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Real hope for short sales or just more bank spin?

Posted by Scott Van Voorhis December 14, 2009 07:00 AM

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Are banks finally starting to get it when it comes to short sales?

Or are we just looking at some defensive industry PR as a backlash builds?

Those are my questions as I look over a Bloomberg piece that claims that banks may be finally getting on the short sale bandwagon.

The evidence seems to be a tripling of the number of short sales over the course of 2009, though, at 40,000 transactions, it is still a pretty small number.

The major banks are also claiming they have hired extra staff and rolled out new software to help make short sales happen.

JPMorgan claims to have hired 5,000 people to handle distressed mortgages and has doubled its short sale staff.

Sounds great, thought the timing is awfully suspicious given budding anger, both in Washington and across the country, over bank stalling tactics.

This pretty modest batch of good news comes as the Obama Administration rolls out its own effort to prod banks - with the stick of some timelines and a carrot of more bribes - to embrace short sales as well.

The Treasury Department, which kicks off in April, would pay up to $2,000 to lender and services for every short sale they do. The effort also establishes some clear guidelines in hopes of putting an end to bank stalling tactics as well.

It's hardly a crackdown, but the industry must know it's playing with fire not to try and at least talk the talk.

Of course, the most frustrating thing is that banks, for their own bottom lines, should be getting this.

A short sale is hardly a cure all, but at least the lender walks away with, say 70 percent or 80 percent of the loan. By contrast, foreclosure can be a pretty safe way to destroy a home, its value, and the values of the entire neighborhood as well.

But of course, biting the bullet with a short sale means taking that balance sheet hit now, rather than pushing off the day of reckoning.

It's an accounting game that's hard to justify given the mounting cost homes foreclosed on and lives shattered.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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