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Legislation to Encourage Short Sales Introduced in Congress
Posted to: MND NewsWire
Tuesday, September 21, 2010 12:22 PM
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A bipartisan pair of Congressmen introduced legislation last week that would require lenders and servicers to speed up the process of approving or disapproving a short title or short sale. U.S. Representatives Robert Andrews (D-N.J.) and Tom Rooney (R-Fla.) submitted H.R. 6133, the Prompt Decision for Qualification of Short Sale Act of 2010.
The legislation is designed to assist homeowners who are underwater on their mortgages, i.e. owe more on the loan than the current value of the house, and have a buyer reader to purchase the house at a price which will net less than the current payoff of that mortgage. The legislation addresses only the timing of the decision, not the lenders criteria for approving or disapproving the request.
The bill, introduced as an amendment to the Truth in Lending Act, says in part; '...if the mortgagor under a residential mortgage loan submits to the servicer of the mortgage loan a written request for a short sale of the dwelling or residential real property that is subject to the mortgage, deed of trust, or other security interest that secures the mortgage loan, and all information required by the servicer in connection with such a request (including a copy of an executed contract between the owner of the dwelling or property and the prospective buyer that is subject to approval by the servicer), and the mortgagor does not receive from the servicer, before the expiration of the 45-day period beginning upon receipt by the servicer of such request and information, a written notification of whether such request has been approved, that such request has been approved subject to specified changes, or that additional information is required for such a determination, such request shall be considered to have been approved by the servicer.'
Many real estate agents and mortgage originators have been outspoken about the difficulties of obtaining approval from mortgage lenders for short sales. A number of real estate and mortgage professionals have told MND they were advising customers not to plan on claiming the tax credit if they were buying a foreclosed property or short sale because of the delays involved in the process. Servicers claim it can be difficult to determine who actually owns the loan and obtaining signatures approving the sale and, as is the case with loan modifications, owners and servicers accuse each other of failing to submit required documentation or losing or mishandling the information when it is received..
According to the National Association of Realtors® (NAR,) the number of potential short sale properties is rising across the country. In Nevada, California, Florida and Arizona in the second quarter of 2010 significant shares of all properties on the market were potential short sales: 32 percent, 28 percent, 27 percent and 24 percent, respectively.
In strongly endorsing the legislation, NAR President Vicki Cox Golder said 'As the leading advocate for homeownership issues, NAR believes that quicker attention to the short sales process is vital to help homeowners who are underwater and their communities, as well as the nation's economy.
'Unfortunately, homeowners who need to execute a short sale are severely hampered because lenders (loan servicers) are unable to decide whether to approve a short sale within a reasonable amount of time. Potential homebuyers are walking away from purchasing short sale property because the lender has taken many months and still not responded to their request for an approval of a proposed short sale price. Many consumers, Golder said, 'have mentioned that the delay in short sale price approval exceeds 90 days, and in many cases never arrives.'
The bill has been referred to the House Financial Services Committee for consideration.
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