Monday, November 19, 2012

LA Times: "Most aid from mortgage settlement in California going to short sales"

by Bill McBride on 11/19/2012 08:41:00 AM

Update: Here is the national report: Continued Progress: A Report from the National Mortgage Settlement

From Alejandro Lazo and Scott Reckard at the LA Times: Most aid from mortgage settlement in [California] going to short sales

Short sales, which allow underwater borrowers to sell their homes for less than they owe, have become the dominant type of relief offered in California by the big banks, according to a report on the settlement expected to be made public Monday.

Under the settlement, banks were required to give homeowners aid in the form of principal reduction, short sales and other modifications. Banks get credit for both principal reductions and short sales under the agreement, but must give 60% of the relief nationally through principal reduction to families who keep their homes. ...

Through Sept. 30, the three banks had provided $8.4 billion, according to data from [UC Irvine law professor Katherine Porter's] office, putting them well on track to fulfill their obligations. About 68% of that money went toward providing short sales for homeowners. Principal reductions on first and second mortgages made up the rest of the California aid.
Short sales were becoming more frequent prior to the mortgage settlement, but this is probably why short sales now out number foreclosures in many areas.