As a foreclosure the bank has moved past a short sale and has taken ownership. The house is usually presented with no utilities and the bank is responsible for maintaining the property. The bank has a higher loss in this transaction
When the bank acts as servicers, they make money from a percentage of the loan payments which may include mortgage, interest or late charges.As servicers, they're supposed to act in the best interests of the investors but they don't always do. Some say they have a conflict of interest.
In deciding whether to opt for short sale or foreclosure, they sometimes look at their bottom line and make decisions in their interests. Sometimes they do look after that of the investors. The decision can be complicated. After a while, their REO departments are flooded with foreclosed properties and they wind up bulldozing some of them to cut their maintenance costs. Bank of America was in the news yesterday for doing that. It seems that in some cases they are better off doing shortsales while in others, foreclosures. We just don't know sometimes.
Also, the banks interests, rights, and obligations are also governed by the pooling and servicing agreements. Each one may be different from the next one.
Also, to the other answers: Why does an owner have to "qualify" to do a short sale if the banks are so ready to go on them instead of foreclosure? If they don't want to foreclose then why make someone qualify? It's almost funny to think one is always preferred over another on a regular basis.
One last thing: PMI... Foreclose and collect the insurance or do a short sale? COME ON PEOPLE!!!
edna mashaal 516-840-8888 (38 Middle Neck Road, Great Neck)