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TESS VIGELAND: Here's another sad statistic in the housing crisis. Take a look around your neighborhood. Out of every 10 houses, odds are one of them is behind on mortgage payments. The Mortgage Bankers Association says that's the worst showing since it started keeping records in 1972.
As homeowners find themselves in trouble and unable to sell for anything resembling an asking price, they're turning to short sales. That's where you work with the bank to sell for less than you owe on the mortgage.
But as Peter O'Dowd reports from station KJZZ in Phoenix, convincing the bank to let you off the hook can be a logistical nightmare.
Peter O'Dowd: You can knock all day on the front door of this house in Peoria, Ariz., and no one will answer. Chris George and his family haven't lived here since June 2008. That's the year George lost his job and eventually, his life savings.
When I called George in California, he said one of the few things he actually wants to lose is the house itself.
Chris George: This was the house that we moved into after we got married. And this is the house that we had our first son in and we loved this place. And now it's just turned into a burden that we can't wait to get rid of.
Back in 2005, George bought the house for $209,000 with no down payment. He moved his family near Palm Springs last summer to find work. But before George abandoned this house, he asked the bank for permission to sell it at a loss. He even offered to pay the remainder of the mortgage himself.
George: The difference would have come in around five or $10,000. That's pretty easy to do.
The bank didn't like that idea, and the George family's finances spiraled downward. Fifteen months later, the house is scheduled for auction. And only now has the lender changed its tune. This time it will consider a short sale if the couple pays the difference in the mortgage. Well, now the gap between the loan amount and the sale price is more like $50,000. George says the worst part has been dealing with the excruciating wait.
Jo Watson hears that complaint a lot. She's the CEO of a local real estate agency.
Jo Watson: If you're thinking this is going to be over in 20 or 30 days, then you're setting yourself up for failure or a lot of frustration.
It appears that frustration is mounting. In Phoenix, where housing prices have fallen drastically, realtors say nearly half of all homes under contract are pending short sales. Some of those sales will take more than nine months to close. Watson says many agents are overwhelmed and undertrained.
Watson: Agents don't like to hear that they're part of the problem, but we are.
That's because a short sale transaction is complicated. Before a lender swallows a loss, it wants to be sure the homeowner isn't just trying to wiggle out of a devalued property. So a seller needs to show hardship with stacks of tax records and financial statements. If agents do a poor job collecting this information, the wait gets longer.
Watson says banks are to blame, too. Bank A has one set of rules. Bank B has another. And Watson says those bank policies can change with little warning.
Watson: We've had short sales where we have submitted offers and gotten a no. And then we pulled them back, resubmitted the offer a week later and gotten a yes.
John Mechem: We understand the frustration on the consumers' end. We understand the frustration on the real-estate brokers' end.
John Mechem is with the Mortgage Bankers Association. He says banks are slammed with short sales and dealing with the paperwork takes time.
Mechem: A bank is in the business of trying to minimize loses whether its through a short sale or a foreclosure, so there is a lot of due diligence that needs to be done.
Part of that diligence includes measuring financial hardship, and that can be the trickiest part of a short sale. Technically, sellers just need to show that if they don't sell the house soon, they'll eventually lose it to foreclosure. But the reality is different. Even banks acknowledge that homeowners in default will be the first in line. As a result, some people stop paying their mortgage and destroy their credit in the process.
Short sales aren't just a headache for sellers. Josiah Pinner is a first-time buyer, who had been shopping for houses for months. From his car, he points out a two-story stucco house that he put an offer on back in March.
Josiah Pinner: I kind of just put all my eggs in one basket there. I just pretty much expected it would go through.
Four months later, the bank came back with answer that made little sense to him. It would agree to a short sale only if the seller paid an extra $3,000 to the bank. The owner was broke and couldn't do it, but Pinner was willing to take on the cost himself.
Pinner: If I could roll it into my loan, you know, but that just wasn't an option for them.
The deal was dead, and Pinner feared if he had to wait for another short sale to go through he would miss out on President Obama's home buyer tax credit.
So he got back into his car and drove a mile down the street where he found a nearly identical house already in foreclosure. With no need for a short sale, that deal was sealed in a week.
In Phoenix, I'm Peter O'Dowd for Marketplace Money.