Bill on Short Sales Could Help Homeowners

Published by nora | Filed under Buyer / Seller Tips, Market Trends, Mortgage / Finance, Real Estate

Finally, some U.S. legislators recognized the gravity of the problem faced by homeowners desiring to use the process of short sales to solve their financial problems. Since the start of the foreclosure crisis, homeowners, housing counselors and real estate agents have been moaning about the difficulties and uncertainties they bear as they kowtow to what lenders require and as they wait for months for any response from the lenders.  

U.S. Representatives Tom Rooney of Florida and Robert Andrews of New Jersey have introduced in Congress the bill called Prompt Decision for Qualification of Short Sale Act of 2010 last September 15. The bill would require mortgage lenders to respond to requests for short sales within 45 days so troubled homeowners can avoid foreclosure and can have more time to try other options if the short sale requests are disapproved.

According to the National Association of Realtors, which is supporting the bill, although lenders have improved their short sales processes, they still need to make substantial improvements in their response times. Plenty of potential homebuyers have walked out on their purchase offers for short sale homes because they could not afford to wait.

The NAR also reported that the share of short sale homes are still substantial, with Nevada having the biggest percentage at 32 percent of all homes for sale in the state in the April to June quarter this year. California was second with 28 percent, Florida was third with 27 percent and Arizona was fourth with 24 percent.

The Federal Housing Finance Agency also said that the number of short sale applications at government-sponsored enterprises like Fannie Mae and Freddie Mac has risen by a whopping 150 percent in the second quarter, compared to the same period in 2009. CoreLogic, meanwhile, reported that short sales across the U.S. have nearly tripled since 2008.

Representatives of top U.S. lenders JPMorgan Chase and Wells Fargo explained that short sales take time because they are not the sole decision makers. They said they must first negotiate with investors, secondary lenders and insurers who have stakes in the mortgage loans before they can issue any response. They also explain that the investors are the primary parties since they are the owners of the mortgages.

Real estate agents also say that the lenders that financed the home equity loans or the down payments are in many cases the ones holding up the short sale requests, demanding cash payments before they release the liens.

For prospective sellers of short sale homes, the bill means hope. As the bill is discussed in the media, the benefits of short sales both for the lender and seller in relation to foreclosure are highlighted, hopefully encouraging mortgage lenders and investors to rev up their short sale processing systems.