Second Loans Keep Houses in Limbo

Lenders hold up sales that would help unclog the market
A wall separates houses in Murrieta from the desert Photograph by Kirk Crippens for Bloomberg Businessweek

Tom Axon’s mortgage collection company gets about 25 calls a day from delinquent homeowners’ brokers seeking approval to sell their houses for a loss and avoid foreclosure. We’ll help, the staff at Franklin Credit Management tells them, as long as we get paid enough. Axon, working with co-investors, buys distressed home equity loans and similar real estate loans, often for pennies on the dollar. Investors like Axon have to be dealt with whenever a home is sold in a short sale, a transaction in which the lenders agree to accept less than what’s owed on the property. “The short-sale brokers know us—they know we’re not cupcakes,” says Axon, Franklin’s chairman. “At the end of the day, my friend, you signed a contract. You owe money, and we’re willing to reach an accommodation that is commensurate with your ability to pay.”

To continue reading this article you must be a Bloomberg Professional Service Subscriber.