Short Sales - The New Moral Obligation

I came across an interesting article in the LA Times back in November, discussing a paper written by University of Arizona law school professor Brent T. White. In the article, Mr. White essentially advises people to walk away from their mortgages in droves. Certainly, it makes sense. Banks have been responsible for some of the most inappropriate lending practices in our lifetime and while there are plenty of guilty parties on the receiving end of those funds, the majority are innocent bystanders now caught up in the mess these practices have caused.

I'll be the first to concede that two wrongs don't make a right, but many people who need to move - for whatever reason - are unable to do so at the moment. And while Mr. White refers those who don't want to walk away from their homes as "woodheads," I understand and respect their dilemma. They made a commitment and even through the situation they find themselves in won't allow them to honor it, they desperately want to. I respect that a great deal - especially since many are victims of these market conditions, not the causes of it. Sadly, the lenders don't respect them.

Naturally, my first recommendation is to try a short sale - it very well might be the best option for both sides. The seller can walk away with less damage to their credit and the piece of mind knowing they likely brought the lender more money than they'd have received via foreclosure. The lender walks away without having to take back yet another home, only to resell it for less and likely get stuck paying taxes, association dues, etc., with a slim chance of recouping all expenses.

Of course some people, the bank will tell you, don't "qualify" for a short sale and those are the people I think Mr. White speaks to. And if those people start listening to his words, short sales will start sounding better and better to the lenders...