I wrote this two years ago but it's appropriate today:
Mario Villagrain asks: Short Sales - Why are banks so difficult to negotiate with?
Because they're not banks.
The mortgage markets exploded in the past 15 years through a technique called securitization. This means that the loans are packaged up into pools and sold to Wall Street investors. In the late 80s/early 90s, most loans were made by S&Ls. These savings and loan associations made wild-ass loans due to deregulation of the industry. In short, they were almost rewarded for gambling with depositors money because the money was insured by the government. EXCEPT...
They had to mark the bad loans to the market. This means that they had to increase their reserve requirements to account for the loan losses. In short, they had to "set aside" money for those losses. It was more convenient for them to sell the property AT ANY PRICE and take the loss rather than to ride it out.
That's not necessary today. Investors in whole loans have these loans buried in pools. Investors are insurance companies, pensions, etc. They are longer-term investors than the S&Ls and are not required to "write off the bad loan" or increase thier liquidity. the investors of today don't have the same pressures of the S&Ls of yesteryear.
They have the staying power to ride this thing out and hold out for higher prices. Not forever, mind you, but they do have staying power.