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Banks Yanking Homeowners' Last Hope: Short Sales

Healthier lenders no longer anxious to cut deals

By John Johnson,  Newser Staff

Posted Oct 3, 2009 2:30 PM CDT
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(Newser) – As banks get healthier, they're getting stingier with one of the few remaining lifelines for underwater homeowners—short sales. To keep home sales moving in leaner times—and to get bad loans off their ledgers—lenders would forgive the difference between the outstanding mortgage balance and the purchase price. Such deals are harder to come by these days, a development that could spell trouble for the nascent housing recovery, writes Christopher Palmeri in BusinessWeek.

"With profits improving and access to capital loosening, lenders can afford to play hardball," writes Palmeri. But the strategy may hurt. Short sales have been pivotal, accounting for about 15% of home sales in the nation this year and twice that figure in hard-hit cities. Meanwhile, a record one-third of homeowners owe more than their home is worth, a figure expected to rise because values are still dropping. Without short sales, expect more foreclosures, which in turn feed the cycle of depressed prices.

A home for sale in Derry, NH.
A home for sale in Derry, NH.   (AP Photo/Charles Krupa)
A home for sale in San Francisco.
A home for sale in San Francisco.   (AP Photo/Jeff Chiu, file)
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When the banks couldn't make payroll, it was a lot easier to deal with them. Now they want to extract every nickel.
- Jake Naumer, an adviser
to homeowners in St. Louis


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COMMENTS
Showing 3 of 13 comments
divetrader
Oct 4, 2009 12:58 PM CDT
Between credit swaps and flash trading, bankers have everything a poor little insider could ever want.
divetrader
Oct 4, 2009 4:03 AM CDT
Does stopthepresses2 mean you simply stopped reading or thinking perhaps? Sub-prime lenders were giving loans to people who either couldn't afford it or not telling people they could have gotten those loans from a prime mortgage lender at a lower rate. You can try to blame a politician for trying to create a situation where more people had an opportunity to go for the American nightmare. Or you can blame the banks for their greed in exacerbating the problem. If Barney Frank made it so loans could be made for lower and middle class Americans, my guess is that he wanted regulation on top of it. What are the chances that regulation was fought tooth and nail by Bush and his Republican Congressional groupies??? The economic downturn started about 3 years ago. Add money pouring out to an illegal war and insider defense contract companies and thus the demise that is hurting our country.
BlueAyez
Oct 4, 2009 2:39 AM CDT
See the bankers like getting us all ticked off at each other. This way we forget they are still pulling the same crap that started this whole mess to begin with -- credit swaps. The banks are still betting that people will lose their mortgages so they can collect from the insurance pool. I'm not surprised they pulled the rug out from short sales. They're doing everything they can to see to it that the average homeowner fails in their mortgage.
Money • US

 
mortgage • credit crisis • homeowners • housing crisis • banking industry • short sales

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