Will Short Sale Incentives Succeed?

An interesting article in the current issue of DS ( default servicing) News explores the dilemma of  secondary lender capitulation in the short sale process.  Many short sales have been derailed by the second lien holder refusing to cooperate and agree to take little or nothing in the impending deal.  Under the Treasury Department's HAFA program there are a host of financial incentives for borrowers, servicers, and investors. But are the incentives for secondary lien holders enough to convince them to cooperate in a short sale scenario?  The secondary lien holder has other avenues for pursuing borrowers for the debt owed.  Statistics show that 52.2 percent of all second liens were held by Bank of America, Wells Fargo, JP Morgan Chase, and Citigroup as of the fourth quarter of 2009.  Do these names sound familiar?  These are our primary sources here in California.  How many borrowers in our area can buy a home without a second mortgage?  If these secondary lenders can pursue debtors, can HAFA incentives sweeten the deal enough?  In a non-HAFA transaction, Realtors, buyers, and even the primary lien holder can contribute to the second's portion of the deal.  But the usual result of a secondary lien holder's refusal or foot dragging is a foreclosure.  And in foreclosure nobody wins.