The use of short sales will get a boost now that many servicers cannot move ahead with foreclosure sales, according to Travis Olsen, a short sale vendor.
Under pressure from regulators, state attorneys general, and the courts to review and fix their foreclosure procedures, banks and their servicers have suspended foreclosure sales.
Short sales do not need court approval. This foreclosure alternative allows borrowers to sell their homes and walk away from their mortgage debt free — that is, if the bank agrees to the sale price.
The use of short sales has been increasing for the past year. In some hard-hit markets, short sale properties outnumber foreclosure or REO sales by a 4 to 1 ratio.
"Short sales are really taking over," said Olsen, the chief operating officer of Loan Resolution Corp. in Scottsdale, Ariz.
Banks and servicers outsource short sales to LRC when it's clear the property is headed for a foreclosure sale. They also set a deadline for completing the short sale. But now they cannot finalize a foreclosure. "That gives the borrower more time to short sale the property," said Olsen.
With the foreclosure crisis worsening, the company is seeing servicers take a proactive approach to short sales. Some servicers are even offering short sales to borrowers who were denied a loan modification.
