Banks Yanking Homeowners' Last Hope: Short Sales

As banks get healthier, they're getting stingier with one of the few remaining lifelines for underwater homeowners—short sales. To keep home sales moving in leaner times—and to get bad loans off their ledgers—lenders would forgive the difference between the outstanding mortgage balance and the purchase price. Such deals are harder to come by these days, a development that could spell trouble for the nascent housing recovery, writes Christopher Palmeri in BusinessWeek.

"With profits improving and access to capital loosening, lenders can afford to play hardball," writes Palmeri. But the strategy may hurt. Short sales have been pivotal, accounting for about 15% of home sales in the nation this year and twice that figure in hard-hit cities. Meanwhile, a record one-third of homeowners owe more than their home is worth, a figure expected to rise because values are still dropping. Without short sales, expect more foreclosures, which in turn feed the cycle of depressed prices.
(More short sales stories.)