Associations can benefit from short sales vs. foreclosures - chicagotribune.com
Foreclosures are an unfortunate circumstance for borrowers and lenders, but community associations also take a hit. Struggling owners who owe more than their homes are worth often are behind in their assessments as well as their mortgages. Associations are lean operations, and when just a few owners don't pay, the rest must make up the difference or leave bills unpaid.
A short sale can be a satisfying resolution for all parties, say many real estate and association professionals.
True, but the association has no power to make a short sale happen. That is between the owner in default on the mortgage and the bank. And check out this statement: "Lenders prefer short sales over foreclosures because foreclosures are more expensive and time-consuming, said Eric Hamilton, a mortgage consultant with Wells Fargo Home Mortgage in Aurora." With no disrespect meant to Mr. Hamilton, this is not what is happening. It is very difficult to arrange a short sale because the "lender" won't agree to it. The reason is that this term "lender" is a misnomer. Mortgages are not owned by actual lenders. Mortgages are sold by originators, who then may or may not become the "servicer" of the loan. Mortgages are owned by investment trusts who buy residential mortgage backed securities. The servicer collects the payments and sends them to the trust, and handes the foreclosure. These servicers do not want to spend time and energy negotiating short sales. They want to prosecute foreclosures, because that's how they get paid. Many of the servicers are banks that hold second mortgages which would be wiped out in a short sale, a conflict of interest that is preventing short sales.