Thursday, July 26, 2012

Why do lenders and borrowers do things like this?

I was talking with a real estate broker today about the process of short sales, and why they are so difficult to do, and she told me a rather sad (and she said typical) story.  A borrower in Compton had an $800,000 mortgage, and was about to close a short sale for $170,000.

Everything was all set to go, when the lender told the borrower that if she didn't sell, she would get a modification.  The borrower in the end did not sign off on the short sale; she never did get the modification, and was foreclosed on 60 days later.  Both the borrower and the lender would have been better off had the short sale happened--the borrower's credit history would have taken a smaller hit, while the lender would almost surely recover more money.