Problem
The lender has commonly required an underwater (negative equity) homeowner to be delinquent on mortgage payments first before a short sale approval can be given. This lender practice has resulted in short sellers being labeled as “strategic defaulters” (those who are able to make a payment but choose not to) for many who did not wish to go delinquent, but had to in order to get the short sale approved. Many have voiced alarm about this delinquency requirement as they struggle but continue to keep payments on time as they prepare to exit their home, often borrowering from retirement funds and relatives to keep up. The known lender policy of requiring this delinquency has baffled many who wonder why they had to have stellar credit to obtain the mortgage but must be delinquent in order to exit the home if it is underwater... a requirement told to them by their own lender.