Investors who are snapping up delinquent loans from banks are helping some New York-area borrowers avoid foreclosure by offering them generous loan modifications, or even just paying them cash to move or cooperate in a sale, Bloomberg reports.
The number of nonperforming loans banks offloaded in 2013 jumped to $34.7 billion from $13.1 billion a year earlier, according to Mission Capital Advisors, Bloomberg says.
Since investors purchase the loans at steep discounts, they can turn a profit by slashing the balance and interest rates of mortgages if doing so persuades borrowers to start paying their mortgages again. Another strategy is to pay a borrower to hand over ownership of a home or to cooperate in a sale. Both tactics are generally more advantageous than pushing a property through foreclosure.
ShortSave recently launched to cater to this breed of investors. The app streamlines the short-sale application process, and can theoretically obtain a short-sale decision in minutes by checking an application against an algorithm provided by the investor that owns the loan on the applicant’s home.