An increasing number of mortgage lenders have been choosing short sales over foreclosure listings because home prices have been falling rapidly anyway.
During the boom times, people who were unable to continue paying their mortgage loans due to job loss or serious illness sold their homes easily through foreclosure listings or through auctions to pay their loans. In the past several months, home prices have fallen so low they are not even enough to pay the balance of the mortgage loans.
Lenders have been considering short sales because they have realized that in many cases, they are losing more when they go through the process of foreclosure and selling the assets through foreclosure listings.
When lenders foreclosed, they undertake processes that include filing documents in court, sending notices, coordinating with property managers and selling through auctions or foreclosure listings. In addition to the costs of these procedures, the foreclosure process also takes time especially if the homeowners undertake legal maneuverings to delay the process and allow them to stay in the foreclosed properties for a longer time for free.
When lenders agree to a short sale, they agree to accept as full payment an amount lower than the mortgage loan balance. They lose in the process, but their potential losses in foreclosure could be bigger if the foreclosure process takes a long time and if their foreclosed properties stay in foreclosure listings for months or years.
According to Fair Issac Corp., handler of the FICO credit score, a short sale also damages an individual’s credit score, but not as much as foreclosures do. Borrowers also prefer short sales because they save their credit records and they save themselves from the pain of foreclosures and evictions.
Mark Pearce, deputy banking commissioner of North Carolina, said short sales across the country have soared by approximately 20 percent in the last six months. Pearce is one of banking officials running a nationwide foreclosure prevention organization collecting foreclosure and short sale information from mortgage servicers.
Additionally, David Knight, vice president of Wells Fargo’s mortgage servicing division in Fort Mill, said his bank’s short sales have tripled in the last 18 months especially in areas of Wells Fargo’s operations where job losses rose to unprecedented levels and where home prices fell from inflationary levels to bottom levels. These areas also had unprecedented numbers of properties that were thrown into foreclosure listings.
Author Resource:-
John Cutts has been educated in the finer points of the foreclosures market over 5 years. Read the latest foreclosure listings news at ListingsForeclosures.com.
![[Valid RSS feed]](http://www.realestateproarticles.com/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites