Loss Severity on Short Sales 13% Lower than REO

Over the past year, the mortgage risk analysis firm Clayton Holdings says it has witnessed an overall increase in short sale activity.

Because of the growing emphasis on keeping borrowers out of foreclosure, servicers are becoming more inclined to employ alternative loss mitigation strategies. And Clayton says the added benefit to servicers – the one with dollar signs in front of it – is that loss severities for properties sold through short sale are 13 percent lower than loss severities for REO sales.

In states with extended foreclosure timelines, short sale loss severities dropped even lower – 26 percent below REO loss severities…

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