Hardship is in the Eye of the Beholder

Since January I've been working with a client on getting his house sold. It's a short sale. I know those are bad words for a lot of folks, so I apologize for hurting tender eyes by using them. But it is what it is.

My guy bought his house with his wife when they had two incomes, he was younger, and she was alive. While his wife was sick with cancer, my client had to retire from his job to take care of her. His income nearly cut in half when he did that. He refinanced his house to help pay her medical bills while she was sick. After she died, she left a heap of bills he had to pay - the company she had leased her car from demanded he pay the remaining balance on her lease contract!

Now his health is deteriorating so that he can't maintain the 3500 square foot house, he's down to one income, and the bills keep coming in. We got an offer on his house at full list price and submitted it to his bank with his hardship letter, income info, etc. His income information shows he's about $200 short from being able to pay his bills each month. The bank has reviewed the file and determined he is selling "by choice" and that they will require him to take a note back after closing for the balance of the loan, which will be roughly $126,000.

I am shocked and amazed at the same time on this one. If the man is unable to make ends meet because of circumstances that happened after his purchase and refinance, how is that not considered a hardship?

Unfortunately, my client is going to give up, move out and let the bank have the house if this short sale doesn't go through... and each day it's looking more and more like it won't. The bank will likely slap him with a huge judgement after the fact, and they will likely put the house on the market and not get a penny more than we've got on the table now. In this case, NOBODY will win. What a tragedy.