A story in this week’s Businses Week magazine is about banks getting tougher on folks looking to sell their homes for less than what they owe and have the lender to eat the difference—a process known as a short sale. Now banks want the seller to pay part of the difference with a promisory note.
From Business Week:
Troubled homeowners may be losing a major lifeline: so-called short sales. To get bad loans off their books and spur home sales, lenders have been forgiving the difference between the outstanding mortgage balance and the purchase price. Banks were never eager participants in short sales, and now financial firms—even those that can offload losses to the government—are balking at such transactions. Some lenders are forcing the sellers to pay extra money at closing. Others want a promissory note for part of the amount due
As I read this Business Week article it reminds me of a famous story in French Literature: a woman borrows a diamond necklace from a friend; and when it’s lost she buys a new one to replace it; then spends the rest of her life slaving away to pay for it; only to discover decades later that the original necklace was “paste”; a fake gem. In this case; the homeowner who overpaid for a house; and the bank who loaned them the money are fighting over who should take the loss on a mortgage that should never have been made!
File Under: In fraud we trust