Was at a seminar today, given by lawyers. With the right lawyer, one could end up staying in a house, while foreclosure proceedings are going on, for a long while ... meantime not paying a dime in mortgage payments. Of course, you'd have to pay the lawyer to keep filing papers.

The short sale situation is even more of a disaster. Even if there is an offer on the property, the bank can decide to turn it down (that's reasonable). But also during the 3 to 6 mos (or longer) that the bank is pushing paper around, they can decide to sell the mortgage to an investor; and you basically start all over with the new owner of the mortgage. One agent at the seminar has been waiting for a bank approval for 9 mos on a short sale situation.

One can ask a bank to take a deed in lieu of foreclosure, but with the huge number of homes involved, the banks don't want to own that many properties, and make it easy for the owners to dump them back at the bank. So, instead, they will go through the foreclosure process (which can cost as much as $50,000 for the bank), and then they bundle several properties together and sell them off to investors "wholesale". Which they could also do with DILs, but they don't want to set a precedent in making it too easy for the owners to do the DILs ... even though it would make the whole thing more expeditious and cost the bank less $ to do that.

It's such a huge mess, of which we've only seen the tip of the iceberg. Right now about 10% of our MLS's listings are short sale situations. That doesn't count the already bank-owned properties.