Short Sales to Cost Lenders $375 Million

In case you might be wondering what a "suspicious" short sale might actually be, CoreLogic defines suspicious sales as those short sales where the lender incurs a significant loss and then there is a follow-up transaction where the house in question is quickly sold for a much higher price that is not supported by any actual or apparent increases in the value of the property. It is definitely a little odd when 16% of all suspicious short sales are followed by another sale transaction closing on the same day on the exact same property. It only gets more curious when you consider that 16% of those suspicious sales all had follow-up sale prices that were on average $50,000 greater than what the mortgage lender agreed to as the original short sale price. CoreLogic also found that even though Limited Liability Company buyers make up only 2% of all short sale buyers, they account for more than 25% of the buyers in suspicious short sale transactions.

Because CoreLogic's report was designed to take a scientific, data-driven look at current trends in short sales and to help businesses identify the potential risks and opportunities that might be associated with these transactions, the fact that the U.S. states with the most short sale activities also have the most suspicious short sale transactions is indeed quite curious and may point to serious underlying legal problems in the home mortgage marketplace. CoreLogic says mortgage lenders lost an estimated $310 million on suspicious short sales in 21010 and the industry will take an even bigger hit this year with losses over $375 million being currently projected. That the lending industry will need to address these serious losses going forward is a foregone conclusion as no industry can throw away hundreds of millions of dollars and continue to thrive.