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Barclays Advocates Short Sales to Lower Loss Severities

With vacant homes stretching the capacity of banks' balance sheets and homebuyer demand lackluster at best, short sales are becoming a top loss mitigation choice for private lenders and investors, particularly in especially hard-hit markets.


According to ""Barclays Capital"":http://www.barcap.com, the benefits of pursuing a short sale are compelling for servicers and investors who are able to liquidate delinquent loans in an expedited fashion with fewer payment and interest (P&I) advances and who take ""quasi"" possession of the property in better condition and at better prices than REO, lowering severities.

Barclays' analysts say they've found much of the reduction in severities from utilizing a short sale over an REO sale are explained by better composition and trimmed timelines. While the discount stemming from the stigma associated with an REO due to upkeep and vacancy still plays a role, it accounts for only about 30-40 percent of the severity difference, they explain.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.

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