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Higher Home Prices Suggest Foreclosure Over Short-Sales

Monday, February 2, 2015

Rising home prices have been a boon to many homeowners but may not bode as well for those who are facing foreclosure.  Black Knight Financial Services' Mortgage Monitor this month takes a look at how liquidation strategies for properties facing foreclosure can affect the recovery on principal made by lenders.  They found that foreclosure and sale of the resulting REO may provide a higher recovery of the unpaid principal balance (UPB) than short sales, a reversal from just a few years ago.

Using its newly developed Resolution Module the company looked at three methods of liquidation, a sale to a third party at foreclosure auction which consistently results in a fully paid mortgage, short sales in which the lender agrees to take proceeds of the property sale which is, by definition, less than the UPB, in full settlement of the debt, and a foreclosure and subsequent sale of the REO.


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