[quote=blew_it]I assumed they would do the rational thing (eat their share of the loss and avoid the costs of foreclosing since they can’t pursue a deficiency judgment in California) and they didn’t. I’m not sure of the reason for this.[/quote]
I think what everyone is missing here is that you are not dealing with a bank, but with a person who works for the bank. Yes, a short sale might be in the banks best interest, but is it in the best interest of that person processing the paper work?
Here’s a similar story. Years ago I was in a motorcycle accident. Long story short: A guy talking on a cell phone ran a red light and broadsided me. I was injured but fortunately not badly. My bike was totaled. All I wanted was to be paid for the motorcycle. I had health insurance so my medical bills were covered. I naively thought I could deal with the whole thing by myself. I didn’t want money for pain and suffering or any such thing. Just pay me for my motorcycle and I’d be happy. I was floored by the treatment the insurance adjuster gave me. He didn’t want to pay for the bike, he didn’t return calls, he did everything he could to encourage me to go get a lawyer. After a week or two of this, I did just that.
When I talked to my lawyer he explained that at this point the insurance adjuster was happy. The case had now been taken from him and given to the legal department. Thus, the insurance adjuster had less work to do, and could report to his boss that he had dutifully done his job on the case. But the bottom line is that after I lawyered up, the insurance company had to pay a whole lot more (and I do mean a whole lot more) in settlement fees.
I would guess that the person who handles the short sales is in the same boat. They mostly want to get the case off their desk. The interests of the bank, or the investors is not their primary concern, if even much of a concern at all. It was much easier (and probably in their best interests) to just stamp DENIED on your file and go for a coffee break.
Bottom line here is that businesses are just groups of people. Businesses don’t have interests really, only people in the business have interests.