Short Sales Solutions out of the Foreclosure Mess Are too Long for Many

The short sale solutions out of the foreclosure mess are proving to be too long for many.

George and Susan Hitchcock were sure they were doing the right thing when they could no longer keep up with the mortgage of their ranch house in Farmington by opting for short sale. They knew that with the change in the market the worth of the house had become less than the loan amount.

They started looking for buyers and when an offer materialized they were hopeful that the lender, Countrywide would agree to it and avoid the hassle of foreclosure. The Hitchcock's had heard a lot about lenders avoiding the expensive time consuming process of foreclosure and agreeing to a short sale, even though the amount would be less than the dues.

The couple laboured for three months to prod an answer from Countrywide but failed. In early March the buyer ran out of patience and went away.

The story of the Hitchcocks is being repeated all over the country. The underwater borrowers with loans being higher than the value of the house have been trying to get an answer from their lenders regarding short sale but the lenders choose to remain mum either intentionally or because they are drowned in overwork from too many foreclosed units.

If the Hitchcocks manage to get another offer then the whole drama will be replayed all over again with the banks saying neither yes nor no for months. Meanwhile the debts keep piling.

As the nation is trying to untangle itself from the mess, the short sale is an invaluable tool to unwind from the impasse. Shaun Donovan the secretary of HUD nurses this opinion and spoke about it while visiting Hartford recently. Foreclosures speed up the decline of prices of adjacent units - sometimes negatively impacting entire localities. A short sale will be help to all three parties concerned - the lender, the borrower and the purchaser. The lender avoids foreclosures that are much more costly than the loss banks incur in a short sale. For the borrower the foreclosure will stain the credit report and this can be avoided with a short sale. The buyer gets a house that is not only cheap but is also in good condition. It has not undergone the damage inflicted on it during the foreclosure period.

But in reality the banks are not cooperating and are still being stubborn about losses even though the feds are feeding them with stimulus funds.