Short sales viable after new rules?

Does it make any sense for a bank to take a $300,000 loss just to stand strong on a short sale? That's exactly what a Philadelphia mortgage banker told me happened with his house in the Old City of Philadelphia when he filed for bankruptcy in 2009. With the downturn his income went from $500K to under $125K and he could no longer afford the mortgage on the home he'd paid $715K for in 2004.

The banker first told Chase, the bank that held the first lien, of his difficulties in November 2008. His tenant offered to buy the home for $525K In January 2009 and he started working with Chase on the short sale. The appraisal came in at $575K, but Chase bank, which held the first lien told him it would not lower the price below the $690K he had in mortgages on the home.

With a short sale the bank agrees to allow the sale of the home for less than the mortgage amount. He told me the home finally sold at auction to the second lien holder Citizens Bank for $225K in November 2009, after the banker filed for bankruptcy.