Who Owns this Loan and Why do they Want to do a Short Sale?
I should start off by clarifying that the bank the mortgage payment is going to usually does not own the loan. Most often they are just servicing the loan. The loan is owned by an “investor.” That could be another bank, a hedge fund, an investment group, Fannie Mae, Freddie Mac, a company or an individual. It will make the discussion easier to just say bank as the servicer and the investor should have the same incentive. “Should” is the operative word here.
The simple answer to why a bank wants to do a short sale is money. More money now in compared to a foreclosure. A foreclosure represents less money an indefinite time down the line with a great deal of hassle in the interim. You may immediately ask, “then why are the banks being so difficult if they want it so much?” Good question. If I were King of the banking world things would certainly be different: Real loan modifications with reduced principals, streamlined short sale approval processes and a little logic and thought on the part of the banks thrown in to name a few changes.
Ah, but we are where we are. The picture that most folks have when dealing with a short sale is that they are dealing with a real banker who is looking out after the best interest of the bank or the investor. The better and more realistic picture is that we are dealing with a negotiator in a cubical somewhere with 250 files on their desk with their hands tied. The investor has tied the hands of the negotiator by giving strict parameters by which the investor will accept a short sale. The overworked and underpaid negotiator is doing their best to craft your offer so that it meets the guidelines set by the investor.
There also seems to be a good deal of fear on the part of the banks that they will somehow be taken advantage of if they are not very, very careful. My hope is that eventually they will see that we are at the tip of the iceberg and there are millions of short sales left to handle in order to get mortgages in line with market values. Additionally my hope is that the banks will see that most people requesting a short sale are not trying to take advantage of the situation. These people are in a desperate position that they never dreamed of. They would much rather be paying a mortgage on a house worth at least as much as the mortgage. Instead they are contemplating a short sale and taking a hit on their perfect credit score for the first time in their lives……and trying to do the right thing.
So, with the knowledge of the investor’s incentive and fear and the negotiator’s dilemma, perhaps your patience will grow when handling your next short sale.