speaking of loans, a report showing nearly 20% of mortgage defaults are done on purpose. they call it strategic defaults. jeremy brand is with us, c.e.o. of 1-800-cashoffer. people default on purpose why? we re seeing this happen more and more when people contact us at 1-800-cash-offer. people make house payments and can afford to stay but walk away because the value of the house is less than the mortgage balance. the balance is $300,000 and the house is worth 250. they feel it s okay to walk away and let the house go into foreclosure. there s a morale component to this. if you re one guy and scrimp and save to pay and the other guy on the other side of the fence walks away, my question is, is
let s get you to stephanie elam here. they are called short sales and they don t sound sexy, but they are the hottest thing going in the housing market and they are expected to become even more popular when a new government program kicks in next year. stephanie elam in new york with the details. how about we do this? let s start by talking about exactly what a short sale is. that s a lovely place to start, tony. a lot of people hear the term and don t know what we re talking it is is really a way t avoid the stigma of a foreclosure. and a foreclosure obviously, that s when a bank repossesses your house. the difference is, in a short sale the house is sold for less than it s worth but the homeowner is involved and still lives in the house that s at issue here. now, a short sale used to take an average of a year, but an hour banks are approving short sales faster than ever. bank of america approved a short sale in less than a month. but it s not just the speed,
in four american borrowers are underwater. if you re struggling to make mortgage payments the mortgage modification could be a way to avoid foreclosure. your lender makes a change to the original mortgage agreement so you can make monthly payments either by lowering the interest rate or stretching out the length of the loan. in some cases the lender may forgive a portion of the loan principal. with the home modification program in place eligible borrowers would have monthly payments reduced to 30% of the pretax income. to qualify for hamp assistance you must own and live in your home, have a mortgage balance less than $729,750 and your current monthly mortgage payments must be more than 3 1% of your monthly income. head to makinghomeaffordable.gov. that s good information. anything homeowners should be wary of? well, unfortunately there are a number of mortgage modification scams out there.
homeowner s credit score by about 200 points. obviously this is better for everybody. better for the property values. just better than to just have people who are just leaving their homes and letting things just go by the wayside. obviously we ll be hearing more about this. something to consider instead of letting your house go into foreclosure. but as for stocks, they re getting a bit of a boost from an upbeat report on consumer spending. that s lifting hopes about the recovery. we ve got the green mountains on our graph there. the dow up 47 points. look at that. getting pretty close. we were just at 10,900. 11,000 is within our eye sights now. nasdaq up four points. we ll keep our eyes on it throughout the day. dow 11,000, given where we ve been? whoa. given where we ve been. but you had to figure it would come wack at some point. it doesn t mean we ll stay on the straight line. thank you, stephanie. the u.s. treasury is moving
it s also the fact that they re happening more often. in fact, short sales made up 17% of all home sales last month. next week the government will give banks new incentives to approve the short sales. so look, they aren t exactly new, but why are the short sales becoming so popular right now? because you ve got to know when to just cut your losses and keep it moving. boy, isn t that the truth. keep it moving. keep it moving. because the thing is, it s better for the banks if they get something for these houses. so if a bank waits for a home to go into foreclosure, it s the bank s responsibility then to maintain the property. when the foreclosed home is sold, the bank could lose up to 50% of the loan it originally made. but with a short sale, the loss is typically around 30%. a way for the bank to get the loan off their books quickly. now, from the homeowner s perspective, if there s no way out, a short sale is not as bad as a foreclosure. a foreclosure can knock down a