Modifications vs. short sale … logic does not apply

I have a client who has been trying for over 3 years to work out a modification with her lender. She lost her good paying job over 3 years ago, has not made a house payment since then and recently found a job paying about half what she was making. She’s offered the lender to make a payment of $400 less per month than she was paying on her loan that, at this current time, is double what her home is worth. So, does the bank look at this, think “We can keep getting our money back on this property by trying to work with this single Mom instead of making her and her 10 year old son homeless”? NOT. Instead, they’d rather she put the house on the market for the true market value of less than half what is owed and take the loss right now. Now, another problem with this scenario is that the property is in sad shape … needs a new roof, needs soffets and gutters, needs porches and inside remodeling, and it’s a mobile on land. Almost no Lender wants to loan on these any more. So the Buyer is going to have to be either all cash or use some sort of home improvement loan to purchase. Does it make sense? Not at all, but I’m not certain the banks are looking for logic or to help anyone out… they’d rather take the hit and let the government pick up the slack. Go figure.