Lender cannot allow short sales simply because it makes financial sense for them, at the moment.

They need the hardship packages to be completed and submitted for review by several levels of management to make sure it’s legitimate. Otherwise, the fraud will get to a level not seen before. What’s to stop everyone from asking for a short sale? Realty agents, appraisers and bank employees will “engineer” short sales of all kinds to defraud on the way down just like they did on the way up.

Audits and checks and balances are key to a functioning system and during the boom, controls were thrown out the window. The lenders need time to get those control systems back into place.

Also, lenders cannot reward bad investment decisions. If a homeowner has other assets, lenders will not approve a short sale to avoid foreclosure (even if they will ultimately get less in foreclosure). That would be rewarding bad business decisions and encourage it the future.

If word gets out that short sales are a given as soon as a house is on the MLS, and a purchase offer is submitted, then everyone who is underwater will ask for a short sale.

Realtors who thinks that they can market a short sale then present the lender with a fait-accompli doesn’t undertand the business.