Delays in Short Sales Frustrate Home Buyers

Charles Wright of Henderson, Nev., fell behind on his mortgage last year after a divorce squeezed his finances. He twice arranged to sell his house for less than its loan balance, a so-called short sale, only to see the buyers walk away because it took too long to get approval from the holder of the mortgage. "I couldn't even get a call back, never mind a yes or no," says Wright, 30, whose loan was owned by Fannie Mae (FNMA), the government-run mortgage-finance company. "Why make it so hard to sell when the alternative, foreclosure, means an even bigger loss for lenders?"

Good question. Thomas Popik, research director for Campbell Surveys in Washington, which conducts national monthly surveys of 3,000 real estate brokers, says more short sales could stem steep home-price declines. Although the home is sold for less than the mortgage in a short sale, it stays out of foreclosure, where the holder of the loan seizes the house and auctions it off at a steep discount to current value. "Any time a short sale can be substituted for a foreclosure, it's extremely good for the housing market," says Popik.