Mortgage Crisis [South Florida]
As more South Florida homeowners fall behind on their mortgage payments, many lenders are slow to embrace a less costly alternative to foreclosure: short sales.
In a short sale, lenders allow owners facing foreclosure to sell their homes for less than the mortgage balance. The lender absorbs the shortfall, but limits its legal fees and the carrying costs of owning a home — especially in markets with sharply declining home values.
But despite the apparent financial advantages, lenders have been deterred by several factors, including the significant amount of documentation required and the related processing costs. They are also holding out for more lucrative — yet elusive — deals.
In a short sale, lenders lose an average of about 19 percent of the loan amount, compared with an average of 40 percent through a foreclosure, said Kevin Kanouff, president of Clayton Fixed Home Incomes in Connecticut.