Crystal Palace were expected to get a deal over the line to bring in Favre as their new manager and a three-year contract was agreed between the two sides.
The Eagles were convinced about the 63-year-old was on the verge of joining the club, but were left shocked when the Swiss decided against taking up the job.
There are suggestions that Favre eventually did not fancy moving to England and learning a new culture while navigating a challenging job at Crystal Palace.
Townsend admits that he was certain that Favre was coming and Crystal Palace were about to start the process of getting him a work permit.
However, he conceded that he is confused why the 63-year-old rejected Palace after going through the whole negotiating process and agreeing on a contract with the club.
The Eagles star said on talkSPORT: “I heard it was almost done.
“I heard they were getting ready to start the work permit process and he was getting ready to fly over and start his quarantine before pre-season.
“I don’t understand how you get through the negotiations stage, the interview stage, you agree the contract and then last minute you decide you don’t have the motivation for it.
“Something must have changed.”
Crystal Palace will now resume their managerial search after failing to land two candidates in Nuno Espirito Santo and Favre.
