When short sales work, they can provide homeowners with an extremely efficient solution to foreclosure. After all, everyone is relatively happy in the end: the bank gets the foreclosure off their books, the homeowners get to avoid sheriff sale and eviction, and the new buyer gets a house for a deal. Often, though, banks have the most to lose from from a specific short sale but are the very party that sabotages the process.

With houses falling into default in such large numbers due to the subprime crisis and decline in property values, banks seem to have become paralyzed about attempting short sales. They turn down reasonable offers only to be forced to foreclose on the house and then list it on the open market for a price even lower than what they were offered for the short sale.

Mortgage companies are turning down deals that would get them some money to pay off these foreclosed loans and help their clients who can no longer afford the payments. Instead of jumping on such offers, the banks spend more money on their local attorneys to foreclose and then on local real estate agents to sell the property. In the end, they lose even more when property values decline and homeowners damage the houses, so they have to list the properties for even less than they were originally offered.

Banks are shooting themselves in the foot in order to avoid helping any of their clients stop foreclosure through the use of a short sale. They know all of the risks of homeowners going into foreclosure: property values decline due to a glut of homes on the market, homeowners may take revenge on the house, court costs and attorneys fees will be paid out of pocket by the banks, and so on. These banks were so responsive to the housing market when creative loans were all the rage, yet they are unable to respond to the fallout of these flimsy excuses to give anyone who could operate a pen a mortgage.

Simple incompetence does not explain this failure by the banks; corruption, criminal activity, and a wealth transfer are far more likely. First of all, the banks would have no reason to request bailout after bailout from the federal government if they were actually helping to alleviate the mortgage crisis. By turning down short sales, banks do not have to take a 15% or 25% or higher loss on the loan -- they can let it go into foreclosure, then trade that mortgage debt at face value for US Treasury securities.

Even with the homes being offered for less than the bank could have gotten from a sheriff sale, the lack of available credit will make purchasing a home more difficult. With so many properties on the market, buyers will not have to settle for damaged, abandoned homes in suburban ghost towns, and they will not be able to get a mortgage to finance the purchase anyway. Property values will have to decline even further and banks will take less on these houses if they ever sell.

One thing is almost guaranteed: the banks are setting up for another criminal leveraged buyout, such as the one used in the Bear Stearns deal, but on a much larger scale. Foreclosures are piling up while money is being directed into the Government-Sponsored Enterprises like Fannie Mae and Freddie Mac, which are also in serious trouble due to the foreclosure crisis. Is the unwillingness to help homeowners use short sales a part of the plan to pump and dump the GSE's and transfer even more public and private wealth to prop up the increasingly insolvent banking system?

More info on your stop foreclosure information search:

Get Free Foreclosure Advice and Free Refinance Quotes
Get your free on-line foreclosure refinance quote and free advice from foreclosure mitigation specialist in minutes. Compare real offers from top national subprime and hard money lenders... more...

Short Sale Training - The Biggest Short Sale Mistake
I'm writing to let you know about the #1 way to speed up the Short Sale process that very few Realtors actually know about. Not using this strategy is the Biggest Mistake most Short Sale Realtors make. It may not be what you think, because it's not a "traditional" real estate strategy... I can't ... more...

Short Sale 101
This occurs when the net proceeds from the sale of a home are not enough to cover the sellers' mortgage obligations and closing costs, such as property taxes, transfer taxes, and the real estate practitioner's commission. The seller is unwilling or unable to cover the difference. Some ? although by ... more...

Short Sales - 3 Key Factors Gurus Never Tell You About How To Do Short Sales
For those of you who are new to the Short Sale arena or new to real estate investment, let's first define what a "short sale" is and what it's SUPPOSED to accomplish. A short sale is the process of negotiating with a Mortgage Lender to convince them to accept less than the Homeowner's mortgage ... more...

Short Sale Questions
The main stream media continues to be rich with stories about the struggling real estate market, here in the Sacramento area as well as across the country. They generally revolve around the increasing number of foreclosures, the mortgage crisis and now some of the government programs that may or ... more...