The Obama administration has announced a new program taking effect April 5 that will pay homeowners in danger of foreclosure cash to walk away. Lenders will also get a cash payment for agreeing to a short sale.

The New York Times piece on the new program reported:

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure…

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

$1,000 to banks for a short sale? Are they nuts?

$1,500 to a seller to ‘relocate?’ Sellers can save five times that by staying in through the foreclosure process, without the potential of a deficiency judgment later.

Who makes this stuff up?

Just one more example to illustrate that walking away 8 times out of 10 makes more sense (maybe 9.5 times out of 10). Period.

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