Why would a Lender agree to accept a Short Sale, which causes them to lose money?
Mortgage lenders are more willing than ever to work with borrowers who have suffered financial hardships. The main reason why the lender may be inclined to agree to this process is because it causes them potentially less of a loss to agree to the terms of a reasonable Short Sale offer than it does to ultimately have the home go through the foreclosure process. There are also legal concerns and pressure from Financial Institutions to compromise. A Short Sale results in the paying off of the loan, and Wall Street really does not want your house, anyway! For every home a bank is stuck with, they have maintenance costs and taxes to maintain. Not to mention all the repairs, administrative costs, and utilities. Under Federal Law, Lenders must also set aside funds to deal with potential losses on delinquent loans. They are unable to have this money returned until the bad loan is resolved. A successful Short Sale allows the lender to put that money to better use, by making them more money.
Related Questions
- If a lender saves so much money working out a short sale arrangement, why do they request so much information and why does it take so long for them to work a file?
- Why would a Lender agree to accept a Short Sale, which causes them to lose money?
- When does the lender agree to a mortgage short sale process?
