The main reason is money, in a short sale they can only lose money. When they foreclose, and the borrower has private mortgage insurance the bank can recoup some or all of the lossses. In a short sale they are wiping out money with virtually no chance to recover it. As well as if the borrower had a 80/20 loan and has a second mortgage or equity line, the 2nd mortgage compnay will get zero in a short sale in most cases and why woul dthey want to agree to it. The price they buy it back at auction is a percentage of what the origional first mortgage was. They need to complete the auction to wipe out any liens or other mrotgages so they can sell it on the open market. this is wherethe pmi compnay will cover the difference between what they sell for and what was owed.