Collapsing Short Sales Contribute To Continuing Flow Of Foreclosures

USA Today reports:

• Scores of homeowners who thought they'd cut a deal with their banks to sell their houses for less than their unpaid mortgages are seeing those agreements fall apart months later, contributing to the mounting foreclosures that threaten the housing market's recovery. The sales of homes for less than the amount owed the bank, known as "short sales," have been widely viewed as an alternative that could help slow the foreclosure epidemic. In theory, delinquent homeowners escape a mortgage they cannot afford, and lenders, although taking a loss, avoid the even costlier process of completing a foreclosure.

• Instead, many homeowners are watching potential buyers walk away as months pass while they deal with lenders' lengthy delays, lost documents and unreturned calls, according to the National Association of Realtors (NAR). Not all the snafus are lenders' fault; inexperienced real estate agents who fail to turn in complete paperwork also are causing holdups, as are severely underpriced homes.

For more, see Long waits for short sales (Home sellers frustrated as short-sale deals collapse).