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BANKS STEER CASH INTO SHORT SALES

For homeowners seeking loan modifications the National Mortgage Settlement was to help homeowners stay in their home. Unfortunately, the banks and servicers are using the 25 billion dollar settlement to get homeowners out of their homes.  Banks have used the cash for short sales.

Under the settlement, five of the largest servicers must grant billions in loan modification relief through measures like refinancing mortgages and reducing loan amounts- principal reductions, letting homeowners dodge foreclosure while making payments they could afford. 60% of the settlement must be provided through loan write downs.

However, in the settlements first few months, banks have used the money for short sales. In Florida, banks approved $2.2 billion in short sales or about 60% of the states 3.6 billion in relief. Short sales totaled more than $1 billion more than principal reduction, deficiency waivers and refinancing combined.

Short sales are cheaper and easier for banks for foreclosures and there are no carry costs and the buyers come to them. Homeowners are out of their homes sooner and potentially face a deficiency judgment or tax liability for debt forgiveness. Furthermore, banks were doing short sales even before the settlement and would have continued to do so regardless.

The National Mortgage Settlement was between the US Department of Justice and state attorneys and the five of the nation's biggest banks - Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo.

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