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Legislation to Encourage Short Sales Introduced in Congress
A bipartisan pair of Congressmen introduced legislation last week thatrnwould require lenders and servicers to speed up the process of approving or disapproving arnshort title or short sale. U.S. RepresentativesrnRobert Andrews (D-N.J.) and Tom Rooney (R-Fla.) submitted H.R. 6133, the Prompt Decision for Qualification of ShortrnSale Act of 2010. </p
The legislation isrndesigned to assist homeowners who are underwater on their mortgages, i.e. owernmore on the loan than the current value of the house, and have a buyer readerrnto purchase the house at a price which will net less than the current payoff ofrnthat mortgage. The legislation addressesrnonly the timing of the decision, not the lenders criteria for approving orrndisapproving the request. </p
The bill, introduced as an amendment to the Truth in Lending Act, says inrnpart; “…if the mortgagor under arnresidential mortgage loan submits to the servicer of the mortgage loan arnwritten request for a short sale of the dwelling or residential real property</bthat is subject to the mortgage, deed of trust, or other security interest thatrnsecures the mortgage loan, and all information required by the servicer inrnconnection with such a request (including a copy of an executed contractrnbetween the owner of the dwelling or property and the prospective buyer that isrnsubject to approval by the servicer), and the mortgagor does not receive fromrnthe servicer, before the expiration of the 45-day period beginning upon receiptrnby the servicer of such request and information, a written notification ofrnwhether such request has been approved, that such request has been approvedrnsubject to specified changes, or that additional information is required forrnsuch a determination, such request shall be considered to have been approved byrnthe servicer.”</p
Many real estate agents and mortgage originators have been outspoken aboutrnthe difficulties of obtaining approval from mortgage lenders for shortrnsales. A number of real estate and mortgage professionals have told MND they were advising customers not to plan on claiming the tax credit if theyrnwere buying a foreclosed property or short sale because of the delays involved in the process. Servicers claim it can be difficult torndetermine who actually owns the loan and obtaining signatures approving thernsale and, as is the case with loan modifications, owners and servicers accuse eachrnother of failing to submit required documentation or losing or mishandling therninformation when it is received.. </p
According to the National Association of Realtors® (NAR,) the number ofrnpotential short sale properties is rising across the country. In Nevada, California, Florida and Arizona inrnthe second quarter of 2010 significant shares of all properties on the market werernpotential short sales: 32 percent, 28 percent, 27 percent and 24 percent, respectively.</p
In strongly endorsing the legislation, NAR President Vicki Cox Golder said “Asrnthe leading advocate for homeownership issues, NAR believes that quickerrnattention to the short sales process is vital to help homeowners who arernunderwater and their communities, as well as the nation’s economy.</p
“Unfortunately, homeowners who needrnto execute a short sale are severely hampered because lenders (loan servicers)rnare unable to decide whether to approve a short sale within a reasonable amountrnof time. Potential homebuyers are walking away from purchasing short salernproperty because the lender has taken many months and still not responded torntheir request for an approval of a proposed short sale price. Many consumers,rnGolder said, “have mentioned that the delay in short sale price approvalrnexceeds 90 days, and in many cases never arrives.” </p
The bill has been referred to the House Financial Services Committee forrnconsideration.
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Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.
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