Banks Are Not Cooperating in Foreclosure Short Sales

With banks not cooperating in foreclosure short sales it is difficult for the foreclosure rage to be tamed. If the banks lose 19% by opting for short sales and 40% by following foreclosure why are the banks not being prudent and remaining stubborn? There are so many numbers involved that it would have led to the collapse of the financial system of the country. Although the fates of banking and finance are interlocked their activities are opposing.

The main hurdle to the smooth implementation of short sales en masse is the problem of securitization. The parceled and sliced mortgages have been sold as investments to various entities across the globe. Thus with whom will negotiation talks be held? In the event of a loss there is no possibility of workouts in the case of securitized mortgages. When securitization happened nobody ever dreamt that the question of loss would ever arise.

Dave Liniger is a realtor. Speaking to reporters he said, “The most significant aspect is that so many of the banks’ mortgages have been securitized, put together and bundled, sold off to Iceland or China or some godforsaken place. The bank has to go through all of the various people who are stakeholders and it becomes a very lengthy process, and the bank is turning off the realtors by not even getting answers back to them, sometimes for months.”

The banks are not interested in untangling the snarl. The mortgages are listed in their balance sheets at the original value of the loan and if a short sale is completed they have to show a loss. By not showing such a sale the loss is not noted either.

A research undertaken by Campbell Communications note that only 23% sale transactions are completed. Tom Popik of the survey group said, “Three out of four potential short sale transactions fail, principally because the mortgage servicer takes too long to respond to the offer. When these same properties are later sold it further depresses real estate prices.”

Congress too has failed when up against securitized mortgages. No medicine seems to work. Re. Brad Miller (Democrat) said, “We’ve been trying to figure out probably for close to two years now why so few mortgages are being modified when it seems to make absolute business sense for the person holding the mortgage to modify rather than foreclose or to take a smaller loss selling it rather than a bigger loss foreclosing on it.” Miller’s accusing finger points at securitization.