the overall housing market.

Nationally, 1.4 million homes were in the foreclosure pipeline in December 2011, and 3.2 million homes have been repossessed by banks since September 2008, according to mortgage information firm CoreLogic.

The process by which banks pick homeowners to offer incentives and determine the amounts is unknown and sometimes seems arbitrary, real estate experts said, other than that the recipients are people who are behind on their payments and whose homes are underwater.

"They are being very mysterious and quiet about it," said Peter Harris of Bradley Real Estate in Marin County, Calif., who has seen Chase offer up to $30,000 as an incentive for a short sale. "They're not telling the agents or promoting it."

Homeowners can use the bonus payouts however they like -- for moving expenses, as a security deposit on a new place, as a nest egg or simply to pay off other debts.

"When a loan modification isn't possible, a short sale is often a faster and better solution for the homeowner, investor and neighborhood than a foreclosure," said Chase spokesman Tom Kelly.

But throughout the foreclosure crisis, banks have dragged out short sales over many months and failed to approve reasonable offers, agents say.

The turnaround has come only recently and isn't universal.

"Banks are taking a renewed eye in the past six months toward short sales, where they had had more of a jaundiced eye previously," said Stan Humphries, chief economist at real estate website Zillow.com.

"I can see why (incentive payments) are an arrow they want in their quiver," he said. "It's much more efficient than going through a foreclosure." But they need to balance that, he said, with not encouraging more people "to go down the path in the first place."

Many short-sellers also qualify for a government program called Home Affordable Foreclosure Alternatives in which they get $3,000 in relocation expenses.

Wells Fargo said that it sometimes provides short-sale bonuses on first-lien mortgages.

"The incentive is based upon the market and individual customer needs, and can range from amounts under $3,000 up to as much as $20,000," spokeswoman Holly Rockwood said in a written statement. "In general, markets where larger incentives are provided usually have extended foreclosure timelines, such as Florida."

Bank of America also focused on Florida, with a pilot program giving incentives for short sales that were initiated last fall, spokeswoman Jumana Bauwens said in an e-mail.

"The amount of assistance is based on the unpaid balance of the loan -- 5 percent of the (unpaid balance) with a $5,000 minimum and $20,000 maximum," she wrote. The bank notifies homeowners who qualify. Of 20,000 people notified, 15 percent chose to participate."