I have to agree with Joanna. People just don't know and there are a lot of people out there giving bad advice. Loan Officers tell people to modify because many do the modifications themselves and get paid for it. Sadly, I've talked to many people who modified their loan and Bob pointed out, their scores tanked. "Obama said my scores wouldn't drop if I modified my loan", said a friend of mine who voted for him. No comment. Anyways, short sales are something that I see Realtors push as a way to get people to sell their homes instead of foreclosing. However, banks are reluctant to do so because they are losing money. There are banks out there that made an agreement with the government to get paid on short sales to help make the short sale into a profit margin.
Short sales do affect the credit and sometimes the lender can require the owner pay the difference. So, after a person is told that they can't modify because they make too much, they can't short sale because the bank wants the difference, they are living on one income, depleted their life savings trying to hold on to the house, the bank is not helping them after all the money they sucked from the government, NACA is still 6 months away from coming to a city near them, it's too late for a deed in lieu of foreclosure, they don't have the income to get approved for a partial claim (put the past due payments back into the loan) or the equity is toast, they turn to an attorney to file bankruptcy.
Why? Because when a person defaults, bankruptcy attorney's go to the public records and send letters to the home owner's by the hundreds telling people that for as little as $495 they can avoid foreclosure and keep their home. Of course it will cost more than that when all is said and done.
Ah, but there are 2 places to go where many are unaware: CCCS and HUD. Consumer Credit Counseling is a non profit organization that will help people facing foreclosure. They have resources that can help the client receive aide in order to keep their home. Housing Urban Development will also help homeowners who have FHA loans. There is a pool of money sitting at HUD available to people under certain circumstances. If approved, money may be paid to the lender to help the homeowner. Why? Because FHA backs loan 100% against default and HUD doesn't want to give that kind of money away. So, it benefits them to help homeowner's.
So, I don't think it's so much the fact that people don't care, I think it's that they don't know the truth. They don't know what's out there and no one is spreading the word on where they can go for help.